Apple Inc shares up near quarterly high as Q3 earnings release approaches

Posted:
in AAPL Investors edited July 2016
Shares of Apple increased nearly 2 percent today to close at $98.79, close to the peak the stock has traded since diving below $100 after the company reported its fiscal Q2 earnings. Within two weeks, Apple will announce its earnings for Q3, which ended in June.




Investors cognizant of new iPhone impact



A variety of analysts have recently bludgeoned Apple over claims that the company has no real growth prospects until iPhone 7 launches, and even then may not see a return to growth until another iPhone appears toward the end of next year.

However, the evidence offered in support of concerns that this fall's iPhone 7 wouldn't drive significant demand is based almost entirely upon rumors looking at physical case prototypes, and ignores the nine year legacy of iPhone launches that have typically focused on faster Application Processors, better cameras, advanced display technologies, and new features unlocked in core software and new apps, not case design tweaks.

Prior to iPhone 7 shipping this fall, investors are expressing increased interest in the current impact of iPhone SE, a model that only began selling during Q3. Being virtually identical to iPhone 5s, the model offers no "new" case design whatsoever, but has remained supply constrained due to the fact that it delivers greatly increased processing power and camera features on par with iPhone 6 models.

Samsung S7: so much for smartphones being dead



After months of handwringing about the supposed end of smartphone growth--particularly among premium customers--analysts have more recently shifted their tune to praise potential sales of Samsung's flagship Galaxy S7, the very kind of product that is supposed to have reached a dead end globally.

While Samsung Electronics hasn't released any actual sales figures for the S7 (it has not ever), nor even detailed the overall performance of its Mobile IM group relative to that of its chips, displays, TVs, appliances and other business divisions, a variety of sources have made big assumptions that suggest Samsung's earnings are related to the performance of its top flagship.

A report Vlad Savov for The Verge cited Kantar Worldpanel data that claimed that Samsung's Galaxy S7 had exceeded sales of Apple's iPhone 6s in the U.S., at least since its launch earlier this year.

However, what Kantar actually reported (and Savov did not) was that the rivalry between Apple and Samsung appears to be increasingly irrelevant.

The firm stated that in the U.S. between May and July "Samsung accounted for 37 percent of smartphone sales and Apple 29 percent. However, sales of their respective flagship models reveal a much closer competition, with the Galaxy S7/S7 Edge accounting for 16 percent of sales and the iPhone 6s/6s Plus at 14.6 percent."

Kantar also observed that "the majority of sales came from customers repurchasing and upgrading within their preferred brand," noting specifically that "just 5 percent of Samsung purchases came from those switching away from Apple, while 14 percent of Apple purchasers came from those switching away from Samsung.""Just 5 percent of Samsung purchases came from those switching away from Apple, while 14 percent of Apple purchasers came from those switching away from Samsung" - Kantar

So rather than the Galaxy S7 eating into Apple's iPhone 6s customer base, Samsung is merely experiencing its own pent up demand cycle after several very poorly received flagship launches. Samsung's overall sales in the U.S. (the majority of which are middle tier or low end offerings) are significantly higher compared to the performance of its flagship.

Even so, the idea that Samsung is returning to growth among commodity Android producers means that Apple too has the potential to grow its own sales of premium phones. Apple has the advantage of being differentiated by the features unique to iOS 10, as well as having a reputation for safeguarding privacy, security and providing years of support via free software updates.

Outside the U.S., Kantar noted that Apple's iPhone 6s and 5s were the top two best selling phones in the U.K., "followed by the Samsung Galaxy J5, and the iPhone SE," another idea The Verge failed to mention, as it didn't support the narrative of Galaxy S7 leading Samsung to growth.

Later this month both Apple and Samsung will provide more actual detail into the performance of their smartphone businesses, but investors seem to be abandoning the idea that consumers are no longer interested in premium models, and that growth among higher end handsets is over.

Samsung does have an advantage over Apple in that its corporate performance is measured in a weaker currency of South Korean Won. Apple's earnings are presented in U.S. dollars, and the strength of the dollar over the last three quarters has effectively repressed sales globally by forcing Apple's prices higher around the globe and exaggerating its revenue declines.

Apple leading sales by value in China



Another example of misleading data that investors appear to now be looking at more critically comes from IDC, Gartner and Strategy Analytics.

In the first calendar quarter, Strategy Analytics insisted in a public press release that Apple had fallen down to fifth place in China due to strong unit sales by unfamiliar new vendors such as Oppo and Vivo, which had exploded with unit shipment growth rates exceeding 50 percent year over year.




Data from IDC and Gartner disagree on the numbers from these vendors by millions of units, but both portray Oppo, Vivo and/or Xiaomi as being major players in China.

The problem with only looking at unit market share in China is that this sort of myopic analysis is what previously fooled commentators into thinking that Xiaomi was doing much better than it actually was. That's chiefly because while these vendors sell large numbers of devices in China, they are very low priced models that don't directly compete with iPhones.

