The Next Acts for Apple, Amazon and McDonald's
The Vision Pro, Amazon Pharmacy and CosMc's ...
Want to get a handle on a company’s value – you know, what it’s worth?
With a public company, there’s the straight-on, easy-to-calculate approach: Market value … the current share price times the number of outstanding shares.
But market value is a “snapshot” in time … what the company is worth at that moment.
The challenge is projecting what that same company will be worth next week, next month, next year … or 10 years from now. In other words … finding that long-term “winner” by understanding “what comes next.”
One way to put the probability of winning on your side is to invest in companies with the strongest “brands.”
We’re devoting today’s Investing Daily Dose (IDD) issue to three strong brands … companies that are traveling innovative paths to “what comes next.”
When somebody says “smartphone,” you immediately think of Apple Inc. AAPL 0.00%↑.
For online shopping (and “getting it tomorrow”), Amazon.com Inc. AMZN 0.00%↑ is always your first click.
For hamburgers, fries and a Coke, the “Golden Arches” of McDonald’s Corp. MCD 0.00%↑ are just a drive-thru away.
These three companies are among the leading “Brand Commanders” — iconic American companies that take in billions of dollars every year. However, to stay relevant, even icons have to reinvent themselves from time to time. As the old business maxim goes, you’re only as good as your last hit.
And these brands know they can’t skate by on their past success.
That’s why we’re looking at the “next acts” for all three of those players. Because when you understand how they’re evolving, you’ll have a better gauge if the companies could be a part of your wealth-building strategy.
Dose No. 1: A “Vision” of Apple’s Future
What’s Happening
Apple has sold over 200,000 Apple Pro Vision headsets as of January 30, according to a report from MacRumors.
Apple is expected to produce 500,000 headsets this year.
Why It Matters
Apple’s corporate storyline is a familiar one: In search of new revenue, it expanded beyond its computer company base – moving into smartphones, tablets, watches, the App Store and subscription fees to fuel that growth. At the start of each new foray, Apple naysayers were eager to predict doom – to write the company’s epitaph, bring down the final curtain and declare the Apple Era as “over.”
And yet, the Apple epitaph writers are back again. But that potential new-growth trigger is there – though (yet again) the “experts” just can’t see it.
One of those “Next Act” ignitors is the Apple Vision Pro headset.
Yes, with its current $3,500 sticker price, Vision Pro won’t be a “must-have” device for mainstream consumers – certainly not here in 2024.
Understanding Vision Pro demands real vision: This device is shaping up as much more than a fancy headset for gamers: It’s the latest addition to – and extension of — the Apple “ecosystem.”
It’s an ecosystem that reaches into – and connects with – almost every aspect of our lives.
The latest research tells us that 60% of all Apple product users own three (or all four) of the company’s main devices (Mac, iPhone, iPad and Watch). Apple is a masterful cross-seller – which means the “ecosystem” is real. All those customers also use all those gadgets to access services like iCloud storage, Apple TV and Apple Music. Now “services” account for roughly a quarter of the company’s revenue.
To sidestep the MBA jargon, ComputerWorld phrased it simpler still: When it comes to Apple, you are the product. And a headset like Vision Pro will “top” it all off.
Fact is, you need a bit of “vision” to fully see the power of this offering. From creating a personalized workspace with multiple monitors to having your own movie theater in your living room, the Vision Pro takes how you use Apple products now to the next level.
Bill’s Investing Takeaway
“I understood, early on, the power of that Apple ‘ecosystem.’ And that power holds true today.
Once you have that ecosystem in place – and your best customers have become the company’s de facto main product, you’ve got all sorts of super-exciting business opportunities. When talking about Vision Pro, don’t get hung up on the initial sticker price. Look past it … to what this new device will eventually let you do … and how it can work with other Apple devices in that same ecosystem.
We’re talking about new ‘wealth windows’ in entertainment, gaming, workplace enhancements and health. This rollout lets Apple gauge demand, work out any kinks and incentivize developers to create more apps. Then, with the bugs worked out and more reasons to buy a headset, Apple can roll out a less-expensive version.
But there’s no guarantee it will be a success. Maybe it catches on slowly, or not at all. I’m covering the full story in this detailed report.”
