Apple Stock Continues To Showcase Value In Undervalued Assets (NASDAQ:AAPL)

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Professional baseball player in motion, action during match at stadium over blue evening sky with spotlights. Concept of sport, show, competition.

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Playing ball is taking on a whole new meaning.

At the first of its hype events this year, Apple (NASDAQ:AAPL) on Tuesday revealed the rumors were true and it would be entering into a deal with Major League Baseball. For investors, the news shouldn’t be a surprise; if anything, it is more of a welcome assurance Tim Cook and team are staying the course on its “moneyball” approach to streaming and not trying to hit a grand slam this early in the game.

Yet that wasn’t the only big news for Apple this week and it may not be the last in the coming weeks.

First, as always, some background.

I’ll keep this part a little brief because I dove into this background in January when I first covered the MLB rumor. The most important element that people overlook here is that MLB and Apple have a longstanding relationship.

One of the first apps launched in the store was MLB’s and it has been a consistent performer ever since then. So, it stands to reason the two companies would want to continue to work together. As I wrote prior, this is a proposition that plays well for both sides. Apple gets to expand its offerings and MLB gets a new partner that has close ties to a younger audience that it covets.

What’s also interesting here is that the deal is for Friday Night Baseball versus the Monday and Wednesday packages, which had been rumored to be on the block. Again, this is something that works well for both sides – Apple gets to launch a new brand from scratch that it can own and MLB gets to, in turn, sell the Monday and Wednesday packages to another network (reportedly NBC for its Peacock service) and rake in extra income.

Now the elephant in the room here is the fact that at present there is no MLB season on the horizon. Players and owners are engaged in a lockout over a new contract and a deal like this, which lines the pockets of the owners, is not really going to help anything.

Apple though is patient.

Apple is always patient.

The entire lifespan of Apple TV+ has been built around patience and at times that would try the patience of analysts who disagree with the company’s approach to the streaming space. Many just want Apple to make a big splash – buy a big company and further compete with the likes of Netflix.

That’s a mistake and investors are fortunate Tim Cook and his team seem to know that fact.

I used the term “moneyball” earlier in the piece and simply put, to those who may not be familiar, “moneyball” is a baseball term that basically means going against the grain. It was made famous by the Oakland A’s when its general manager turned to stats and figures to build a team over the opinion of experts in the field.

A still image from Sony

Sony

The thinking is more that to score runs you had to get players on base, so singles and doubles were more important than just triples and home-runs. At a high level in business, it also means buying the undervalued and selling the overexposed.

That’s what Apple is doing with Apple TV+.

And Major League Baseball is very undervalued.

It’s a three-hour long game where nothing happens for long periods at a time – and I say that as a fan. It is the polar opposite of the faster pace world of the NFL, NBA and NHL… but there is appeal there and it is valuable and it hits a cross-section of viewers that Apple and MLB know are profitable to them.

Apple buying a company just to buy a company because the market “says” it is supposed to, is a rushed move that is purely reactive… that’s not Apple’s style. Apple likes setting the pace and having others react to them. The MLB deal is part of a calculated approach to add together new elements that only Apple can offer – and still at the low $5 price point.

Keep in mind the service itself is just over two years old; it is still very young and it has made amazing strides since those convoluted early days. Apple TV+ was always a value added proposition to consumers, which is something many critics miss.

They like to point to a (presumed) low subscriber count and churn rate as an argument that Apple doesn’t know what it is doing. Yet the opposite is true and all of this is by design. Apple knew that by hiring the right people and working with the right creators the success would come.

Need proof? Look at The Morning Show and Ted Lasso which, in addition to being popular with critics and audiences, are both Emmy winners. Apple won the top prize at the Emmys in just two years; it took Netflix (NASDAQ:NFLX) nearly a decade to achieve that feat… ironically both happened the same night.

And remember earlier when I teased that Apple could be making more news before the month’s over? Well, those whisperings began last weekend when Apple original CODA won hardware at the Screen Actor Guild (SAG) awards. In addition to Troy Kotsur’s history-making win for Best Supporting Actor, the entire cast won Best Ensemble (the SAG equivalent of Best Picture), upsetting the two presumed favorites.

CODA, like baseball, also isn’t as splashy as its contemporaries… but that’s the point. It’s a movie that centers around the dynamics of a deaf family – with a cast that is predominantly deaf themselves. It’s a powerful film that is giving a platform to a group that usually doesn’t get one.

(Credit: Apple)

While not always a precursor to who will win at the Oscars, the SAG results have consistently signaled when the race is changing and a dark horse is emerging. CODA is proving to be an undervalued dark horse.

Apple likely never imagined in its wildest dreams two years into its streaming foray that it would be talked about as a real contender to win Best Picture… and yet here we are.

Believe it or not – and I know many do not – awards do matter to these big giants of the industry.

In fact, you can argue awards carry the same level of importance to Apple that they do to Netflix, largely because it’s tangible validation. For Netflix, it’s needed to attract new subscribers and new creatives, and for Apple it’s needed because it builds its brand recognition and can also lead to more of its hardware being sold.

That’s also what the many are missing – Netflix is using its deals to try to get people to spend $15 a month, Apple is using its deal to try to get people to spend $1,500 all at once.

You can do the math.

Apple knows when it gains a consumer they are likely going to get more than $5 subscription out of the deal. They are bringing them into the world of Apple and its high priced toys… which are constantly being updated.

That’s the win.

Where Netflix is struggling right now is that its core business is singular – streaming. Whereas all of its big rivals have multiple lanes of revenue, Apple being no different. It’s also why when Apple glosses over subscriber count (and streaming in general) at its earnings call nobody blinks, but when Netflix pulls in less new customers, the sky is falling.

It’s not.

This last earnings cycle, Netflix was the only mainstream streaming service to not put up high metrics – even longtime punching bag AT&T (NYSE:T) was able to boast good news about HBO Max. The reason is because the parent companies of the other streaming leaders are diversified, which is what Netflix is trying to do, but is surprisingly late to the game.

For Apple, it’s been ahead the whole time.

Apple Music, News, Fitness, Arcade… etc. are all ways to build its brand up while not losing focus of its core hardware-first strategy. The MLB deal is a part of that because it continues to bring new value to mix and even if it is just two live games a week, it’s still two live games it will promote like crazy. Apple will make you think these are the two must watch games of the week because that’s what Apple does.

Like baseball, streaming has become a chess game where it comes down to more than who has the most power – it comes down to who uses that power the best.

Game on!



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