Is Apple’s next frontier The Great Outdoors?

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Key points to remember

  • Apple has announced the ability for iPhone 14 users to send emergency SOS messages via satellite, even if their cellular or WiFi service range is outside of it.
  • They have committed $450 million to build the service’s infrastructure, which includes the option to buy a significant stake in private satellite company Globalstar
  • Along with the Apple Watch Ultra announcement, it looks like the company could make a serious push into the outdoor recreation business, which is worth nearly $700 billion a year in the US alone.

Like every year, all eyes were on the Apple event last week as they announced their latest iPhone, Mac, iPad and software updates. The event may not have the same hype as years past (nobody’s sleeping on the pavement for the iPhone 14), but it’s nonetheless a key preview of Apple’s upcoming plans.

Typically, new features announced showed incremental improvements and upgrades across the board, but there was a thread woven through some of these announcements that provided clues to one of the next growth areas. from Apple.

That is to say the adventure and outdoor market.

Apple has been rumored for some time to add the ability for iPhone users to send messages via satellite, and the feature was finally announced at last week’s event.

They have entered into a partnership with satellite company Globalstar, which will allow iPhones to sell short, emergency text messages even if the user is out of cell range.

It may seem like a minor feature, but it could have massive implications for the outdoor recreation industry. This is especially true when combined with the introduction of their new Apple Watch Ultra.

Globalstar and the outdoor watch market leader Garmin’s
GRMN
stock prices reacted strongly to this news, so let’s break down what this push could mean for Apple, as well as dissect how it could affect companies already in the space.

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Apple’s new satellite features explained

The new feature allows intrepid adventurers out of range of Wi-Fi and cell phones to text SOS to emergency services. This service is not designed to be used by hikers to tell their partners to restock the beer fridge or order a pizza, it is only for people who are in real danger and need help from emergency.

The phone will initially attempt to connect to emergency services through traditional methods i.e. through a cellular signal or WiFi. Even if a user’s phone carrier does not have a signal, other carriers can be used to contact 911.

If this connection fails, iPhone will connect to a Globalstar satellite and transmit user information such as location, medical information, and remaining battery life. It can also be configured to notify your personal emergency contact that you have contacted 911.

The feature will only be available on iPhone 14, and at launch it will only be available in the US and Canada.

Dedicated satellite phones have been around for a long time, but they are expensive to buy and operate and have generally only been used by adventurers who really go off the grid.

This update makes some of the core technology of these dedicated devices available to anyone who owns the latest iPhone.

The agreement between Apple and Globalstar

Apple is going to be shell out $450 million to launch this new feature, with the majority of it going to Globalstar as part of a deal that will see Apple acquire a percentage of the company.

This seemed like great news for the company, until it became clear that Globalstar would need to borrow millions of dollars on top of Apple’s investment.

That’s a concern for a company that already has $350 million in net debt against revenue of about $140 million over the past 12 months.

Apple will also offer this service for free to iPhone users. Now, you imagine there won’t be as many people each year who have to call 911 when they’re out of cell phone range, which suggests the revenue going to Globalstar won’t be as significant. important.

That said, the fact that they’re spending $450 million to set up the satellite infrastructure suggests there are bigger plans for the future of space.

There are already a number of companies vying for ownership of the stratosphere, with Elon Musk’s Starlink one of the main players, as well as Lynk Global and AST SpaceMobile.

It’s clear that Apple is keen to allow its users to think outside the box while staying connected.

Should Garmin be worried about the Apple Watch Ultra?

The release of the new Apple Watch Ultra further reinforces this push. It’s bigger, tougher and more expensive than any previous Apple Watch, and it’s aimed squarely at the “premium” fitness watch category dominated by Garmin.

It’s an odd position for Apple, given that the rest of their product line is aimed squarely at the high-end segment of the market. When it comes to fitness watches, the likes of the Garmin Enduro series can run well over $1,000.

Along with the higher price comes advanced mapping, heart rate and fitness features, as well as greater durability and battery life.

That makes the regular Apple Watch line, which starts at around $250, a relative bargain.

While the original Apple Watch was designed to cater to young professionals, casual joggers, and busy moms and dads, the new Ultra (as well as many Garmins) is aimed squarely at marathon runners, triathletes, hikers and mountain bikers.

Right now, the new Ultra is still a long way off for hardcore adventure seekers, but it brings the series closer than ever to being on the wrists of trail athletes everywhere.

The ace up Apple’s sleeve could be the new satellite capability. While the feature isn’t available on the Apple Watch right now, it’s not hard to envision it being added in future releases.

With the ability to use Apple Watch both as a regular phone on a cellular network and potentially as a satellite communications device in the future, it could provide outdoor enthusiasts and athletes with a compelling package that sits directly on their wrist.

However, there’s also something to be said for Apple upping the pie for companies already in the space. You might expect Garmin stock to drop on the news that Apple had a new competing product for its high-end watches, but the opposite happened.

Garmin’s stock has fallen significantly so far this year, but it actually rebounded 3% on the announcement of the Apple Watch Ultra.

It could be that the marketing dollars spent by Apple highlighting the benefits of a rugged, outdoor-focused watch could raise awareness for the product segment as a whole, which could work in Garmin’s favor in the long run. .

It remains to be seen how far Apple plans to go in this space and how much that will impact Garmin’s results.

Market potential

Putting it all together, it becomes a compelling story for an Apple push into the outdoor recreation business. Unless you run or cycle the trails every weekend already, you might be surprised how big this market is.

Garmin’s market capitalization is currently around $18 billion. It’s a similar size to other big global companies like Spotify, Coinbase, and Best Buy.

According to the Bureau of Economic Analysis, the the outdoor recreation sector is worth $689 billion and contributes 1.8% of US GDP. Surprisingly, this makes it a bigger industry than mining, utilities, agriculture and ranching, and chemical manufacturing.

Obviously, Apple won’t take on this whole industry unless the Apple car rumors turn out to be the Apple canoe instead, but it does give an indication of the scale of the opportunity in the industry. ‘space.

What does this mean for investors?

The investment landscape is such that we have big companies at the top of the tree that can enter and dominate a new market whenever they want. A $450 million investment may seem like a lot of money, and it is, but it represents just 0.22% of Apple’s current cash reserves.

It’s the equivalent of someone with $100,000 in the bank spending $220. Sure, it’s not nothing, but it really doesn’t matter either.

Just look at what they did to the rest of the smartphone market when they invented the iPhone. Multi-billion dollar companies like Blackberry and Nokia have all been abandoned.

This is a point worth noting for investors trying to pick individual stocks. No matter how good a company, something could always happen at any time to change their fortunes.

That is why diversification is so important.

This has never been more important than now, with a collapsing economy and inflation that remains stubbornly high. When economic growth is weak or even negative, large companies tend to outperform small ones.

They tend to have more cash, more stable income streams, more diversified sources of income, and less confidence in growth to achieve their goals.

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This means that as long as large companies perform better than small or medium-sized companies, investors can profit from this whether the overall market is bullish, bearish or sideways.

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