IDC analyst Melissa Chau was cited in a report by the South China Morning Post as noting that "Lenovo benefited with ASPs [average selling prices] below US$150 in 2013, and Xiaomi picked up the mantle with ASPs below US$200 in 2014 and 2015. Now Huawei, Oppo and Vivo, which play mainly in the sub-US$250 range, are positioned for a strong 2016."

Apple's iPhone ASPs are above $650. So while market researchers report iPhone market share based on around 11.5 million iPhones sold in China (based on Strategy Analytics numbers, above), a number that's between 1 and 5 million units fewer than Vivo, Xiaomi, Oppo or Huawei, the real commercial share grabbed by Apple is far higher.

Apple brought in around $7.5 billion from those 11.5 million iPhone sales, compared to maximum potential revenues of between $3-4 billion for Vivo, Xiaomi, Oppo or Huawei.

Apple's profit margins are also far higher, meaning that the company has built a sustainable business in China and is competing against waves of different companies that each take turns blowing out large numbers of poorly-differentiated, low end phones before a new entrant emerges and takes away their share.

Rather than recognizing this, Strategy Analytics referred to Apple's "lackluster performance" in contrast to Oppo, a company that brought in about a quarter of Apple's revenues while shipping nearly two million more units in the first quarter via razor thin margins.

Apple's customer churn rate is also far lower than that among Android vendors in China. As noted by Kantar, "for Apple, 42 percent [of iPhone buyers] were repeat purchasers, and 25 percent came from Samsung," a far higher rate of Android defection compared to what it reported for the U.S.
sockrolidpatchythepirate
«1

Comments

  • Reply 1 of 22
    sockrolidsockrolid Posts: 2,788member
    Apple Investing 101:

    1. Buy on rumor

    2. Sell on news
    ksecbadmonklkrupp
  • Reply 2 of 22
    anantksundaramanantksundaram Posts: 18,951member
    'Near quarterly high'. 

    Nice spin. At this 'quarterly high' it's down 30% from less than a year ago. 
    lord amhrankermit4krazy
  • Reply 3 of 22
    DanielEranDanielEran Posts: 290editor
    'Near quarterly high'. 

    Nice spin. At this 'quarterly high' it's down 30% from less than a year ago. 
    Yes but that's well known. The reason for highlighting the stocks recent swings is to contrast Q2 & Q3 and expectations leading into earnings. 
    patchythepirate
  • Reply 4 of 22
    entropysentropys Posts: 1,547member
    Smells like stock manipulation to me. This report is not likely to be good. Buy after the news and keep until January earnings report.
    kermit4krazy
  • Reply 5 of 22
    The Samsung S7 bubble?

    When I was in the US during May/June at least one of the major Carriers was offering an S7 with a free Tablet to new customers.
    That might have cause their sales spike but at what cost? (in terms of overall profit)

    As for the share spike, I get a feeling that the shorters will soon spring into action. If the doom mongers are true with their predictions of less than 40M phones sold then perhaps even $80 is a reasonable target for AAPL stock in their eyes.
    kermit4krazy
  • Reply 6 of 22
    apple ][apple ][ Posts: 8,360member
    I still hold a few shares of AAPL, but to be honest, I'm not excited at all for this upcoming earnings, and I have basically zero expectations. Usually, I follow the earnings when it comes out at around 4:30 pm EST, but I might not even bother this time.

    AAPL has been a dud for quite a while now.
    kermit4krazy
  • Reply 7 of 22
    IttrutIttrut Posts: 4member
    Should be an ugly quarter again with possibly declining sales. With iPhone 7 looking like very much a similar offer to 6S the earliest time to buy back is 3 months before iPhone 2017 release.
    kermit4krazy
  • Reply 8 of 22
    IttrutIttrut Posts: 4member
    Long-term risks with iPhone-centric portfolio look like they might be starting to come to reality and market may slow down and upgrade cycles approach those of tablets and PCs.
    kermit4krazy
  • Reply 9 of 22
    IttrutIttrut Posts: 4member
    On the other hand the company is still valued low compared to earnings so it's difficult to say where it's headed. My real concerns started with aesthetics of phones getting worse with iPhone 6 compared to 5, the new Apple TV remote being horrendous in terms of usability and and frankly I liked the old keyboards more as well. And don't get me started on the out-dated components in Macs currently.... Love the company, but it needs to move faster and stop making their great products worse.
    kermit4krazymjhnl
  • Reply 10 of 22
    jfc1138jfc1138 Posts: 3,090member
    apple ][ said:
    I still hold a few shares of AAPL, but to be honest, I'm not excited at all for this upcoming earnings, and I have basically zero expectations. Usually, I follow the earnings when it comes out at around 4:30 pm EST, but I might not even bother this time.

    AAPL has been a dud for quite a while now.
    Sell and end the misery. 
  • Reply 11 of 22
    apple ][apple ][ Posts: 8,360member
    jfc1138 said:
    Sell and end the misery. 
    I'll sell when the time is right. That time is not now. I'm in no big rush.


