|Wearables, Home, and Accessories||$41.24B|
To understand the world in 2022, check this out!
This was Facebook, who had just turned into Meta a year ago.
A company worth around a trillion dollars is now worth $240 billion.
If you had invested $1000 in Facebook (rebranded as Meta) in 2015, you would have exactly $1000 today.
Meta is worth $240 billion in market cap, exactly where it was on June 2015.
Welcome to the new world of 2022!
A world where technology can create huge wealth, new markets, and expand the economy. But also a world where when cheap capital becomes expensive, technology turns upside down.
Let’s see some interesting bits and pieces of this year to understand the current market context.
The sinking advertising machine
It all started when a week back. Meta ads revenues slipped to $27.2B in Q3 of 2022, down from $28.2B in Q3 of 2021.
The metaverse is getting increasingly expensive, costing Meta almost $3.7B in operating losses in this quarter alone!
The graph below seems fake, yet it’s the world in 2022.
Apple is almost 10x Meta’s market cap.
Is Apple killing Meta?
On April 26, 2021, Apple launched App Tracking Transparency, a framework that required user authorization to access app-related data for tracking the user or the device.
Since then, Meta, Snapchat, Twitter, and all the apps that relied on third-party tracking have been severely damaged.
Apple’s service business, in 2022, is worth over $78 billion, with advertising among its fastest-growing sub-segments.
But how is Apple boosting its advertising business if it cuts off third-party tracking?
Simply, Apple is using a different paradigm for advertising.
As Apple highlights:
“…ads don’t access data from any other apps. In the App Store and Apple News, your search and download history may be used to serve you relevant search ads. In Apple News and Stocks, ads are served based partly on what you read or follow. This includes publishers you’ve enabled notifications for and the type of publishing subscription you have.”
Welcome to the new advertising world set by Apple!
A new advertising paradigm
In the last five years, Apple stock appreciated by 237%.
Whereas Facebook’s (now Meta) stock depreciated by 27.15%, most of which was lost in the last year when it rebranded into Meta (over 70% of its market cap has been gone in the last 12 months indeed).
Apple’s iOS change (users must explicitly opt-in to tracking) has completely wrecked Facebook’s ad machine.
In this scenario, Facebook – turned into Meta – has been throwing over $20 billion at Zuckerberg’s vision of Metaverse.
And the most interesting part?
Apple’s Service business this year is worth $78 billion, growing by 14%, compared to $68 in 2021.
Could you guess which one is the fastest-growing unit within the service business?
It’s Apple’s advertising business!
Indeed, Apple is building a thriving advertising business on top of its App Store, which might be already worth a few billion in 2022.
That does look like a business war for the advertising cake of the next decade!
Is Apple a service company now?
When it comes to Apple, many people get easily confused, and they look at the service side of it, as if it was a separate business unit.
That’s far from the truth. Apple’s service business lives on top of the successful combination of hardware, software (operating system), and marketplace.
For Apple, there would be no service business without the hardware line-up of products.
And even more, without the iPhone, which accounted for over 52% of Apple’s net sales in 2022.
No service business without iPhone
Last year, Apple sold over $200 billion worth of iPhones!
In 2022 (15 years from its launch), the iPhone represents over 52% of Apple’s total revenues.
iPad sales are the only segment slowing down; all the other segments keep growing.
In 2022, Apple generated $394 billion in revenues with a net income of almost hundred billion dollars!
Apple is the new Coca-Cola
As the story goes, in the 1980s, Steve Jobs had to bring adult supervision to Apple; he lured Sculley away from Pepsi by saying:“Do you want to sell sugared water for the rest of your life?”
In a strange turn of events, Apple has turned into the new Coca-Cola.
Indeed, Warren Buffet, consistently among the wealthiest people on earth in the last decades, is Berkshire Hathaway’s owner.
Among the key principles of value investing is staying away from hot stocks (especially tech) and taking a longer-term view of financial assets based on fundamentals.
Yet, starting in 2016, Buffet started to invest in Apple, gathering – in a couple of years – a very large position (he owns through Berkshire more than 5% of Apple).
That position today is worth over $100 billion.
In 2022, Apple will be Berkshire’s largest holding, accounting for nearly 41% of its stock portfolio.
Berkshire, even in this disastrous year, has kept a good performance.
And guess, thanks to which stock? Apple!
So is Warren Buffet moving beyond value investing? Nope.
When he invested in Apple, he saw it as one of the strongest consumer brands in the world.
Just like he had done a few decades back when investing in Coca-Cola.
|AirPods, Apple TV, Apple Watch, Beats products, HomePod,|
iPod touch and accessories
|Services (Company’s advertising, AppleCare, cloud, digital content, payment, and other|
Read: Apple Business Model.