brucemc

christopher126 said:

This may sound ethnocentric, but I'm glad I don't live in China and it is steadily moving down my list of places I'd like to visit.

Best

As a Canadian, I will not be visiting China anytime in the planned future (work or leisure), as the Chinese gov't has been detaining / imprisoning Canadians (13 so far) since the Huawei CFO was arrested on Canadian soil, based upon an arrest warrant from the USA (with whom we have an extradition treaty).  Funny how China is extracting is revenge (how mature of them) on Canadians, but not on Americans who issued the arrest warrant.

A few things to consider:
- Apple started to return cash to shareholders as a result of generating so much of it.  Their net cash position was well over $100B.  The iPhone phenomenon was bigger than anything before, and it was after the Jobs era when the bucket loads of cash started to pore in (for those who want to focus on Jobs' view)
- A focused company - which, if you know anything about Apple, you know they strive for this - can only invest in so much at one time.  More money, past a certain point, does not solve a problem faster.  Anyone who understands product development and engineering knows this.  Things take time, regardless of money.
- So there is excess, or free cash, and as you should know with Apple, it is a lot - about $50B/year.  Believe it or not, but high amounts of cash on a companies balance sheet is *not* considered a good thing.  People don't invest in Apple to gain a share of cash earning little money.  So that cash has to be dealt with.
- Some would argue that Apple should go around buying numerous large companies (Netflix, Disney, Tesla) - and spend all of their money that way.  But for such shrewd investors, they should look at the history of large acquisitions to see how they turned out for company value.  Hint - it isn't pretty (something like 80% are value destructive).  Now think about Apple's culture and how that would work.
- Or there is returning it to shareholders.  That can be with dividends (taxable in the year received) or buybacks with retirement, which reduce the count and increase ownership %.  Apple does both.  Apple has been raising their dividend on average greater than 10% each year, which is considered a gold standard.
- Some may look at the buybacks as "burning money", but at the end of the day it is increasing the % ownership in Apple for remaining shareholders, and if you think Apple is a well run company, with great products, which generate money, and have a solid future - then that is a good thing.

Melgross appears to be a successful investor, and as such his opinion has value, but while he has been skeptical of buybacks, I can't recall him making any suggestions as to how Apple should manage their excess cash.  For the cash levels that Apple is making, the choice is really huge dividends each year, buybacks, or large company acquisitions.

Apple is not like many other companies performing buybacks, who are borrowing huge money to do so (arguing that it is OK with rates so low).  Apple only borrowed effectively against foreign cash, to have domestic funds for buybacks.  Their net cash position was, and is, strong.  With tax changes, Apple has access to its foreign cash at an acceptable rate, and no longer needs to borrow to fund its shareholder return programs.  Apple's buybacks are funded from free cash flow - not increasing net debt.  Hopefully people can understand the difference.

gmgravytrain said:

brucemc said:

lewchenko said:

They are still delusional to think it will be back at 236 within a year I think. 

and I would disagree that the post above that the  markets are usually down this time of year. Quieter and flatter perhaps , but not down as much as they are. That’s due to exceptional circumstances this year and in apples case a series of bad news to go on top. 

I got lucky and sold everything I had at 227 (main reason for selling was the sky high prices they were now charging.. smelled fishy)

Key question is whether to get back in yet.  Gut says it’s gonna go lower (150 easily) before it slowly recovers back to 200 by mid next year. 

But it I do agree with the analysts that apple has a problem. And cranking up the prices is not going to work in the long run of unit sales keep falling (which they will at the prices they are now charging) . All stocks are priced for future profit, hence why it’s falling. Hiding the unit sales after years of showing them also says you have something to hide. 

It's true.  Apple has absolutely no clue about where to go next.  If only they had invested in wearables or services or something...

I'm a bit puzzled as to why Apple didn't see this coming years ago and forked away from iPhone dependency. Smartphone market saturation was clearly going to happen with all those cheap Android smartphones being cranked out 24/7/365. Apple will still be the most profitable smartphone maker but it seems that's not important to big investors. If Apple is struggling then how do all those other smartphone makers survive? That's something I can't quite figure out.