  • Reply 12 of 22
    cnocbuicnocbui Posts: 3,613member
    If you think sales are bad now, just wait for the iP7 without a headphone jack.  That is not a positive feature and I think it will discourage a lot of potential sales.  An exercise in trying to make the ecosystem even more sticky that could well turn into a quagmire.
    lord amhrankermit4krazy
  • Reply 13 of 22
    badmonkbadmonk Posts: 754member
    Oh please!!!!!  Any who is a longterm Apple investor knows that Wall Street beats up on Apple every 3-4 years because of a perceived lack of growth, lack of services or macro-economic concerns.

    The stick typically drops 30+% from it's high but than finds a new plateau.  In many ways Apple is a very cautious company.  They keep their plans close to the chest and make very few mistakes (unlike MSFT and Alphabet).

    The iPhone revolution hasn't even come close to playing out.  These little buggers aren't even 10 years old and already have changed our brains and our culture in crazy potent ways.

    And the younger the consumer the more Apple centric and committed they are...try seperating a chld from their iOS device.  Every year new consumers are born and come of age.

    The iPhone is more essential to modern living than a car, a computer, oil, friends, really anything you can think of.  My iPhone 6S rocks...made like a jewel, stable, fast and is on my person at every waking moment.  Give me a flipping break you marons.  Sell your damn stock if you don't see the big picture.  Who gives a rats ass if upgrade cycles extend to 3 years.


    patchythepiratefastasleepbaligeko
  • Reply 14 of 22
    badmonkbadmonk Posts: 754member
    and thanks DED for the article.  looks like i'm going to have to replace sog35.

    where is that crumudgen anyway?
    patchythepiratefastasleep
  • Reply 15 of 22
    mj webmj web Posts: 918member
    The only thing that sucks more than AAPL stock performance is Tim Cook's stewardship of the company. Cook doesn't have a creative bone in his body and is the worst possible CEO for Apple. Even Jony Ives design has suffered. The Watch and Apple TV are boring eyesores compared to Ives earlier designs. AAPL doesn't merit a higher price with such outdated and mediocre products.
    edited July 2016 kermit4krazy
  • Reply 16 of 22
    nolamacguynolamacguy Posts: 4,758member
    Ittrut said:
    Long-term risks with iPhone-centric portfolio
    is that kinda like google's search-ad-centric portfolio? or coke's soda-centric portfolio?
    edited July 2016
  • Reply 17 of 22
    nolamacguynolamacguy Posts: 4,758member

    cnocbui said:
    If you think sales are bad now, just wait for the iP7 without a headphone jack.  That is not a positive feature and I think it will discourage a lot of potential sales.  An exercise in trying to make the ecosystem even more sticky that could well turn into a quagmire.
    you don't know that. any of it. you certainly don't know whether it's a positive feature until they announce what the new positive features are. and you definitely can't know that they did it just to make the ecosystem more sticky. 
    patchythepiratefastasleep
  • Reply 18 of 22
    nolamacguynolamacguy Posts: 4,758member

    badmonk said:
    and thanks DED for the article.  looks like i'm going to have to replace sog35.

    where is that crumudgen anyway?
    who knows - I plonked him months ago during one of his anti Tim Cook mood swings. does he still post here?
    lkruppfastasleep
  • Reply 19 of 22
    nolamacguynolamacguy Posts: 4,758member

    mj web said:
    The only thing that sucks more than AAPL stock performance is Tim Cook's stewardship of the company. Cook doesn't have a creative bone in his body and is the worst possible CEO for Apple. Even Jony Ives design has suffered. The Watch and Apple TV are boring eyesores compared to Ives earlier designs. AAPL doesn't merit a higher price with such outdated and mediocre products.
    troll nonsense.

    - AAPL is doing much better under cook than it ever did under Jobs.

    - revenue and profit are also much higher. so there goes your entire premise.

    - that aside cook likely has no influence over Ive and design -- that's not his job and I doubt he's making Ive change design things.

    - the Apple TV is awesome and unchanged from Jobs.

    - the Watch is on my wrist every day and I rather like it. 

    - apple's phones, watches, tablets, and notebooks are almost all the top sellers in their categories, which makes them definitively not mediocre. 

    ...sounds like your FUD materials are out of date, bro. put in for new ones. 
    fastasleepbaligeko
  • Reply 20 of 22
    lkrupplkrupp Posts: 6,682member

    badmonk said:
    and thanks DED for the article.  looks like i'm going to have to replace sog35.

    where is that crumudgen anyway?
    who knows - I plonked him months ago during one of his anti Tim Cook mood swings. does he still post here?
    He’s probably over at MacRumors.com. That’s where all the disaffected Apple haters congregate. Trouble with that crowd is they have nowhere else to go. They now hate Apple but the other options are much worse. What to do, what to do? Move to Android/Windows, the very platforms that pushed them toward Apple in the first place? Move into the basement with the neckbeards? Nope, the only thing left to do is go negative on everything and live in misery because the world has moved on.
    edited July 2016 fastasleep
Sign In or Register to comment.