A big week for Apple data out of China and Taiwan

From a note to clients by Wells Fargo’s Aaron Rakers that landed in my inbox Saturday:

Apple Data Points in Focus: As we look into the week ahead, we will be focused on:

  • (1) Mobile Phone Exports from China: We expect to receive mobile phone export data out of China for the month of March later this week. This data has shown a high correlation with Apple’s quarterly iPhone shipments (excluding China; R2 = 0.94).
  • (2) China Smartphone Data: Following very weak domestic China smartphone shipments in February (-38% yr/yr; lowest level of shipments since Feb. ‘13), we will be focused the release of March data later this week.
  • (3) Taiwanese Revenue & PC ODM Shipments: We expect investors to be focused on reported March Taiwanese revenue trends; implications for overall PC supply chain and Apple’s results (most notably Hon Hai / Foxconn and Pegatron). We would note that notebook ODM shipments in March have historically increased by more than 30% over February.
  • (4) IDC Prelim. PC Estimates: We think next week’s IDC’s preliminary PC shipment estimates for 1Q18 published could prove a bit softer than expected.

My take: Fasten your seatbelts, readers. With a trade war looming, it’s going be a bumpy ride.

9 Comments

  1. Michael Thompson said:

    If Apple buys back 7-10% of its stock over the next 12 months, as a $100 billion increase to the Capital Return would indicate, then it might be a bumpy ride for the market, but it won’t be a bumpy ride for Apple.

    Even with an increased expenditure of $100 Billion year over year, most of it will be replaced by the operating free cash flow during Apple’s next 12 months and each successive 12 months.

    Apple can increase the Capital Return by $100 Billion per year for YEARS. Anyone that can’t see what’s coming for Apple’s share price going forward is blind. There is no safer stock to own when we’re backed up by hundreds of billions in cash reserves and an annual FCF of more than $60 billion annually.

    We’re going much higher and Wall Street’s concerted effort with the Fake News media to manipulate Apple’s stock price is coming to an end, much to their chagrin.

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    April 7, 2018
    • Gregg Thurman said:

      Not picking on you (although it may seem that way), but using your example numbers Apple could spend $100 Billion for buyback for about 4 years, and in the interim have nothing for dividend payouts.

      Your sentiment is correct, just a little over the top.

      As to timing on burning through excess cash Maestri gave an approximate timetable of 4 years to get to cash neutral (cash equals debt).

      What people are forgetting is that in the next 4 years AAPL is going to $400/share. Sounds crazy but an increasing iPhone ASP (brought about by higher priced OLED models filtering down through the pricing tiers) and increasing unit sales of Apple Watch and HomePod, accompanied by continued double digit services growth justifies the estimate (compound 19% annual appreciation rate). It should be noted that during FY2017 AAPL grew nearly 50% YoY, and even as badly as AAPL has traded since February earnings, AAPL, for the quarter, is up ~23% YoY.

      The only thing that will prevent AAPL from achieving $400 by January 2022 will be a worldwide bear market (possible, its been a long time since the last one).

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      April 7, 2018
      • Michael Thompson said:

        The current market capitalization for Apple is about $850 billion. If $100 Billion is added to the Capital Return over the next 12 months that allows for 10% of the outstanding shares to be repurchased and $15 Billion for the dividend , which would be about a 25% dividend increase.

        The reason that I estimated a 7-10% annual share decrease was to allow for the stock to appreciate and the potential for a higher dividend increase.

        We are in agreement that the stock is going much higher and soon.

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        April 7, 2018
      • Michael Thompson said:

        One other small detail, I would expect that free cash flow will increase over the 4 year period. Although according to Tony Sacconaghi in 2015, 2016 and 2017, Apple’s best days are behind it. How does he still have a job?

        Also, as the shares decrease, Apple pays no dividends on the repurchased shares, allowing for further increases to the dividend.

        No matter how much FUDD the analysts and fake news media engage in, there is simply NOTHING that will get me to sell my large Apple holding.

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        April 7, 2018
  2. Michael Thompson said:

    The days of Apple trading like a “steel mill going out of business” are shortly a memory of the past and anyone that didn’t take advantage of the cheap pricing of the failing “steel mill company” a la Warren Buffett (who has now invested more money in Apple BY FAR than any of his other equity investments in Berkshire Hathaway history), will have regrets.

    While Buffett has other equity holdings that are close to his Apple holding in total market value, his total investment in Apple of more than $20 billion (now worth close to $30 billion at the all-time high) dwarfs any of the amounts originally invested in his other top holdings. For example, he invested a total of $1.2 Billion in Coca Cola.

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    April 7, 2018
    • David Drinkwater said:

      Thinking in terms of investment vs current value (though my total position in Apple is WAY smaller than Buffet’s) makes me laugh a bit. I bought AAPL in 2002 (current cost basis $1.29/share) and sold half my shares in 2007 after the stock split (I was up 5X, so I didn’t want to get greedy). I replaced AAPL with JNJ. Those JNJ shares have nearly doubled in value … 11 years later. I’m very happy with where I am in AAPL today, but I’m also a little bit behind on where I would be if I had never sold on the split. I left a lot of money on the table there. The “sold shares” are also a nice chunk of annual dividend income. That’s life.

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      April 7, 2018
      • Michael Thompson said:

        There is simply NO reason to sell Apple until it gets overvalued, which may never happen. How can the most profitable, richest, and company with the strongest balance sheet trade for a discount to the market. At some point we’ll trade at a market multiple.

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        April 7, 2018

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