If by struggling, you mean that Apple is likely (per their own traditionally conservative forecast) to post record revenue in this Q1 of fiscal 2019, then I guess that is a problem indeed!

Before you respond back and tell me "sure, but what about the future", lets try to put a few things in context:

1) iPhone sales are quite likely to be seeing some declines - too much evidence - but that is likely in the single digits %.  While higher pricing could be a factor, it could also be related to things like:
   a) Lengthening upgrade cycle, due to iOS12, battery replacement program, overall quality & features keeping users happy.  These are good things for user satisfaction.
   b) Some users that would by an "XR" (e.g. who purchased an iPhone 8 last year) might be put off by its size (no 4.7" chassis size - too big for my preference), and some wanting familiar TouchID
   c) Value of iPhone 8

The point: Nothing is pointing to sales going off a cliff (user sat is very high).  iPhone user base continues to grow, though not as much (some people mistakenly believe that if unit sales drop, it means the installed/user base must be dropping which is of course not the case at all).  The iPhone market, like the Mac, can stabilize at a very high level of overall sales for years & years.  Growth might be over, but the $billions of sales remain.

2) Apple is investing in new products.  They always have.  Apple Watch is growing well (40-50% YoY increases estimated, prices up).  AirPods are off the chart.  You can bet AR glasses are the top next product.  Additional focus on health.

3) Services are growing strongly, and while a slowdown can happen due to slower growth of the user base, that is going to be offset by additional services (video, news) as well as increases with music, cloud, care.

4) Fourth, and certainly not least.  From a stock perspective, Apple is buying back about $20B per quarter.  As the stock drops, they are able to buy back even more shares for same amount.  They might even increase the purchases in the short term.  This will cause an increase in EPS that - when the fear fades out - will be a catalyst for stock price rise.  Even traders who do not understand Apple react when EPS growth continues in double digits quarter in & out.

lewchenko said:

They are still delusional to think it will be back at 236 within a year I think. 

and I would disagree that the post above that the  markets are usually down this time of year. Quieter and flatter perhaps , but not down as much as they are. That’s due to exceptional circumstances this year and in apples case a series of bad news to go on top. 

I got lucky and sold everything I had at 227 (main reason for selling was the sky high prices they were now charging.. smelled fishy)

Key question is whether to get back in yet.  Gut says it’s gonna go lower (150 easily) before it slowly recovers back to 200 by mid next year. 

But it I do agree with the analysts that apple has a problem. And cranking up the prices is not going to work in the long run of unit sales keep falling (which they will at the prices they are now charging) . All stocks are priced for future profit, hence why it’s falling. Hiding the unit sales after years of showing them also says you have something to hide. 

It's true.  Apple has absolutely no clue about where to go next.  If only they had invested in wearables or services or something...

chasm said:

canukstorm said:

Doesn't say much.  It can simultaneously be the best-selling iPhone model and not sell according to management's expectation

Except that that would mean that sales of the other models are also “slow,” and that would trigger a legal obligation for the company to advise investors of the strong possibility of missing its guidance. As a reminder, Apple has forecast a record-setting guidance that is $10 billion higher that last year’s fiscal Q1.

So either Joz is wrong, or the reports we8ve seen are BS — as DED has already pointed out in a particularly well-researched article here on AI.

Actually, that isn't the case.  Apple's forecast for Q1'19 is a range of $89-93B USD.  Last year's Q1 was $88.3B USD.  So if they reach the upper end of guidance, it would be a 5.3% increase YoY. 

If you factor in the higher ASPs expected, with growth in services, and wearables, Apple likely "IS" modelling for (small %) iPhone unit sales decline.  Which is fine.  Overall revenue is expected to be up, with growth in a couple of key areas.  The global smartphone market is estimated to have declined by 9% in the last quarter (when Apple was slightly up / flat), so Apple is still doing much better than the overall market in terms of sales trends, and of course have the higher ASPs, and majority of premium users.

The devices, especially for Apple, are lasting longer.  People holding them for longer periods of time.  Better resale, which means someone is buying the used iPhones and not the new ones.  While of course increasing new unit sales would be the best, it is far better for Apple to have a growing user base through the grey market than just be concerned about unit sales (hence...unit sales do not represent the health of Apples iPhone business...and thus why have stopped reporting it).