‘Apple remembers the time it almost went bankrupt’ as it eyes future outlook: Analyst

Rene Ritchie, Tech Analyst, joins Yahoo Finance’s The First Trade with Alexis Christoforous, Brian Sozzi and Ines Ferre to discuss Apple’s potential subscription bundle, future outlook for the company and much more.

Video Transcript

BRIAN SOZZI: Apple's looking to pull you even deeper into its ecosystem while taking a play out of Amazon's playbook. Company is preparing a bundle service called Apple One , according to Bloomberg. It would allow people to subscribe to a number of its digital services at a lower price for the month. Ines, tell us about this one.

INES FERRE: So the goal is really for customers to subscribe to these services and for this to be reoccurring revenue. There are different types of tiers, so to speak, of what this service would be like, reportedly. A basic package-- this would include Apple Music and Apple TV+ as well, and then a more expensive package that would include Apple Music, Apple TV+, and also Apple Arcade Gaming. Then you'd have another tier on top of that that would also include Apple News+ and then another tier that would include extra Cloud space.

The goal is really to offer these group services together, that if you were to purchase them individually, they would altogether cost more. So the bundle, of course, would be more cost effective for customers. But it's really trying to play on the Amazon type of bundle as well, with Amazon Prime. This bundle kind of model has been very successful for Amazon, and other companies have tried to replicate this.

Now, of course, Apple doesn't have this e-commerce delivery network and such. But it does have millions of customers that really are very faithful to their hardware and that have also had some of these digital subscriptions as well. It also is focusing on a family package as well, so you can have up to six people that would have access to these services.

And, Brian, finally, I also want to mention something that they're reportedly working on as well, and that is a new subscription for virtual fitness classes through some of Apple's devices. This is huge because reportedly they are working with Peloton, they are working with Nike for some of these virtual classes. I've always said, I'm not sure why Apple just doesn't buy Peloton because it would be a great fit, a great match. In this case, the company is reportedly working on developing a program where you can take the virtual classes and access them through your devices, through your Apple devices.

BRIAN SOZZI: All right, I want to break this down more with Tech Analyst, Rene Ritchie. Rene, good to see you. You should certainly win my epic backdrop background-of-the-day award. That is pretty impressive there, sir.

RENE RITCHIE: Thank you so much.

BRIAN SOZZI: What are your thoughts on this Apple One news? Is it a financial needle mover for Apple?

RENE RITCHIE: Yeah, I think, you know, they've gotten to the point with iPhone penetration in the market-- it's a very mature market now-- that you want to extract greater value from every customer by providing greater value to every customer. And services are the best way to do that.

But Apple has different services value. Apple Music is easy to understand. TV+, especially with what's going on with production stoppages now, is more difficult. And News+ is far more regional. So arraying those things together and making people buy a little bit more than they might have otherwise, even if it's for a little bit less, could move the needle for them on services.

ALEXIS CHRISTOFOROUS: Rene, what do you think about what Ines just said? You know, it makes sense for Apple to go out and buy Peloton. Do you see that as a match that would actually make sense? I mean, they certainly have the money to go ahead and do it.

RENE RITCHIE: I think, you know, quite possibly. I'm not sure they'd want to actually get into the fitness equipment hardware market. They're very cautious about how far they extend themselves in terms of what physical products they make. But I think in terms of the software, the experience, they have people like Jay Blahnik on staff. They have a huge health system.

The COO, the Chief Operating Officer, Jeff Williams is in charge of all health for Apple. And this is something that they can provide easily with all the resources they have on top of what they're doing with Apple Watch, and with tvOS, and all of those things.

BRIAN SOZZI: Rene, do you think-- you know, the next two years can be pretty fascinating for Apple. You have the potential 5G super cycle on the iPhones. You have these potential bundle plans. As crazy as it may sound, do you think Apple's stock is undervalued at these levels?

RENE RITCHIE: I think, traditionally, Apple stock has pretty much always been undervalued. It's almost like the gambler's paradox, where the more products they ship and win with, the more the market suspects the next one will finally be the flop. And then if they win again, it's just, oh, well, it definitely has to be the flop next time.

But we saw them reach their goal of doubling services revenue early. And it seems like that still has running room for them. And as we approach things like AR glasses, all of these services-- if you don't have to have a physical computer with you, you don't even have to reach for your phone, that's just an even greater market for all of those services. And I think there's a lot of value they can tap into.

INES FERRE: Rene, Ines here. Getting back to the cash that Apple has on hand, what could they buy? What do you see them buying in the future? Would it be, perhaps, a studio?

RENE RITCHIE: I think Apple psychologically still remembers when they almost went bankrupt and when they were incredibly dependent on big houses like Adobe and Microsoft and had to go begging Bill Gates for their basic survival. So I think it's just-- it's almost like they've lived through a depression, and they're going to stockpile as much resources as they can and then do strategic buys, like a Beats, or maybe like a company that lets them enter into or expand the services market.

Studio is super interesting, especially because their biggest problem now is they have no catalog content. After you finish watching the Tom Hanks movie, what do you watch next? Netflix, Disney+ all have that answer, and Apple doesn't.

ALEXIS CHRISTOFOROUS: Yeah, I mean, if you were to pick, it's hard to believe that this is a company that's almost a $2 trillion company, and we're talking about the stock maybe being undervalued. But if there's a weak link that you could point to within Apple, would it be Apple TV, and is the subscription bundle a clever way to get revenue from that, get eyeballs on Apple TV because you're bundling it with these other things that people really want?

RENE RITCHIE: Yeah, I think big picture, Siri is still something they have to invest a ton of money on because Amazon is doing that, and Google's doing that. And this ambient computer model is what you're going to use in the future to tap in to all of these surfaces-- sorry-- services and all of these devices. And that should be as important to them now as silicon was to them for the last 10 years. But then you're going to need exactly those services to fill. When people say, hey, show me a movie, you've got to have that movie to show them.

BRIAN SOZZI: Rene, Apple stock splits 4-for-1 on August 31. How do you think the stock will react?

RENE RITCHIE: You know, I think, initially, it'll probably be just a little bit of a reflex hold on it, and people are going to wait to see what happens. But it's got such upside just in terms of what they're producing compared to a lot of other technology companies that I think it will end up playing out similar to the last stock split, where over time, it goes back up to the point where people start talking about it again.

BRIAN SOZZI: All right, I'll leave it there for right now. Tech Analyst, Rene Ritchie, good to speak with you. And, certainly, all eyes remain on that Apple stock split day on August 31, right along with Tesla. We'll talk to you soon.

RENE RITCHIE: You too.