NEW YORK (TheStreet) -- I'm not an Apple (AAPL - Get Report) expert, nor do I read many blogs or reviews about each new product that the Steve Jobs co-founded company casts onto the market. However, every holiday season, as I pass Apple's flagship Fifth Avenue store in Manhattan, I wonder the same thing: Is Apple a technology company or is it the fastest growing luxury brand in the world?
This Thanksgiving, Black Friday and holiday shopping binge, I would challenge Apple investors to think about the company in an entirely new light. Would you invest in Apple if you compared it against the world's prominent luxury brands? Would that hurt or improve expectations on Apple's long-term prospects?
Apple's obvious competitors are Google (GOOG), Microsoft (MSFT) and Samsung. Nevertheless, every quarter I comb through Apple's results and see few similarities between the profit margins and earnings of the iPad and iPhone manufacturer vs. its supposed competition. Mobile devices, which drive astronomical earnings and margins at Apple, have so-far proven to be a cost center for direct competitors such as Google, Microsoft and Amazon (AMZN).
Still, Wall Street analysts can't help themselves from comparing one unit of Apple iPhone sales to those of Windows or Android. It does little to explain why Apple has become one of the most profitable companies in the history of the world, while other device manufacturers languish with volatile and razor-thin margins.I wonder whether it's time to evaluate Apple as one of the premier global luxury brands and find a set of comparable companies with similar margin and growth characteristics. Maybe Apple's better comparable's would be Burberry apparel, LVMH Moet Hennessey Luis Vuitton goods, Diageo (DEO) alcohols, Tesla (TSLA) electric cars, Lululemon (LULU) yoga pants and Estee Lauder (EL) perfumes. Basically, are margin characteristics of one unit of iPhone sold closer to a unit of Windows Phones sold or a unit Johnny Walker whiskey? After all, margin is a percentage, and it's easy to do common size analysis of companies with operations of vastly different scale. OK, fine. Comparing Apple, the most innovative Silicon Valley giant of this generation, to a maker of British trench-coats is a bit ridiculous. Those comparable would also likely create error messages in the Excel spreadsheet models of sell-side Wall Street analysts. But here's the kicker: Buyers of the products from the aforementioned luxury brands are also more than likely to be Apple iPhone and iPad users, relative to Samsung or Microsoft. Why do we relentlessly seek ways to compare Apple with a narrow universe of tech sector giants? Google can take whatever global market share it wants from Apple, and yet when investors see both firm's earnings it is clear who is winning the battle for mobile device profits. More importantly, as investors and analysts speculate when Apple will compete in emerging markets, where Google and Samsung products dominate, few appear to wonder what it would do to Apple's brand and luxury-like profit margins.
Should Apple be chasing device manufactures into China and India, or should Apple wait for those markets to come to its products?
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