Analysts are not usually all that correct in their predictions. Their previous attempts at guessing what will happen in our future have often not turned out all that well. That said, if a new report by Jefferies analyst – Peter Misek – is to be taken with any real credibility, Apple could be yet to face its toughest years.
Issuing a note to the company’s investors, yesterday, Misek highlighted that he believes Apple is facing ‘a very rough two-year period’. Republishing some parts of the investor’s note for the purpose of public scrutiny, Fortune highlights a number of specific points which would appear to back up Misek’s assumptions that hard times are ahead for the Cupertino company.
The first? – capital expenditures. These, the analyst noted, are likely to see increases of around 50% over the next two years alone, (a figure which would, potentially, see the company add $10 Billion annually to its current expenditure). This, the analyst continues, will be caused by the company being ‘forced to finance [expansions in] chip and touchscreen suppliers’ as well as maintaining the intrastructure and operation of its now – globally used – iCloud datacenters.
The second concern in Apple’s future relates to the possibility that the company’s cash balance could be ‘reduced by $10 Billion,’ a situation which Fortune highlights could see as much as $40 Billion worth of the company’s current cash hoard ‘deferred’ over the next 24-months. The main cause of this, the analyst speculates, may relate to Apple’s plans for a cheaper iPhone model targeted at pre-pay countries (such as India), which would – in effect – replace the carrier subsidy model we see today with ‘an arrangement where [Apple] lends the money to buy [iPhones] directly to consumers.’
“We believe alternative distribution models like those in India can improve growth and the financing receivables will largely be securitizable; however, increased capital commitments would make a quick change more difficult should sales fall.”
The analyst concluded that Jefferies, as a whole, believes “high-end white box phones” are “forcing Apple to invest in next-gen screen technology in order to differentiate.”
We guess only time will tell if Misek’s predictions prove to be accurate.