Wedbush: Apple would trade for $150 today if it weren't for regulatory fears

"Our view: Apple remains more on the edge rather than the center of the anti-trust spider web." -- Analyst Dan Ives

From a note to clients by analyst that landed on my desktop Monday:

We believe right now there is roughly a $20 per share overhang on Apple's stock due to antitrust and regulatory concerns on the Street. With the drumbeat getting louder with the Beltway and Brussels around Big Tech with Apple caught up in the cross-fire, there is clearly some worries on the Street weighing on shares. We also believe the Epic Games lawsuit verdict (likely over the next month) has added to the uncertainty, along with anti-tech critic Lina Khan now appointed to head the FTC. Taking a step back, our view around the monopolistic and anti-trust swirls remain a containable headline risk for Apple and Big Tech for now. We also believe the App Store remains a very defendable moat both in the courts and in the Beltway and speaks to our view that Apple remains more on the edge rather than the center of the anti-trust spider web with Facebook/Alphabet more in the 202 area code spotlight.

Maintains Outperform rating and (Street-high) $185 target. 

My take: Ives leads his note with a channel check that suggests a "normal" iPhone 13 launch in the third week of September, early enough for first week sales to count toward fiscal 2021 revenues.

20 Comments

  1. Fred Stein said:
    I like the way Dan thinks, and defends his thesis.

    Selling long-term, out-of-the-puts, takes advantage of the market’s worries.

    1
    June 21, 2021
    • Gregg Thurman said:
      I would hold off on doing that until July 12th. After that the risk factor in selling Puts declines significantly.

      1
      June 21, 2021
      • Alan Levy said:
        Gregg,

        I’m puzzling over your July 12th date. I can’t find anything (quarterly earnings, product announcements) that coincide with that date. Please illuminate….

        Thanks,

        Alan Levy

        0
        June 21, 2021
        • Gregg Thurman said:
          I maintain a chart of AAPL’s intraday lows, broke down from earning report to earnings report. The raw data goes back to 2010.

          Without exception AAPL swoons during the July 4 week, creating a 2nd Half calendar year low.

          Interestingly, from that point AAPL goes up (on average) ~25% by January earnings.

          I’ve made a lot of money playing this phenomenon.

          A JAN $145/$150 Call Spread (about 10% out-of-the-money vs 25% average gain for safety) will yield ~300% ROI.

          Buying on July 12 gets you past July 4 week volatility. I give up a bit of yield doing that but what the heck.

          0
          June 21, 2021
          • Alan Levy said:
            Thanks, Gregg. I’ve been selling out-of-the-money covered calls these last couple months after seeing AAPL plateau at a relatively high p/e. First time seeing enough near-term weakness to feel comfortable playing what are supposed to be the least risky type of options and then seeing a July date with no easy explanation was disconcerting. It’s also disconcerting to want the stock to go up and down at the same time…Closest I’ve come to your strategy is jan 22 VCS. I would think your raw data gives you at least some level of comfort about the risk/reward of any given play.

            0
            June 21, 2021
            • Gregg Thurman said:
              I would think your raw data gives you at least some level of comfort about the risk/reward of any given play.

              It does until it doesn’t. When the wheels fall off it seems to happen fast and it takes me a couple of weeks to realize it.

              In the last 246 weeks, I’ve had 188 successful trades and 58 ugly trades, an average of 76.42% winning trades. The losses are concentrated in two years: FY2018 (26.92% losers) and FY2021 (31.58% losers so far). FY2021 losers are concentrated during the period January earnings through May 7. I skipped a few weeks of trading so it hasn’t been as bad personally as the results data indicates.

              One of my secrets to my strategy is buying near the interday low on Monday for a Friday expiration. I developed a little algorithm that forecasts Monday’s intraday low. This gives me something to look forward to on Monday. On average for the last 4 weeks, my algorithm has missed Monday’s intraday low by an average of 33¢. During periods of high volatility, such as the 4 weeks preceding the above, my algorithm missed the Monday intraday low by an average of $1.61. When the error rate drops my confidence goes up. When the error rate goes up I don’t trade.

              I don’t think of myself as a classic technical trader as I eschew all their theories as being market-based, and not specific equity-based theories.

              1
              June 21, 2021
              • Gregg Thurman said:
                I have begun following Ianjit Bhatti of Atlantic Securities. He doesn’t post often, but when he does he stays consistent with his thesis.

