Apple watcher Gene Munster on why the company still shines

Apple doesn't receive the attention it once did, so you maybe missed that Apple unveiled some new products last week at its annual launch event.

The new iPhone 11 models were clearly upgrades, yet still managed to look a lot like the iPhone X that made its debut a couple of years ago. Meanwhile, maybe the most noteworthy news about the latest Apple Watch, aside from a model sold at a lower price, is that the screen never goes dark.

Not sure that even seems like a feature.

There probably weren't many doubters in the room last week at the Steve Jobs Theater on Apple's California campus. In recordings of the event you could hear the hooting and hollering of the fans. Out there among them in the theater was Gene Munster, co-founder of Loup Ventures in Minneapolis and among the highest-profile close observers of Apple.

By day's end, Munster had published "Proliferating Arguably the World's Best Consumer Tech," his quick overview of an event that demonstrated to him, once again, that Apple remains better at producing consumer-technology products than anybody else.

This isn't what we often hear with Apple these days, even though Apple is worth roughly $1 trillion. So it is worth taking a step back to see a little of what Munster sees to understand how the maturation of one of the most extraordinary businesses of this or any era may not mean stagnation.

For the doubters, the story is simple. There have been no category redefining products since the passing of co-founder Steve Jobs in 2011. The iPad appeared nearly a decade ago, and it has been a dozen years since the first iPhone.

"It's a well-traveled theme" is Munster's response to this persistent criticism of Apple's recent innovation record.

"Commentary following [the event] has largely been in line with that," Munster continued. "But it generally misses the point. You can get a little too wrapped up in the details of what comes out every event and miss the bigger picture."

What he got out of the presentation is that Apple displayed what its customers wanted. The iPhones, for example, included improved cameras and battery life.

Apple executives last week talked about customer satisfaction scores near 100. And while admittedly it is Apple's own research, Munster said, Apple remains masterful at giving customers a good experience by selling them stuff that all works together, from the gadget to software and available services.

"By definition, that means they are innovating," he said, "because these are tech products. The customers are saying they are innovating around things they care the most about."

News accounts after the last quarterly results noted a continuing slump in iPhone sales, but Apple still managed to sell about $26 billion of phones in the quarter. Apple no longer discloses how many phones it sells, but third parties have put the number at about 35 million.

Imagine designing complex little computers and then releasing the new designs to an operations team with every expectation that it can get 10 million of them built and shipped to customers in a single month.

Sales growth, on the other hand, has lately been difficult to come by for the company. It is clear the smartphone business is maturing pretty much like the laptop computer segment did 15 or 20 years ago, without enough new technology every year for consumers to justify dumping still functional machines they might have owned for a year or two.

Among other things, this transition in the laptop market made it more difficult for producers to come up with clearly differentiated products that could justify a premium price. IBM Corp., which helped usher in the age of cheap personal computing with its 1981 launch of the IBM PC, even decided to get out of the personal computer business 15 years ago.

The fast growth years for the phone business might be in the past, but Munster sees at least two big categories that Apple could go after. One he calls "mobility," things like technology for self-driving cars. The other is gradually introducing or adapting products for health care applications.

A staple, of course, just means something people really don't want to do without. Producers of consumer staples, like breakfast cereal, are decidedly low-tech businesses.

A consumer staples company should keep generating sales no matter what is happening in the economy. In good times and not so good, people still eat packaged foods, shop at grocery stores, apply deodorant and pick up a 12-pack of beer to enjoy during the Sunday football game.

That is the reason investors value these companies so highly, and as a group their stocks trade at about 30 times the current year's earnings estimates. They may not be growing all that fast, but future cash flow seems solidly predictable.

Even with a market capitalization of roughly $1 trillion, Apple stock is trading at only about 17 times the consensus estimate of its next full fiscal year of earnings.

Can the perception of Apple change so much that $300 billion or $500 billion of wealth gets created solely by investors deciding that Apple's earnings might be worth more than that? That doesn't seem likely, but it has rarely seemed wise to bet against Apple.