Apple has become a big ponderous company. They move too slowly in a rapidly changing market place. Look how long it took them to get the HomePod released. Then look at how long it took for the HomePod to get AirPlay 2. With Google and Amazon updating their products every couple of weeks, Siri is hopelessly behind.
You can see this again in the streaming service they're releasing. They're way late to the game and they're coming without any real IP's or studio know how. They're going to spend a billion dollars on a flop
Same thing with the iPad Pro. There's no reason for it not to have a file manager, mouse support, a desktop browser, and be able to support external hard drives.
They're too slow to make changes and until they become more nimble, they will continue to stumble.
While everyone is reacting to the here and now, remember Wall St. is forward looking. The concern is that this is the beginning of a trend of reduced earnings and struggles with selling product in developing markets.
Apple has saturated the the market for premium phones. iPhone owners are delaying replacing their phones. Developing markets can’t afford Apple’s premium priced iPhones and overwhelming turn to Android phones. Is Apple capable of delivering a truly new and innovative product that can propel revenue growth? They missed a huge opportunity with smart speakers and are playing catch-up. Can they develop services offerings that are compelling and revenue/profit rich? These are the factors driving the share price.
the trade issues with China will eventually work their way through. But for now there is much uncertainty, which is always a negative on Wall St. Apple is at risk relying on China for manufacturing and this needs to be addressed. The Chinese market is not a free market and Apple cannot count on growth there due to government interventions.
Overall Apple will continue to be a highly successful enterprise but they will struggle with the double digit growth the market became accustomed over the past decade.
Wall Street hasn't been forward-looking in over 20 years.
The value of a share of stock is the net present value of all FUTURE earnings. If that’s not forward looking I don’t know what is
The overreliance on China for manufacturing and growth put company earnings at risk. What bugs me is Tim Cook was on an advisory council to the White House, so he should’ve seen the tariffs and trade issues coming from far away and spent more time trying to insulate Apple from the inevitable.
What makes you believe Tim Cook didn’t see this coming? The fact that he didn’t move manufacturing from china overnight?
Clearly something happened within the last month or so that Apple execs didn’t see coming.
This to me is the MOST concerning thing. It suggests to me that it’s not trade (old news, if anything tariffs have been delayed), it’s not the government or Huawei (Chinese competitors have been gaining share for a year now), it’s not the dollar (which is no worse than what it has been in the past six months), it’s not the slowing of the Chinese economy (this is also old news).
IMHO, it could well be the product and the price. Especially the XR, starting at $750 (for a laughable 64GB). Frankly, when it was introduced, my reaction was “meh, some candy-colored overpriced crap”. Apple did something similar before (5s? 6s?) and those colored phones did not do well, IIRC. And, while I did buy the Xs Max, I can’t say it does anything different or better than the X that I bought last year. Interestingly, two people in my family have no interest upgrading from their iPhone 8, and one had to be bribed to switch to my X (so that I could get the Xs Max).
I think the XR — I have not seen one in the wild yet! — could well be history in the next product iteration. And Apple had better get on the 5G game asap, or the next product cycle could be tough too.
Mike, get the hell off this pro-Apple site and into the mainstream media where people really need to hear your point of view. Another well-thought out and well-written piece. I have friends talking about selling their stock and have been sending them a link to this.
While everyone is reacting to the here and now, remember Wall St. is forward looking. The concern is that this is the beginning of a trend of reduced earnings and struggles with selling product in developing markets.
Apple has saturated the the market for premium phones. iPhone owners are delaying replacing their phones. Developing markets can’t afford Apple’s premium priced iPhones and overwhelming turn to Android phones. Is Apple capable of delivering a truly new and innovative product that can propel revenue growth? They missed a huge opportunity with smart speakers and are playing catch-up. Can they develop services offerings that are compelling and revenue/profit rich? These are the factors driving the share price.
the trade issues with China will eventually work their way through. But for now there is much uncertainty, which is always a negative on Wall St. Apple is at risk relying on China for manufacturing and this needs to be addressed. The Chinese market is not a free market and Apple cannot count on growth there due to government interventions.
Overall Apple will continue to be a highly successful enterprise but they will struggle with the double digit growth the market became accustomed over the past decade.
