From a note to clients by analyst Daniel Ives that landed on my desktop Friday:
On Monday Apple will be hosting another virtual product launch which we expect Cook & Co. to launch a handful of products led by the MacBook Pro and likely the new AirPods 3. Ironically, in the face of the biggest chip shortage seen in decades Apple is launching two key products into holiday season speaking to the company’s confidence around getting the new Macs/AirPods into customer hands by holiday season despite the doomsday supply chain skeptics.
With Apple’s new Silicon chips front and center Cupertino continues to refresh its hardware ecosystem across the board with Monday a long anticipated day for Mac Pro power users to finally get the the new Apple chips on board.
The star of the show at the event will be the new M1X-powered MacBook Pros with 14-inch and 16-inch models. The new MacBook Pros are expected to feature a mini-LED display, an HDMI port, MagSafe for charging, among other new feature.The proprietary M1X processor is the foundational part of this MacBook and ultimately we believe will be a game changer that will convert 30%+ of current MacBook users to upgrade over the next year catalyzing growth on this hardware segment…
The biggest wild card heading into Monday is around the AirPods 3 launch, does it happen or not? We know based on our supply chain checks that the new AirPods 3 have been built, manufactured, and awaiting shipment globally but will Apple ultimately unveil these Monday remains a debatable issue within the Apple tech community.
Maintains Outperform rating and $185 price target.
My take: For me, the biggest wildcard is AAPL’s performance after the event. Lately, there’s no good news from Apple that hasn’t gone unpunished.
Long before the crazy reaction to the blowout quarters of 2020, AAPL followed a pattern of buy the rumor leading up to events, then sell the news once the event began. I don’t see any reason why that irrationality will subside this year.
The primary feature I want to see in the new machines is an SD card slot. That’s not a deal-breaker if it’s missing, but it’s a deal-maker if it’s present. Having to carry an SD dongle is Yet Another Thing in my bag when traveling. I could get by with 8gb of RAM, but would prefer 16gb. But I’ve found that 1TB storage is pretty much essential, it’s enough for my normal files, etc, my extensive music collection, and enough extra space for lots of photos.
As a long term investor, you get more bang from a $90 billion Buyback at $140ish than you do at $175. The EPS this quarter and next are going to be substantially higher as a result. Followed by Rod and Tony S. with their tired old comment: “Comps moving forward will be very difficult to achieve as these larger numbers dictate.”
At some point you’re going to want AAPL to trade much higher relative the S&P than it is now, buybacks or no.
Personally, I don’t care, options are providing me a very nice supplement to my structured retirement income. I don’t have to worry about my stock treasury shrinking as I sell it off.
Upvoted. Ever since our forced retirement during the Great Recession, Donna and I have had “to worry about my stock treasury shrinking as I sell it off”, as you so succinctly put it. That makes us a special case compared to most posting here.
Robert can afford to be sanguine about the price of AAPL: We cannot. The best we can do is to try and “time” when we sell, in order to build up a cash slush fund to tide us through periods (like now) when Apple’s valuation is under attack. And thank the Maker, aftet years of bad luck trying to do so, we’ve lately gotten better at it.
Also, we were literally rescued by Apple’s buybacks, which I view as a form of Apple investing for us, and very successfully so at that.
I’m pleased as punch for others like Jerry who have successfully employed, like us, the “100% AAPL” scenario. But Jerry also was fortunate to have avoided the “shrinking stock treasury” that Gregg speaks of.
It didn’t help that I personally made at least one bonehead move several years back that cost us a big chunk of shares. But at the time, I was getting a bit desperate and grasped the wrong straw. But the biggest loss of shares by far came from being hammered by horrible AAPL valuations year after year and being totally at the mercy of AAPL stock manipulators.
That I’ll never forget.
My point was that not every Apple investor shares the same viewpoint. We saw this plenty in the old Braeburn Group discussions. Each POV colors a different reality, and I felt it important to point out where mine was coming from.
Also, I do not consider destructive trading practices a positive for Apple in general. Yes, there are forces Apple has employed to counter that destruction, but ultimately these attacks stain the company itself to some degree. Also, perhaps Apple’s biggest weapon of defense, its massive buybacks, are now themselves under attack.
These attacks on a fair Apple valuation, therefore, can yet again see the bad old years of Apple’s junk valuation (following the Great Recession) return, if not vigorously opposed. Can I prove that? No. But I sense it, and that’s enough to stir me to speak in opposition to them.
Please excuse my naïveté, but what am I missing here? If the AirPods 3 are built, manufactured and awaiting shipment globally why not unveil them? Supply chain constraint issues are going to be around for some time, no matter. So, I suspect that is not the reason. I welcome enlightenment.
The more practical issue is maybe building a few more weeks worth of AirPods 3 inventory before being “unleashed” unto the world. AirPods 3 production was rumored for Vietnam but apparently kept to China due to (relatively less) COVID and supply disruptions being an issue for Vietnam.
If you think about it for the moment, that benefits Apple greatly, in that TSMC production belongs to Apple, not someone who finds themselves short because they underestimated demand.
My take is that Apple takes possession of end of run inventory and sets it aside first, instead of at the end of a product year. Underestimates of demand/yield problems then are resolved over time from EXISTING inventory. This only needs be done for critical components where second sourcing isn’t easily done. The only supplier I can think of where second sourcing isn’t easily done is TSMC.
This just requires TSNC to start full production about two months earlier than is commonly thought.
Operating in this manner does not impact FINISHED GOODS INVENTORY. The cash involved would show up on Apple’s Balance Sheet, as it does now, as an Asset under prepay so.
These are really good points! Folks, check out Gregg’s comment.
Also, Apple cannot run by a strict JIT system, since it has such a huge Holiday quarter. That inevitably means some stockpiling and buildup way in advance. It’s obviously preferable to do JIT, but some “rules” need to give way to a larger reality.
You are correct. Each and every earnings report Apple reports channel inventory. It is consistently reported as being 4-6 weeks sales. My comment regarding prepaid components vs finished goods inventory, was meant to appease those on WS that follow finished goods inventory for signs of channel stuffing, aka slowing sales.
That level of finished goods inventory neatly fits my thesis that Apple stockpiles new product/components before launch