Stock analysis of Apple AAPL, by Brian Colello, CPA, analyst for Morningstar Research Services We believe Apple's strength lies in its experience and expertise in integrating hardware, software, services, and third-party applications into differentiated devices that allow Apple to capture a premium on hardware sales. Although Apple has a sterling brand, strong product pipeline, and ample opportunity to gain share in many end markets, short product life cycles and intense competition will prevent the firm from resting on its laurels or carving out a wide economic moat, in our opinion. We believe Apple has developed a narrow economic moat, thanks to switching costs related to many attributes around the iOS platform that may make current iOS users more reluctant to stray outside the Apple ecosystem for future purchases. In our view, much of Apple's exponential growth in recent years has stemmed not from the firm's economic moat, but from the achievement of building the first truly revolutionary smartphone, the iPhone, that integrated hardware and software, as well as a robust app store and ecosystem that attracted new users to platform. Apple's first-mover advantage and "easy growth" from new smartphone adopters is over, but the company appears likely to retain its existing premium customer base and could still attract some switchers from Android over time. Ultimately, we think future smartphone competition will stem from software and services, as we're seeing less and less meaningful hardware differentiation. We view Apple as well positioned to develop and expand enough services to enhance the user experience, in order to build switching costs that will help the firm retain customers and generate significant repeat purchases will be critical for future iPhone growth in the years ahead. We consider almost all other products and services that Apple offers (Apple Watch, iCloud, HomePod, AirPods, Apple Pay) as not only incremental revenue and earnings drivers for the firm, but as (more importantly) improving the iOS ecosystem that will enable Apple to sell future iPhones at premium prices to a loyal customer base.