Apple (AAPL) earnings preview: mid-teen revenue growth

Apple’s competitive advantage stems from its ability to package hardware, software, services, and third-party applications into sleek, intuitive, and appealing devices. This expertise enables the firm to capture a premium on its hardware, unlike most of its peers. Despite its admirable reputation, loyal customer base, and a myriad of unique products, the consumer hardware space can be unforgiving to firms unable to consistently satiate the customer’s appetite for more features.

The firm enjoys stellar returns on its devices by offering a unique user experience with its iOS ecosystem. Contrary to its peers in PCs and smartphones that rely on relatively open operating systems, Windows and Android, respectively, Apple’s walled garden approach for its popular iOS allows it to charge a premium for relatively commoditized hardware not too different from that sold by Samsung, Dell, and others. Customer switching costs are elevated for Apple users as a non-Apple iOS experience does not exist, unlike computing platforms for the Windows or Android ecosystems that boast PCs and smartphones from many firms.

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