                His current PT is $150 posted 238 days ago. Bhatti’s target is the oldest of the 31 analysts I track. Sans his PT the average target is 70 days old. Seven of the remaining 30 published targets are between 135 days and 150 days old. All others (23) average 34 days old. I rather like the consistency (coupled with accuracy) of his targets. Bhatti was not swayed by AAPL’s push to $145 back in January, nor AAPL’s subsequent fall from grace through May, as so many were.

                0
                June 21, 2021
              • Alan Levy said:
                Batting .764 is damn good.

                0
                June 21, 2021
  2. Horace Dediu said:
    Apple went from doomed because the competition will crush it to doomed because it has no competition so quickly some may have missed it.

    16
    June 21, 2021
    • Robert Stack said:
      Sadly, I admit I’m one of those who missed it. The moral I guess is Apple is doomed no matter what!

      1
      June 21, 2021
      • John Konopka said:
        That’s what the Macalope says. The first rule of Apple reporting is that every story has to be spun as bad for Apple.

        1
        June 21, 2021
  3. Daniel Epstein said:
    While I think it is very possible there is a 20 dollar discount in Apple share price due to government regulation concerns I also think there are positive premiums in the stock for potential new products like the car project. Are these a wash? It depends on the news more than the fundamentals. Frankly I think the market is underestimating the power of Apple Silicon over time as well as new Home initiatives to name just two. If I was Apple I would try to keep new IPhone sales starting as close to the beginning of October as possible if supply chain can do it. Not so concerned with the end of September but happy with a full product release with supply for Christmas.

    2
    June 21, 2021
    • Gregg Thurman said:
      While I think it is very possible there is a 20 dollar discount in Apple share price due to government regulation concerns I also think there are positive premiums in the stock for potential new products like the car project.

      The current consensus PT (sans the outlier doubting Thomas’) is $166. It could be that there is more than a $20 discount ($36?) being applied to regulatory concerns.

      0
      June 21, 2021
  4. Jerry Doyle said:
    I agree fully with Daniel Ives that Apple remains more on the edge rather than the center of the anti-trust spider web with Facebook/Alphabet more in the 202 area code spotlight. Apple will prevail in the Epic trial and that judicial victory will go a ways toward mitigating the anti-trust negativism directed at Apple’s App Store. I also feel somewhat consoled, if not vindicated, when I read Brother Dan saying we would be at $150 now if not for a $20 per share overhang on Apple’s stock due to antitrust and regulatory concerns on the Street. I had a $150 PT for this period.

    Like Brother Fred S says, “I like the way Dan thinks!” Also enjoyed Horace D’s humorous one-liner.

    PED, we may want to consider bringing Brother Dan back later this year for an Apple update. It’s also time to tread down Apple memory lane. Could we consider getting Steve Wozniak, Ronald Wayne and New Orleans’ favorite, Water Isaacson?

    4
    June 21, 2021
    • Robert Stack said:
      @Jerry: Why stop there? How about extending an invite to Tim Cook? Or Hair Force One? 🙂

      Or other senior Apple managers? I ‘m only partially kidding, as Gruber seems to have little problem getting some of these folks to sit down with him for informative discussions…

      4
      June 21, 2021
      • Jerry Doyle said:
        @Robert Stack: Well brother Robert, I do believe the good Mr. Ronald Gerald Wayne would welcome an invite; and, he has a humongous amount of information to share with us about Apple’s early days. The good man, who is in his 80s, lives in retirement in a trailer mobil home park outside Vegas (I believe Pahrump, NV) playing penny slot machines. As an early co-founder of Apple and as the man who refused over the years Steve Jobs’ entreaties to come back to Apple, it would be most interesting hearing Mr. Wayne discuss the early days & his answering questions. So, I do believe Mr. Wayne would be receptive to PED’s invitation.

        It is true that Steve Wozniak & Walter Isaacson have busier schedules, but each of those guys are amiable and warmhearted individuals who often give-of-themselves for the edification of others willing to consult with them & to seek their opinions. I say brother PED should go-for-it! One never catches a fish if one never goes fishing.

        2
        June 21, 2021
  5. Gregg Thurman said:
    As long as we’re throwing names out there how about Ianjit Bhatti, Atlantic Securities? He posted his current PT ($150) on 26 OCT 2020. That’s 238 days ago, and he hasn’t wavered from that target since. In the interim AAPL achieved an all-time high of $145.09 on 25 JAN 2021.

    0
    June 21, 2021

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