Dose No. 2: Meet Amazon’s “Dr. Prime”
What’s Happening
Back in November, Amazon introduced a new benefit for Prime members through One Medical that includes 24/7 virtual care across the country and “easy-to-schedule office visits” – for $9 a month or $99 annually
Prime members also have access to Amazon Pharmacy, which includes RXPass. With RXPass, members can receive all their eligible medications for a flat fee of $5 per month and have them delivered for free in two days or less.
What’s Important
In 2013, journalist Brad Stone released a book called “The Everything Store: Jeff Bezos and the Age of Amazon.” Talk about a prescient call. Getting into health care really does let Amazon fulfill that moniker of “The Everything Store.”
That’s quite a journey for a company that started out as an online bookstore. Amazon has been dabbling in the healthcare space for years, but it finally ramped up its aggressiveness when it comes to health acquisitions.
And those specific acquisitions are now starting to fit together like pieces of a puzzle.
Bill’s Investing Takeaway
“If there’s one idea … one concept that I want you to take away from today’s IDD issue, it’s the concept of an ‘ecosystem’ company. True ecosystem companies are rare … so when you find one, study it carefully … you’re probably going to want to buy the stock … and own it for a long, long time.
Amazon is joining Apple to become an ‘ecosystem company’ itself. They share similar traits. Like their deep customer reach … and all the customer data that gives them. With today’s story about Amazon, this is really a data move that will let the company hyper-tailor its product recommendations (reportedly 35% of its revenue comes from recommendations).
Think about it.
Thanks to all that data, Amazon will be able to provide a mother-to-be with curated product recs that include pre-natal vitamins to maternity clothing to parenting books.
For a consumer, this is certainly a tradeoff … between providing Amazon with more of your personal data (meaning less privacy) in exchange for more-affordable and easier-to-access medical care and related services. But this is a tradeoff consumers are already making elsewhere … for instance, with folks picking up prescriptions at big-box retailers in exchange for the convenience of single-stop/buy-all-I-need shopping.
Amazon’s market power just got stronger.”
Dose No. 3: More Than Burgers and Fries
What’s Happening
McDonald’s will open two of its CosMc’s concept restaurants in June 2024 in San Antonio, Texas.
What’s Important
Let’s go back to that “Brand Commander” concept from the outset of our IDD visit here today.
Late last year in Illinois, McDonald’s launched CosMc’s – a drive-through-only concept that sells food and drinks … though the focus is really on those high-profit drinks.
In an investor presentation back in December, McDonald’s CEO Chris Kempczinski conceded that his company doesn’t have a strong presence in the “afternoon beverage pick-me-up” market. And that that market has a lot of allure: It’s worth $100 billion a year.
And that’s where branding comes into play.
When you get as big as McDonald’s – revenue for the trailing 12 months ended September 30 was $25 billion — and you’re an American icon, pretty much everyone has heard of you.
So finding new customers or tapping into a new market big enough to “move the needle” on sales – will never be ever easy. It comes down to innovative thinking … and innovative new offerings.
That’s what’s happening here.
To the folks who normally hit Starbucks, Panera, or Dunkin’ Donuts for their afternoon pick-me-up, CosMc’s can counter with a Tummeric Spice Latte, a Cold Brew or a Sour Cherry Energy Burst.
Plus, folks who don’t want a full meal but are up for a quick bite can add a snack to their drink order.
McDonald’s is doing a slow roll(out) with the CosMc’s concept, using this learn-as-it-goes approach to gain insight, gather data and do any needed fine-tuning.
These two new locations in Texas are part of that plan.
Bill’s Investing Takeaway
“Through good times and bad — and against all sorts of economic climates — Mickey D’s performance against such a rocky, uncertain backdrop the last few years has my total attention.
During the Great Recession of 2008, McDonald’s stock was up 8.55%, while the S&P 500 was down 38.49%, according to MacroTrends. In 2022, while inflation contributed to the S&P 500’s 19.44% beat-down, McDonald’s ended the year up 0.51%.
Even more interesting is the company’s ‘pricing power’ – which has raised hackles .. and financial results. So you have a company that’s resilient during those rough patches, but now you also have a growth story with CosMc’s and overseas expansion.
There are near-term issues, to be sure, like reports of customers pushing back against $18-Big Mac combo meals and issues overseas affecting sales in the last quarter.
But it’s a strong brand with a good management team headed by CEO Chris Kempczinski … who’s active, visible, articulate and an innovator. Toss in the dividend – 2.2% – and you’ve got a company that’s worth a look for anyone seeking longer-term profits.
I have more on McDonald’s in this report.”
