Apple Stock Prediction: The Trillion Dollar App Economy Is Boosting Apple

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

Apple Stock Prediction


  • Let’s forget about iPhone 8 production delays and focus more on Apple’s fastest-growing business segment, Services.
  • Unlike the business of real-world products like the iPhone 8, iOS apps are not subject to production delays or component shortages.
  • The walled-garden nature of the iOS platform means it’s a forever-secure environment for app developers. App monetization on iOS will always be better than on Android.
  • Increased revenue from Services (like stronger app store sales) can make up for future weakness in iPhone sales.
  • I Know First has negative short-term algorithmic forecasts for AAPL. However, Apple’s stock still touts a bullish one-year forecast from I Know First.

I Know First has negative 30-day and 90-day algorithmic forecasts for Apple (AAPL). This bearish sentiment from the stock picking neural network of I Know First is likely due to the persistent news of production delays for iPhone 8 smartphones. This year’s December quarter will probably result in to no iPhone X for sale. Apple fans will just have to bear with the iPhone 8 and iPhone 8 Plus this coming Christmas shopping period.

You should wait for cheaper entry-points to go long (or buy more shares) on AAPL.

Apple Stock Prediction

AAPL still touts a bullish one-year algorithmic forecast from I Know First. The iPhone 8 production problems are temporary. Apple’s suppliers and partner manufacturers will eventually be able to maximize production by early next year. Any potential dip or stalling in iPhone sales can be offset by Apple’s surging Services business segment.

Two years ago, income from Services segment was only contributing 10.14% of Apple’s quarterly revenue. Now it accounts for 16%. App store purchases by iOS device users are now generating more quarterly revenue than the iPad and the Mac business units. Services recently posted a record quarterly revenue of $7.3 billion, up from just $6 billion from Q3 2016. I expect this to grow to $9 billion by Q3 2018.

Apple Stock Prediction

Two years ago iPhone sales accounted for 64% of Apple’s quarterly revenue. It only now accounts for less than 55%. This is partly thanks to the crazy growth in iOS app spending. The trillion dollar app economy is definitely an underappreciated tailwind of Apple. The world’s growing appetite for mobile app usage is why Apple has a good thing going on.

Mobile Apps Are Now Our Favorite Entertainment

By 2021, 3.5 trillion hours will be spent on mobile apps. A large part of that will be courtesy of big spending iOS gamers and media watchers. The times are different now, most people no longer waste money getting drunk in bars/at home, many now prefer to play mobile games and spend on them too. Instead of people going to movie theaters, they would just buy streaming movies from iTunes.

Apple Stock Prediction

Instead of people buying expensive jewelry, most people now spend $800 for an iPhone and $1,800 more on iOS/movies/music. App Annie expects that mobile apps will generate $183.6 billion this year, up from $134.2 billion in 2016. Four years from now, this industry will generate $340.2 billion in annual revenue.

Apple Stock Prediction

The app industry is a trillion-dollar concern because there are several sectors involve in it. There’s the datacenter, programming team, and the marketing experts who keep advertising mobile apps business. Promoting apps which in turn will host more advertisements is genius. The business of mobile apps needs art directors, UI/UX designers, graphic artists, and music composers.

Why Developers Will Continue To Prioritize the iOS Platform

In spite of their much smaller number iOS device users, generate far more revenue than Android device owners. This is because the walled-garden, closed-source iOS platform is more secure than Google’s (GOOG) open-source Android operating system.

Unlike Google’s tolerant attitude toward apps side-loading and third-party app stores, iOS apps can only be downloaded and installed from Apple’s app store. The iPhone maker therefore has a monopoly on app and media sales to iPhone/iPad owners. Apple’s absolute control over its mobile ecosystem tightened the security of commercial apps, thereby protecting the lifetime monetization of iOS games and apps.

A five-year old game like King Digital’s Candy Crush Saga still generates $47 million in net monthly sales (Apple’s 30% cut was already deducted). Notice that Candy Crush Saga’s downloads is way lower than Android’s. However, the iOS version of Candy Crush Saga generates far higher net monthly sales.

Apple Stock Prediction

Apple Stock Prediction

(Source: SensorTower)

Unlike Google, Apple also operates an exclusive app store in China. Apple has it easy raking in its 30% cut from hit Chinese mobile games like Honor of Kings. Tencent’ (TCEHY) Chinese mobile MOBA game generates monthly sales of at least $150 million in China. Around $100 million of that amount is probably being spent through Apple’s China app store. Take 30% of $100 million and multiply it by 12, Apple’s share is $360 million/year from just one Chinese mobile game.


Apple has a rich, growing app store business. It won’t feel any pain from lower-than-expected iPhone sales this Q4 2017. I therefore endorse this stock as a buy. Apple is the biggest beneficiary of the massive mobile apps industry. The iOS ecosystem is now so big that Apple has a mini-cloud computing business catering to mobile gamers.

Yes, sir. Hosting and managing more than a million iOS apps is considered as a cloud computing effort. Processing in-app purchases and outright app purchases is a datacenter-level industry. The Services division is Apple’s rising star player now that its most valuable player, the iPhone segment, is losing steam. Think of Services as Kawhi Leonard and LeBron James the iPhone. The iPhone is still the best revenue generator of Apple. However, it is getting old and losing its invulnerability (it is now plagued by production delays).

Past I Know First Forecast Success with AAPL

I Know First’s algorithm has made accurate predictions on AAPL in the past, such as its bullish article published on September 16th, 2016. In the article, it explains that the best camera is what people always carry around, and that is the smartphone. The improved photography potential of the 5.5-inch iPhone 7 is the most compelling reason why many people should upgrade to it. Forbes Contributor Gordon Kelly agreed with my assessment that the iPhone 7 Plus is now a legitimate replacement for their bulky DSLR cameras. Since the September 16th, 2016 forecast, AAPL shares increased by 34.21% in line with the I Know First algorithm’s forecast. See chart below.

Apple Stock Prediction

(Source: Yahoo Finance: AAPL)

This bullish forecast for AAPL was sent to I Know First subscribers on September 16th, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

Apple Stock Prediction

Apple Stock Prediction