Jana’s issue is parental responsibility, not Apple’s
Over the last few days, our Apple (AAPL) shares have risen but underperformed the larger movement in the technology-laden Nasdaq Composite Index. Some of this could be attributed to the lack of Apple’s presence at CES 2018, an event that is teeming with virtual assistant wins for Amazon’s (AMZN) Alexa be it in cars, PCs, and household as well as bathroom appliances. Also throwing some cold water on Apple shares this week has been a resurgence in concern over the addictive nature of smartphones. That follows statements from activist investor Jana Partners and pension fund California State Teachers’ Retirement System urged Apple to develop new software tools to help parents limit phone usage as well as study the mental health impacts of spending excessive time on mobile devices.
Concerns over the addictive nature of technology are nothing new. We’ve heard similar arguments with video games, and yet we are now seeing the rise of professional e-sports teams complete with corporate advertising, arenas, and sponsorships. Halfway through 4Q 2017, the media picked up on comments over the addictive nature of Facebook (FB) made by former president Sean Parker.
As we think back on this, it echoes comments from decades ago that “TV will rot your brain, kid” and yet in recent years we have seen a shift in how and where we consume video content.
Perhaps smartphones and social media may be addictive, but we also have to recognize they are the Swiss army knives for how we consume information and other content, shop and transact, and communicate. The short of it is, these devices touch many facets of our daily lives, and if what we are hearing at CES 2018 it looks like they will be touching more of it.
Getting back to Apple, the company has had parental control settings in its iPhone and iPads dating back to 2008. These controls have allowed for the restriction the kinds of apps, movies, games and other content children can access. With iOS 11, Apple added a “Do Not Disturb While Driving” feature as it continues to stress both safety and privacy.
Will Apple make additional changes? Apple has already shared it will make its current crop of tools more robust, which likely means it will be a topic at this year’s World Wide Developer Conference, Apple’s seemingly annual showcase for its software. We see that as Apple doing the right thing, but we would be remiss if we didn’t point out that it is a parent’s responsibility to oversee a child’s screen time – be it on a smartphone or TV – rather than pas the buck to Apple or one day Samsung, Sony or another company. After all, let’s remember that all of these devices come with an off switch for a reason.
This likely means the current headlines will likely pass and investors will once again focus on the current iPhone upgrade cycle, growing services business, and new products both from the company, like the Home Pod, and others that will make the iPhone a very sticky device. Data suggests iPhone ASPs will benefit from the mix shift toward higher priced and higher margin iPhone X upgrades this quarter, and we are already hearing about new iPhone models for 2017 that will adopt organic light emitting diode technology, a positive for the Universal Display (OLED) shares on the Tematica Investing Select List.
- We continue to rate Apple (AAPL) shares a Buy with a $200 price target.
- We continue to rate Universal Display (OLED) a Buy with a $225 price target.
