Apple & Shake Shack: Different Industry Sectors, Same Business Model

UBS analyst Steve Milunovich thinks that the reason Apple Inc. (NASDAQ: AAPL) and Shake Shack Inc (NYSE: SHAK) continue to be successful in selling their products at a higher margin than others is the same.

Milunovich was on CNBC Wednesday to explain that reason and share his outlook on Apple's stock.

Consumers Are Different From Corporate Buyers

"Technology investors are used to looking at companies that sell to other companies," Milunovich began. "And chief information officers put a big focus on cost. In the consumer market, we think it's fundamentally different. Arguably, the product is never good enough and particularly with millennials you are finding increasingly the're willing to pay a premium for a better experience."

He continued, "In Shake Shack's case, it's higher quality beef and better service; for Apple of course it's an integrated phone with services like Apple Pay and Apple Music. So investors tend to always be worried about the attack from below from a cheaper phone, but it's just not happening. And we think this fundamental understanding of how consumers are different from corporate buyers is at the heart of it."

Probably Will Grind Higher

Milunovich was asked what trigger can get the stock moving again. He replied, "Well, I think it's probably going to grind higher. There's a lot of concern about the next product cycle and the difficult year-over-year comparisons."

"I think having good iPhone numbers over the next one to two quarters where there's sense that there is still significant upgrade potential to come is going to help. Our surveys suggest that there is still a significant demand in China. The watch is getting off to a decent, but not to a great start. But I think you'll see a little bit more momentum there," Milunovich said.