From a note to Wedbush clients that landed on my desktop Sunday:
The main event for Apple is on deck for Tuesday when Cook & Co. launch the iPhone 13 in a virtual format which we expect will continue the all-important supercycle iPhone upgrade cycle well into 2022.
Taking a step back, Apple remains in the midst of its strongest overall product cycle in roughly a decade… Asia supply chain builds for iPhone 13 are currently still in the ~90 million unit range compared to our initial iPhone 12 reads at 80 million units (pre-COVID) and represents a ~10%+ increase YoY out of the gates.
From a spec perspective, we have increased confidence that iPhone 13 will have an eye-popping 1 terabyte storage option, which is double from the highest Pro storage capacity today (512GB) and will also include a number of key enhancements with Lidar across all iPhone 13 models…
In a nutshell on the iPhone front, we believe the robust consumer product cycle continues globally for Cook & Co. especially with today roughly 250 million of the current 975 million iPhones not upgrading their smartphones in over 3.5 years based on our analysis, speaking to massive pent up demand within Apple’s installed base.
Regulatory pressures look containable for now… We estimate in a worst case scenario that Apple would lose roughly 3% of total revenues (4% of EPS) from this App Store change to gaming publishers and likely this will be closer to a ~1% revenue and EPS headwind the next few years given we believe the vast majority of consumers will continue to use the App Store for in-app purchases.
Maintains Outperform rating and (Street high) $185 price target.
My take: He’s right about what the vast majority of consumers will do.
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Thank you for that info. Probably not worth having 2 extra SKU’s for the Pro models to have 1TB options plus with the chip shortages, 1TB or 2x 512GB chips could be costly and not in Apple’s favor for marketing, price, or profit. A 1TB option would probably cost $500 above base Pro Max total being $1599 minimum. IMO, Apple would rather have those folks use the 2TB iCloud storage option at $9.99 per month, making the same revenue in 20 months over the incremental upgrade over the $1399 512GB Pro Max and then continuing beyond. This would also shift revenue from hardware side to Services side.
My guess, though, is that Apple didn’t pull 14 M shares off the market. In many ways, Apple is still a very, very conservative company….
(I believe Apple is legally restricted from buying more than 25% of shares sold in any single day. Please correct me if I’m wrong.)
Joe: “Talk about wringing out the weak hands!”
Robert “I don’t think algorithms have hands, let alone weak ones.”
I think algorithms started the slide, but I don’t think they were completely responsible for it’s depth. There are two volume “humps” in the mid-day selloff. I suppose you could have had a “triple algorithm” event (the first fires off a selloff, which fires off a buy-in, which fires off another selloff), but the time period of a full hour from start to end makes that less than likely, IMHO. A double-algorithm event, OTOH, is quite likely, and would explain the big initial jump back up following the first selloff. A triple algorithm also implies that algorithms can “reload”, which I think is also unlikely on a single stock, even AAPL.
So I definitely see some “weak hands” throwing in the towel here.
But. The fact that, following that initial hour, the stock hovered at around $150/share for the rest of the day and then closed at just a hair under $149 says that there were lots of buyers for sub-$150 AAPL! All things considered, a 3.3% haircut in stock price is indicative of a substantial amount of AAPL demand. Considering Apple is literally about to unveil its new product line, AND it’s the last few weeks of its fiscal year, I can only see this is an opportunity for folks to snap up some stock that may never see these levels again….
Algorithms are reactive, They don’t start anything, but may exaggerate a move once it has started.
Joe: “My guess, though, is that Apple didn’t pull 14 M shares off the market. In many ways, Apple is still a very, very conservative company….”
Robert: “I’m sure Apple will remain consistent in executing the company’s repurchase plan.”
I agree. I just chafe a bit at the conservatism….
I will be paying attention to Apple’s COVID induced fuzzy guidance as my primary investment driver. WS, in general, is just too damn conservative with a consensus +/- standard deviation you could drive a large truck through.