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Apple sales are still 'all about the iPhone': Analyst

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Tigress Financial Partners CIO Ivan Feinseth analyzes Apple's growth in electronic sales following its third-quarter earnings beat, trends in tech earnings, and Apple's advertising and streaming opportunities.

Video Transcript

RACHELLE AKUFFO: Taking a look at Apple stock there, still in positive territory of about 3 and 1/3 of a percent there after reporting earnings. So here to break it down further is our guest, Ivan Feinseth, Tigress Financial Partners chief investment officer. So Ivan, taking a look at what we saw there, beating the Street's expectations in terms of sales and profit, but still showing some signs of slower growth there. What was your big takeaway from this report?

IVAN FEINSETH: This is spectacular. First of all, it's not better than feared. It's just way better. And not only did they overcome all these headwinds that you mentioned before, the lockdowns in China, the supply chain issues, shutting down of Russia, and the overall general economic uncertainty, but look at the size of the numbers that they're dealing with. I mean, tens of billions of dollars. I mean, just services alone of almost 20 billion in the quarter, that is more than 80% of the S&P 500 companies do on an annualized basis.

I think it's even more than half do on a-- their quarter than most companies do in a year. This is just incredible. And it's all about the Apple ecosystem and flywheel just selling more devices, people connecting more to services and consuming more services, and then continuing to expand the content that's available as far as music and entertainment. The big push that is yet to come in fitness and healthcare, and just the incredible consistent demand for their products. So I think this was an incredible quarter in light of what we are going through right now in the economy, in the market, and in the world.

DAVE BRIGGS: Rather remarkable, isn't it? I mean, despite all those headwinds, you mentioned they're still on pace for near 100 billion in profit in 2022. Only a 1% pullback in China, which is rather remarkable itself, considering the lockdowns there. Tim Cook talks of pockets of softness, though, to CNBC. Where are they?

IVAN FEINSETH: Well, Mac sales were a little bit lower than expected, but that's all about having a portfolio of products. At any one time, some-- and Mac is going through a cycle transition. They introduced some upgrades to the Air and the new iPad. So it goes back and forth between people buying the iPad versus a Mac. And but still, it's all about the iPhone that has consistent, strong demand and every version of the phone sells much more than the previous one. And everybody says, oh, it's going to slow. Well, it hasn't slowed down.

And it doesn't seem like it's going to slow down because if they're doing this well in this environment-- and this is why companies better than feared and the stock reporting better than feared and the stocks rally because if they can make it through times like this, then when things do turn-- and again, this whole inflation is driven by supply chain issues. It's not about demand. It's about supply. And if we never had the pandemic, we never would have had these breaks in supply chains. And this inflationary pressure would have never existed.

Now, the other wildcard now is what's going on with Russia and Ukraine, which is sad and causing other issues and that are rippling out to global economies. But eventually, there will be some resolution there. And it will be business as usual. And companies like Apple and even Meta that was a little disappointing, yet-- in financial results, but user engagement and number of users continues to grow. Microsoft, again, soft current quarter, incredible 2023 outlook. So, for the most part, we're going through short-term headwinds that are creating long-term buying opportunities in all of these leading companies.

SEANA SMITH: Ivan, what's your perspective on the potential here for services? During the quarter, 19.6 billion, pretty much in line with what the Street was expecting. Morgan Stanley saying that services, the pivot there could get Apple back above 3 trillion. What do you see as the potential in this division?

IVAN FEINSETH: Well, they are in negotiations with-- versus several other companies to get NFL. Live action sports is going to be the next big driver of not only viewership, but I mean, Apple-- I believe Apple, at some point by the end of this year or even early next year, will introduce a virtual reality headset that brings them into the Metaverse. And it will be about interacting with content and interacting with other people in this virtual reality of the Metaverse.

So live sports is also very powerful for embedded commercials. And so they are continuing to-- there's been a big bid for soccer for all kinds of live sports, and as well as developing movies and TV shows. So it's all about content. And then we will move to this next content-- the next level of watching interactive content in the Metaverse.

And the Metaverse is going to be the next big thing for all of these companies, Google, Apple, Microsoft, Amazon. And they're all going to be in Meta and going to be a big part of it. And this is going to be a game changer on so many ways and levels. Not only for consumers, but in commercial interaction and learning and manufacturing and product creation. So there's a lot of great things ahead of us.

RACHELLE AKUFFO: And consumers do seem willing to still keep spending on these iPhones, the new one supposed to roll out in September. And Tim Cook also telling CNBC they had a record level of switchers from Android to iPhone. Not me, in particular, but they did see that record number of switchers there. Where do you see their iPhone growth going from here?

IVAN FEINSETH: Well, there's still-- I mean, there's still people with iPhone 8s. So there are still a lot of people yet to upgrade, and a growing population of new adopters. I'm kind of surprised about the switching from Android to Apple, but that's positive for Apple. And still, though, the overall Android installed base is much more even sizable, surprisingly, than the Apple iOS installed base. So there are a lot of opportunities for Apple and for Android and for Google.

But so-- but one of the things about Apple's ecosystem is that all of the Apple products do connect incredibly well with all of the Apple products. And they do have-- I don't even want to say it's a customer base. It's a fan base. They have an extremely loyal fan base that consistently buys and upgrades Apple products, as well as expands their ownership of Apple products for other family members and other business employees in a business situation.

So there is a lot of opportunity ahead for all of these companies. And Apple will continue to lead because it's all about innovation and quality of products. And Apple does innovate, and they produce a very high quality product.

DAVE BRIGGS: Right about those fans. It is an emotional attachment we all have to Apple. And it's a remarkable report. Appreciate it, Ivan Feinseth, Tigress Financial Partners chief investment officer. Great stuff.