Source: Apple
What you need to know
- Loup Ventures analysts say that Apple may bring an Upgrade Program model to its other devices.
- Apple may eventually also offer a subscription package that covers all of its hardware, software, and services.
In a new post by Loup Ventures, Gene Munster and David Stokman speculate that not only will the iPhone Upgrade Program business model make its way to the Mac, iPad, and Apple Watch, but that Apple will eventually offer an all-in-one subscription for all of the company's hardware, software, and services.
Today, about 55% of the company's revenue can be purchased as a subscription. By adding Mac, iPad, and Watch subscriptions, that number will approach 85%. This dynamic will increase Apple's revenue and earnings visibility which should, in turn, expand their earnings multiple. Our $200 price objective is based on 35x our 2022 EPS estimate of $5.70. As a point of reference, this would be a slight premium to Facebook and Google and a discount to Amazon and Netflix.
Munster and Stokman point to consumer's desire to own the latest and greatest as well as the younger generation's interest in renting versus buying as two main reasons why Apple may offer a subscription model to all of its product offerings.
We see two factors contributing to the macrotrend of consumers preferring subscriptions over buying products outright. First, the fast pace of tech innovation leads consumers to want to own the latest and greatest. Subscriptions are an answer to this dynamic, as they offer greater flexibility to upgrade more quickly because consumers don't absorb the full purchase price upfront. Next, consumers, particularly millennials and the front end of Gen Z, tend to have a rent vs. buy mentality. A 2019 survey by First Insight found that 31% of millennials use subscription services, compared to 21% of Gen Xers, and 8% of Baby Boomers. The trend of renting over buying impacts all levels of consumption, from low-priced items like music and video streaming, all the way up to high-priced items like home and car ownership. A recent output of this phenomenon is Affirm's success. Affirm, which is expected to go public soon, is a point-of-sale loan provider for e-commerce companies that allow consumers to buy essentially anything on a subscription basis.
The two analysts say that Apple, with its complete control over the hardware, software, and services that it offers, is in a truly unique position to offer such a subscription package. The company already has a version of this on a smaller scale with its iPhone Upgrade Program and Apple One subscription bundle. You can read the full report at Loup Ventures.

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