Apple’s Walled Garden Warrants a Wide Economic Moat; Raising Fair Value Estimate to $150

We are upgrading our economic moat rating for Apple to wide from narrow, as we have greater confidence in the firm’s competitive advantages stemming from high customer switching costs, intangible assets, and network effects associated with its iOS ecosystem. We believe switching costs from iOS are as strong as ever thanks to more auxiliary products and services that make switching away from iOS more difficult over time. Regarding intangible assets, Apple’s differentiated user experience via iOS coupled with its expertise in hardware, software, and now semiconductor design allows the firm to build vertically integrated products more seamlessly. We also see network effects around iOS and its 1 billion-plus installed base with new app development favoring iOS.