This week’s Apple trading strategies (9/27-10/1/21)

A place for Apple traders and investors to share their best ideas.

To get things rolling, here is an odd couple — Joanna Stern of the Wall Street Journal and Evercore’s Amit Daryanani — finding common ground on the iPhone 13:

Below: Apple vs. the S&P 500 last week, normalized…

apple trading strategies 9-27
Disclosure: Although I am now an Apple shareholder (see Why I bought a share of Apple, my first), I am in no position to give trading advice. Don’t blame me if you drain your IRA doing something you read about here.

See also last week’s trading strategies.

17 Comments

  1. Jerry Doyle said:
    Folks, I have written in this blog on several occasions that we are seeing carriers offering incentive upgrades over their concern with consumer “churn.”

    Carriers used to offer these type upgrade incentives years ago. The upgrade incentives caused consumers to get new phones every two years. Then, carriers took away the upgrades. What happened? Immediately consumers started holding onto their devices longer.

    Built into the carriers’ plans is the cost of the iPhone. After two years of the plan the consumer paid off the phone. Yet, many consumers were not aware they had paid off the phone and continued with the inflated monthly payments that reflected not only the carrier telecommunication service, but the price of a paid-off iPhone. No longer locked into the original contracts, many consumers took their phones and went shopping for a more competitive plan. Thus, carriers once again saw a significant uptick in consumer churn.

    Myself is a good example. Several years back after my phone (contract) with AT&T was paid off, I went shopping for a more competitive rate than the $95 monthly plan that I had with AT&T. I found the same plan giving me the same services for $35 monthly. That $35 is more competitive because it does not reflect the monthly charge of purchasing a new phone; just telecommunication services.

    In summary, the carriers may be entering a period where we will be seeing these incentives continue, going forward. What does this fact mean? It would mean that consumers once again may return to a two year upgrade cycle, if carriers continue offering these incentives to preclude “churn.” So think now what a 1,000,000,000 IB of many users getting new phones every two years. One whopping upgrade cycle: year-after-year. I believe this is what we can expect.

    5
    September 26, 2021
    • David Drinkwater said:
      I’m with you until your final conclusion. The 1,000,000,000 IB will not be upgrading every four years. Many of those phones are probably already dead. (I have at least five of them in my house! 🙂

      But I do agree that many buyers will choose different cell data plans if they, like me, buy and won the phone independently from the carrier. I’ve been wasting money on my AT&T plan. :\

      0
      September 26, 2021
      • Gregg Thurman said:
        The 1,000,000,000 IB will not be upgrading every four years. Many of those phones are probably already dead.

        Apple has sold about 940 thousand iPhones since the iPhone 8/10, an average of 235 thousand per year for 4 years. I don’t see a material number of these dying without being repaired/replaced/upgraded.

        But the fact remains, at 235 thousand iPhones per year you have a 4 year upgrade cycle. I would suspect the owners of iPhone 7S and older are predominantly used iPhone buyers. There will be exceptions of course, but they will be on the fringes, ie., my ex and daughter both have iPhone 8’s purchased new in the last couple of years, because the form factor fits their hand better. The iPhone 13 mini overcomes that problem so I see a lot of 8s being upgraded.

        0
        September 26, 2021
        • David Drinkwater said:
          “Apple has sold about 940 thousand iPhones since the iPhone 8/10, an average of 235 thousand per year for 4 years.”

          OK, that’s helpful. I didn’t know where the supposed installed base lineage started/ended. I will freely and enthusiastically acknowledge all of those as potential near future upgrades.

          I must have been on mute 😉 during the recent Ives call when I was telling the audience that the Supercycle is dead and that the water levels in the lagoon had simply risen 2X and would stay there now on a very comfortable high volume.

          I’m probably relatively unique in that, when I retire an iPhone, I turn it off, rather than reselling it to help pay for the next one But I blame my financial success with Apple/AAPL for that! :))))

          0
          September 27, 2021
  2. Gregg Thurman said:
    Last week’s trade (SEPT $139/$140) did very well for me returning ~27% for the week. My trade was deeper in the money, offset by a greater amount invested. I back tested the change to October 2020. The change reduced losing trades by half, resulting in more profits than I experienced.

    I will be doing the same this week as last week.

    I’ll also be paper trading a “free shares” strategy. Back testing to the beginning of this fiscal year looks very good.

    2
    September 26, 2021
  3. Jerry Doyle said:
    Concomitant with the unfolding scenario described above is Apple offering its own incentive upgrade plans with premium trade-in prices for their used iPhone. There used to be a cottage industry buying used iPhones, but when Apple initiated its own trade-in program these cottage industries suddenly became close to obsolescence. Then, to become more competitive, Apple instituted its own 24 month 0% financing plans. This is what the telecommunication carriers are confronting: Apple’s 0% financing along with Apple’s own enticement trade-in offers for used iPhones. It also is why I believe the carriers are offering these upgrade incentive plans: to entice consumers to stay locked into the carrier’s plan and not go shopping around.