Wall Street hasn't been forward-looking in over 20 years.
The value of a share of stock is the net present value of all FUTURE earnings. If that’s not forward looking I don’t know what is
I agree that's the ideal. However, that isn't how Wall Street has been responding to anything for a very long time.
Apple is still making tons of Profit - the name of the game by which Wall Street Measures everything. They always want incremental sales increase, incremental profit, etc. Never want to have to see or deal with lower numbers of any kind, except costs.
The only thing I missed out on was not selling at the high point, missing a quarter of dividends, & re-purchasing. WS understands that - be sure they unloaded a lot of stock during the last quarter - need those profits. Have you ever noticed how Analysts like the middle of the road (fence). One analyst comes out with a buy recommendation and another analysts comes out the same week or even day with a sell recommendation. If you bought the belief in a company for the short run, you probably made a mistake unless you are a day trader.
Apple still made an enormous profit. The manufacturers, etc, did not fair as well, but they were warned - i.e., Apple adjusted requirements. It will happen again. If you get sloppy, you get wet.
One thing I don't like is the increase in selling price of the products. One would think the price of technology would come down or remain the same. Apple cannot sell the lowest priced product or they will be like everyone else - but they cannot overprice the products either.
The overreliance on China for manufacturing and growth put company earnings at risk. What bugs me is Tim Cook was on an advisory council to the White House, so he should’ve seen the tariffs and trade issues coming from far away and spent more time trying to insulate Apple from the inevitable.
What could he have done? Magically create a new market for iPhone? Like every other multi-national CEO and mainstream economist, they advised against a trade war. But our current US President prefers to listen to his "gut" rather than intelligent advice. He thinks "trade wars are easy to win". His gut tells him so.
The trade war with China intensified fairly quickly. Strong words on both sides. Just as the US has gung-ho "patriots" joining the President in his MAGA nonsense, so do the Chinese. From what I've read, anti-American sentiment has grown rapidly - individual citizens have begun buying more Chinese goods - some companies have begun actively forbidding the use of Apple smartphones at work. Some folks describe the sales slide as a side effect of a cooling Chinese economy - I don't think so. It's an anti-American sentiment that has developed solely because of the Trump tariffs.
You know, I don't really care how much Apple stock is worth. I own zero shares. I care about quality devices, which my XS Watch 4 are (returned Mini, not so much).
However, this article sounds quite similar to reporting the 2016 elections 'Ha, never happen' 'No reason to worry' 'Everything is under control'
We all know how that ended...
Competition , national pride , and extortionate pricing is what’s killing the demand (especially in China). Huawei proved the China market is still a huge growth sector with their stellar results so a little of what cook said isn’t true. I’m sure Apple realise this as well but Cook can’t openly say “people in China think we over charge compared to the competition and don’t like buying American phones”
Also, I see many people at work now who used to have iPhone 6 and 7’s (UK) with Huawei phones which I never did a year ago. Same for OnePlus phones. People are realising that top end androids cost HALF what apple charge.
Service revenue will not continue to grow for long (unless they raise prices there too) if the use base starts to shrink down. The two are intrinsically and proportionally linked.
So unless something changes at Apple , expect more bad news. Hence why the share price has been falling and took last nights dive.
I sold old all my Apple stock at $227 (thank god!) and contemplated getting back in several times since (thankfully didn’t). I’m sure it will make money again in the long term , but expect a few gains and drops on the way. Is it worth the stress ? The dividend isn’t exactly great.
While everyone is reacting to the here and now, remember Wall St. is forward looking. The concern is that this is the beginning of a trend of reduced earnings and struggles with selling product in developing markets.
Apple has saturated the the market for premium phones. iPhone owners are delaying replacing their phones. Developing markets can’t afford Apple’s premium priced iPhones and overwhelming turn to Android phones. Is Apple capable of delivering a truly new and innovative product that can propel revenue growth? They missed a huge opportunity with smart speakers and are playing catch-up. Can they develop services offerings that are compelling and revenue/profit rich? These are the factors driving the share price.
the trade issues with China will eventually work their way through. But for now there is much uncertainty, which is always a negative on Wall St. Apple is at risk relying on China for manufacturing and this needs to be addressed. The Chinese market is not a free market and Apple cannot count on growth there due to government interventions.
