Gassée: Wall Street still doesn’t get Apple

In his Monday Note, Jean-Louis Gassée anticipates an “extraordinary” 2018 holiday season for Apple.

From Apple, Sui Generis:

Wall Street still doesn’t trust Apple’s future. The company is seen as an anomaly, it shuns accepted ways of doing business and defies categorization. Perhaps the categories are wrong…

For my money [Gassée writes], the best analyst of Apple’s business is the technically astute, historically knowledgable, and occasionally poetic Horace Dediu. In a tightly-reasoned post, Dediu forecasts $120B total revenue for this year’s Xmas quarter, a 36% increase from the same period in 2017. My more simplistic analysis looks at Apple’s Manufacturing Purchase Obligations (MPO) for the mid-year, a number that, in the past, has reliably forecast up and down trends in the following Xmas quarter. The company’s MPO for the quarter ended in June shows a 31% increase.

A 30+% increase in revenue would be extraordinary, nearly without precedent, especially at Apple’s $200B+ size. If it happens, it will be interesting to see if it impacts Wall Street’s assessment of the company’s future. Perhaps a hugely successful quarter will convince traders that Apple can’t be compared to other companies. Apple, sui generis.

My take: As an Apple watcher, the man who ran the Macintosh division for nearly a decade after Steve Jobs’ ouster—and whom Jobs never forgave for his part in it—is also sui generis.

Below: Gassée unveils the ill-fated Macintosh Portable (1989 video)

13 Comments

  1. George Row said:

    It looks clunky to 21st century eyes but I remember portable computers in the 80s. They were huge barely luggable suitcase-sized things. For its time the Mac Portable was an amazingly sleek, powerful and compact portable computer.

    Even without Steve Jobs there were people at Apple who really understood marketing … so I wonder what was it that motivated them to have the Project Manager re-enact the job of an assembly line worker?

    1
    August 28, 2018
    • Gregg Thurman said:

      I remember seeing a smartly dressed woman dragging an Osborne “portable” through LAX on a two-wheeled cart.

      1
      August 28, 2018
  2. John Kirk said:

    “The company is seen as an anomaly…”

    “it shuns accepted ways of doing business…”

    I don’t think analysts understand Apple. And what we don’t understand, we either fear or mock.

    4
    August 28, 2018
  3. Gregg Thurman said:

    Nothing in their MBA prepared them for an Apple, ergo it must be a fluke to be scorned.

    My $95.177 Billion revenue forecast for the December quarter is looking more and more conservative, to the extent that I’m starting to have difficulty believing it myself. What a nice break from the mundane.

    1
    August 28, 2018
  4. John Butt said:

    I had one of the first Mac Portables as a Telco exec in 1990, I loved it, I was able to do anything I wanted because it had the power of the desktop, but after carrying it any distance I did need a new arm. the next generation was a welcome arrival.

    2
    August 28, 2018
    • George Ewonus said:

      I did purchase the Mac Portable in 1989. Really enjoyed it – but it did weigh a ton! Had a few friends at Apple who were part of the project. When they finished they all went out for a celebratory dinner. As it happened there was a severe thunderstorm and a great clap of thunder. There was silence at the table until someone said – ” Hey, someone dropped a Mac Portable!” I still have that beast of a machine in somewhere in storage.

      0
      August 30, 2018
  5. Fred Stein said:

    “more simplistic” – Like.

    I also like Deidu, a lot.

    That $275 price target looks more realistic. It’s about 20X forward earnings. Jean-Louis Gassée’s estimates imply that current forward earnings estimates are low.

    The street doesn’t get Apple because people have a hard time admitting mistakes. LOLN means nothing, Likewise “communization of hardware”; “can’t innovate anymore”, “iPhone company”, Such labeling, stereotyping, shuts off learning. Hey Wall Street, it’s back to school season. Start studying Apple. Look at all the catalysts for growth, small, large and even tiny.

    1
    August 28, 2018
  6. Gregg Thurman said:

    Has anybody been tracking Manufacturing Purchase Obligations (MPO) and its relationship to future revenue growth?

    I placed an order for 100 Sept Wk2 $217.50/$220 Put Spreads (50 in each of two accounts) at 90¢ this morning (currently trading at $1.02). After reading Gassee’s comments about MPO (something I haven’t tracked in the past) and his admiration of Dediu’s analysis I’ve been thinking the wiser decision would be to look longer term. That means skipping the potential of a pullback and buying out of the money January and April Call Spreads.

    Sure would like to hear from anyone that has been tracking MPO.

    BTW, even if a 31% increase in mid-year MPO only results in 20% YoY revenue growth, Apple reports ~$106 Billion for the upcoming December quarter. Current WS consensus is $90 Billion. Using historical guidance to results ratios, a $106 Billion result means guidance of ~$101 Billion to $105 Billion. That’s fully 14% (at the mid-point) higher than current WS consensus. I’m open to thoughts on how the market will value AAPL in such a scenario. Brian White’s one year $275 target occurring by January is starting to look realistic.

    0
    August 28, 2018
    • Gregg Thurman said:

      Following up on the above I looked at January’s Open Interest and saw this.

      The highest January Open Interest is the $250 Calls at 31,000 contracts. Open Interest jumped during three different periods. They were:

      June 11-June 14 ~5,000 contracts at ~68¢
      July 9-July 11 ~6,000 contracts at ~50¢
      August 13-August 15 ~8,000 contracts at~$1.12

      IOW, interest in the $250 Strike has increased, in 3 large purchases, >230% since June 11. Nineteen thousand contracts at an average 76¢ require $1.444 Million. These purchases were NOT made by options traders like myself.

      This takes me back to my contention that AAPL’s current rally is not being driven by management’s September quarter guidance. WS is buying FY2019 results with both shares and options.

      0
      August 28, 2018
  7. Gregg Thurman said:

    I admit that I had to look it up.

    Sui Generis

    “Things that are unique or that seemed to be the only representative of their class or group.”

    That would accurately describe Apple, Inc.

    2
    August 28, 2018
  8. John Konopka said:

    To outsiders Apple looks vulnerable. I’ve seen commenters on investment sites compare it to cabbage patch dolls, beanie babies and other fads. Google, FB and others seem to have virtual monopolies.

    0
    August 28, 2018
    • David Emery said:

      In part, that’s a belief that any advanced product will eventually be “commoditized” and price will rule. A key part of what Wall St fails to understand about Apple is -why- Apple’s products have been immune to that pattern.

      1
      August 28, 2018
  9. Ken Cheng said:

    That Mac Portable weighed a ton, with its lead-acid battery, but it came in a very nice case that made carrying it feel much better. Also had a nicely padded handle. It’s strange, but that was the best portable computer carrying case ever!

    0
    August 28, 2018

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