    4
    September 26, 2021
    • Gregg Thurman said:
      For my 10 S Max and switching from Verizon T-Mobile is offering me $1300. I’m just leery of the quality of it’s coverage.

      4
      September 26, 2021
      • Precisely, Gregg. I’m 90% rural, 10% urban any given month. I ask locals all over what carrier they use. One carrier is mentioned far more than others and it isn’t T Mobile or AT&T. Some get the service through a pre-pay service, they get throttled late in the month but pay $20 less for the same coverage area.
        Upgrades & trade-ins are frequent for the young & tradespeople. Plumbers, bricklayers, etc. & active older teens/early 20s folks, on the waterfront, lakes & beaches here, quickly brutalize each phone they get. Otterboxes and other thick cases don’t seem to slow the destruction. Apple Watch, handsfree car holders & Airpods keep the phone in the car holder instead of under the wrenches & sabre saws.

        1
        September 26, 2021
      • David Emery said:
        T-Mobile is better here (“suburbs” of Dover NH) than ATT for coverage. Price is cheaper. Customer service from T-Mobile is worse, though.

        0
        September 26, 2021
        • David Drinkwater said:
          My Dad and Sister live in Francestown, NH, a suburb of nowhere, for ay least part of the year, and I typically have to call their land-lines to have a steady conversation quality. But at the same time, even knowing that Verizon is the dominant carrier in the area, I find that AT&T data is sufficiently reliable for me. Go figure.

          1
          September 26, 2021
  4. Jerry Doyle said:
    Off topic: If some of you are not getting the “unlock feature” with Apple Watch to work with your new iPhone 13, then here is the reason why: https://support.apple.com/en-us/HT212828

    This official Apple announcement was released this morning after many new iPhone 13 users experienced this problem, including myself.

    2
    September 26, 2021
  5. Fred Stein said:
    I chatted with my son-in-law about the iPhone 13 Pro. He owns a 12 Pro Max and is a serious pro-am photographer/videographer. (He’s also a TV evening news anchor.).

    He said, “I love you like a brother, but expletive deleted, now I have to have this.” Soon after he bought the 13 Pro Max 256K. We can expect more viral promotions. Add the carrier promotions and this upgrade cycle goes to the moon.

    Cue Rod Hall; “The iPhone 14 will be a tough compare”

    2
    September 26, 2021
    • David Emery said:
      > Cue Rod Hall; “The iPhone 14 will be a tough compare”

      Not if the iPhone 14 is a complete re-design, as Mark Gurman is predicting. (no link, so this post doesn’t get quarantined. But the article on Bloomburg or TUAW should be easy to find.) Add a redesign to the return to a 2-year cycle, and we could be in a multi-year boom cycle 🙂

      1
      September 26, 2021
      • David Drinkwater said:
        What about an M-chipped iPhone? A chips for the amateur iPhones and M chips for the Pros? I think it could happen.

        1
        September 26, 2021
        • Gregg Thurman said:
          David, I embrace David Emery’s explanation on how Apple’s silicon has achieved its power and battery efficiencies: processor is optimized to the feature set of the host OS.

          That being the case the A Series will never be seen in a Mac, and vice versa, the M Series will never be seen in an iPhone.

          Future iPhones will achieve greater performance through continued optimization of the A Series with iOS and the features Added to it.

          0
          September 26, 2021
  6. Jerry Doyle said:
    @David Emery: “…. Add a redesign to the return to a 2-year cycle, and we could be in a multi-year boom cycle ”

    Exactly David! I believe this poignant fact is being realized gradually by WS analysts. When it sets in fully to where WS analysts understand clearly the internal growth drivers involving another massive repetitive two year cycle of upgrades as we used to have years ago is again being reignited predicated on carrier subsidies, then this new found discovery will drive Apple’s stock price higher. Some of us on this forum have been thinking in this vein for months and now that thinking it is coalescing clearly amongst WS analysts.

    WS analysts have been behind our group in recognizing what is happening in front-of-us. We are looking at a potential solid and substantial growth in Apple stock going forward, if the carriers stick with these phone plan subsidies. I say carriers will be compelled to do so, if they intend to control “churn.” Why? Because of Apple’s own iPhone trade-in program and Apple’s 0% financing. Apple benefits from this program in multiple ways. The carriers need to diminish Apple’s trade-in and 0% financing programs, or at least compete with the two offerings through carriers’ own financed offerings.

    The carriers also can benefit if they provide phone subsidies in that they reduce churn rate. Also, carriers can sell the “trade-in” used iPhones to new customers at lower prices, bringing those customers into the carrier’s system. Many of those customers buying used iPhones from the carriers most likely will be “Android” customers. This helps Apple grow its IB further. This behavior is the same as Apple instituted through its own trade-in program to bring in new customers into the iOS system through lower price offerings.

    Apple has brought all this about through its own trade-in (subsidy) program and 0% financing plans. It forced the carriers to “reinstitute” their discarded phone subsidy programs. So what does all this mean?

    Summary: Look for Apple stock to grow strongly with renewed iPhone sales growth in the coming future. Buy as many shares as you have discretionary funds to do so.

    1
    September 26, 2021

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