Posts Tagged ‘iPhone’

Apple (AAPL) reports after the bell today.

Everyone expects a miss.  Lots of people have already significantly cut iPhone and rev estimates.  The stock has already fallen about 10% (correction territory) in just the last two weeks… so a lot of negativity is already priced in.

On the other hand, what’s NOT priced in are two biggies:

(1)  Apple is going to talk about what it’s going to do with its MASSIVE repatriated cash horde.

I think this is going to be stunning… since I believe it may be the LARGEST cash repatriation EVER for a corporation.

All kinds of stock-positive things will be discussed… like significantly raising the dividend… or massively increasing buy backs… and so on.

So this will be a positive.

(2)  The market is so totally fixated on iPhone that it sometimes forgets that Apple has other massive businesses, too… like services… like Mac… like iPad… and so on.  And like the rest of tech this quarter, I think those will surprise to the upside as well.

So, my thoughts are these:

The bad news about iPhone is already mostly priced in, which I think minimizes or eliminates the downside.

The good news about repatriated cash usage and all the other Apple businesses are NOT priced in.

So I tend to think they’ll be more of an upside surprise than not.  Which is counter to the way everyone’s going into this earnings call.  As a contrarian, that’s scary but what I like as an investor.

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Lots of downgrades for Apple over the last few weeks.  The stock was spooked from a $180 level just two weeks ago to around $166 today.

It has nothing to do with the holiday quarter that Apple is going to report on tomorrow after the market’s close… that, people believe, will come in at record levels.

No, it has to do with how the iPhone X is selling this quarter.  Channel checks with suppliers indicate Apple is slashing its expectations of iPhone X sales this quarter… by as much as half

… which certainly seems like a huge let down given that the iPhone X is supposed to be the flagship product and the first iPhone to crack the $1,000 price barrier.

But… come on, people… did you really think a $1,000 iPhone X should sell in consumer numbers?  It’s not supposed to be a volume leader… rather, it’s supposed to be something exclusive and, quite frankly, unattainable for many.

That’s the whole point… to have a high-end iPhone entrant that (1) makes the device/technology more desirable, and (2) contributes in some way to an even higher overall iPhone family “ASP” or Average Selling Price (which is already the highest in the industry).

My guess is — since there are no negative reports on the iPhone 8 — that it’s not only selling well, but making up for any short-fall from the iPhone X… after all, if they’re not buying an iPhone X, they’re buying one of the other not-so-cheap models.

Additionally, don’t be surprised if some of Apple’s “smaller” businesses — like cloud & other services — make meaningful contributions, too.  Even the analysts that have raised flags on the iPhone X agree that last quarter should be pretty spectacular for the company.

And, finally, I always have to throw in the irrationality of the market:  Apple, one of the most stellar tech companies in the world according to any measure (even growth), has a P/E of 14.2 forward earnings… while the average company in the S&P 500 has 18.6.  If you’re looking at tech leaders, Google has a forward P/E of 28… and Amazon has — wait for it — 168.  Go figure.

AAPL has been beaten down so much by negative sentiment in the last few weeks that I think we might have a nice setup for a pop after earnings tomorrow.

At least, that’s what the contrarian in me thinks.

The market seemed quite disappointed that Apple “only” released an upgraded iPhone 4… rather than a new, spify iPhone 5.

After all, Apple lovers have waited an eternity for the new model… err, I mean a whole 18 months.

I was watching the news yesterday morning… lots of shots in front of the Apple building where the announcement was being held… and on the front of the building some beautiful and simple Apple-styled icons about the event… one in particular caught my eye, a giant “4”… as part of a calendar icon showing the date, October 4th.

It looked weird for some reason.

Now it’s a “duh” moment for me.

I don’t think Apple could have signaled its naming intentions any stronger than scheduling the event on October 4th — as opposed to easily being able to have it on October 5th — and putting a giant “4” right in front of our faces.

Duh.