Analyst: Apple shares back on track after March guidance scare

“Apple’s iPhone Product Cycle is ‘Alive and Well’ for 2018.” —GBH Insights’ Daniel Ives

From a note to clients that landed in my inbox Tuesday:

With Apple shares hitting all-time highs today and having a significant snap back from the dark lows we witnessed post December results/March guidance, we believe the Street is now starting to fully appreciate the massive iPhone upgrade opportunity on the horizon for FY18 with three new smart phones slated for release. Importantly we estimate Apple has roughly 350 million iPhones that are in the window of opportunity to upgrade over the next 12 to 18 months, now it’s about which model and price point “strike a chord” for these customers to ultimately upgrade as the iPhone X demand has softened since reaching a supply/balance level in late December.

Maintains Highly Attractive rating and $205 price target.

My take: Easy to say now that the stock has recovered.

13 Comments

  1. Gregg Thurman said:

    “My take: Easy to say now that the stock has recovered.”

    That “scare” got to me. After 14 years of doing this you’d think I would be immune to irrational declines. But no, I sold all my April contracts, not believing that in the then current atmosphere AAPL would not recover $50 (33%) in 3 months. That emotional move cost me $125,000. I can afford it, but would rather not.

    The hardest part of looking back is that, with a damaged outlook, I didn’t take advantage of the dip (still not in) and my former Aprils are on track to payoff.

    3
    February 27, 2018
    • Ken Cheng said:

      It’s why I don’t trade options too often, even though I studied them in grad school. Hard to stomach at times.

      0
      February 27, 2018
      • Gregg Thurman said:

        Your mistake was studying options. The key to options success is knowing the underlying equity as good as (better?) WS.

        In doing so I have become contemptuous of financial “journalists”, the WSJ, CNBC, bloggers and especially WS analysts (with a few exceptions).

        0
        February 28, 2018
  2. Phil Service said:

    It’s beyond me why the March guidance was considered a “scare”. As I recall from checking at the time, Apple’s guidance for the current quarter represents 15 – 20% Y-o-Y growth. AAPL is doomed.

    2
    February 27, 2018
    • Gregg Thurman said:

      Apple’s March quarter guidance was exceptional. The “problem”, as is often the case, was WS’s expectations. When AAPL (or any company) doesn’t meet WS’s expectations they never admit to being irrationally exuberant, they immediately blame the firm, taking the position that they know better than management. The media reports analysts derision (extensively) that then leads to a negative narrative.

      0
      February 28, 2018
  3. Tommo_UK said:

    My loss: being all-in on leverage.
    My gain: being long the VIX and buying the AAPL dip almost at the low, adding on the way up again..
    My take: I never want to go through that again.

    0
    February 27, 2018
  4. Ken Cheng said:

    I didn’t consider the drop anything to do with Apple, but more a macroeconomic effect, or at least the market’s interpretation of the strong jobs report and potential interest rate consequences.

    0
    February 27, 2018
    • Tommo_UK said:

      Apple was going down well ahead of that. The events of Feb 5th/6th just exacerbated the downwards momentum already building.

      1
      February 27, 2018
    • Gregg Thurman said:

      Absolutely correct. There 2 kinds of dip causation: a negative change in a firm’s fundamentals (a micro event) and a macro event. Macro events are out of management’s control and generally are of short duration.

      This last selloff began in the Asian indexes (Nikkei, Hang Seng) then spread westward to Europe (FTSE, CAC, DAX). By the time the markets opened in the US the world markets were in panic. Much of that panic was in program trading that once triggered dumped a lot of shares into a weak environment. The bottom occurred when informed PEOPLE couldn’t resist the bargain sale and started buying.

      The depth of the selloff led me to believe it would be of longer term than usual, and my April contracts (staggered exit points at $185, $190 and $200) we’re hopelessly underwater. Today the $180/$185 Spreads and $180/$190 Spreads are trading higher than my entry points.

      0
      February 28, 2018

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