Overall Apple will continue to be a highly successful enterprise but they will struggle with the double digit growth the market became accustomed over the past decade.
Wall Street hasn't been forward-looking in over 20 years.
How can you say that with a straight face? All the hot stocks for the past decade have been companies with little or no profits but huge future potential. When a company announces record sales for the just-closed quarter but projects future revenue below street estimates, there is a huge sell off. Wall Street has always been, and always will be, about "what can you do for me tomorrow?"
While everyone is reacting to the here and now, remember Wall St. is forward looking. The concern is that this is the beginning of a trend of reduced earnings and struggles with selling product in developing markets.
Apple has saturated the the market for premium phones. iPhone owners are delaying replacing their phones. Developing markets can’t afford Apple’s premium priced iPhones and overwhelming turn to Android phones. Is Apple capable of delivering a truly new and innovative product that can propel revenue growth? They missed a huge opportunity with smart speakers and are playing catch-up. Can they develop services offerings that are compelling and revenue/profit rich? These are the factors driving the share price.
the trade issues with China will eventually work their way through. But for now there is much uncertainty, which is always a negative on Wall St. Apple is at risk relying on China for manufacturing and this needs to be addressed. The Chinese market is not a free market and Apple cannot count on growth there due to government interventions.
Overall Apple will continue to be a highly successful enterprise but they will struggle with the double digit growth the market became accustomed over the past decade.
Wall Street hasn't been forward-looking in over 20 years.
How can you say that with a straight face? All the hot stocks for the past decade have been companies with little or no profits but huge future potential. When a company announces record sales for the just-closed quarter but projects future revenue below street estimates, there is a huge sell off. Wall Street has always been, and always will be, about "what can you do for me tomorrow?"
Tomorrow? Sure. But it isn't "what can you do for me next year" and hasn't been for ages. Most of those hot stocks have been hot because of the hopes of a buyout by somebody bigger, in the short term, not what the company's future looked like.
Wouldn't it be nice if the headlines read "Apple's Second best quarter ever despite all the turmoil in the financial markets" but no, the tech media loves any opportunity to bash Apple.
I'd love to know if Tim is going to buy back even more AAPL than he'd planned on now.
While everyone is reacting to the here and now, remember Wall St. is forward looking. The concern is that this is the beginning of a trend of reduced earnings and struggles with selling product in developing markets.
Apple has saturated the the market for premium phones. iPhone owners are delaying replacing their phones. Developing markets can’t afford Apple’s premium priced iPhones and overwhelming turn to Android phones. Is Apple capable of delivering a truly new and innovative product that can propel revenue growth? They missed a huge opportunity with smart speakers and are playing catch-up. Can they develop services offerings that are compelling and revenue/profit rich? These are the factors driving the share price.
the trade issues with China will eventually work their way through. But for now there is much uncertainty, which is always a negative on Wall St. Apple is at risk relying on China for manufacturing and this needs to be addressed. The Chinese market is not a free market and Apple cannot count on growth there due to government interventions.
Overall Apple will continue to be a highly successful enterprise but they will struggle with the double digit growth the market became accustomed over the past decade.
Wall Street hasn't been forward-looking in over 20 years.
The value of a share of stock is the net present value of all FUTURE earnings. If that’s not forward looking I don’t know what is
Yeah, in macroeconomics 101 maybe. In the real world, the market is irrational and driven mostly by emotion and herd mentality. Shares are valued what they are because that’s what people value them at. It’s not directly tied to any actual metric in practice.
In the UK, I noticed a lot of people given Huawei's mobiles and tablets as a gift. That surprised me and started thinking that Apple wouldn't have a good holiday season in UK, so I am not surprised about the news. Pricing is definitely affecting iPhone and iPad sales.
Clearly something happened within the last month or so that Apple execs didn’t see coming.
This to me is the MOST concerning thing. It suggests to me that it’s not trade (old news, if anything tariffs have been delayed), it’s not the government or Huawei (Chinese competitors have been gaining share for a year now), it’s not the dollar (which is no worse than what it has been in the past six months), it’s not the slowing of the Chinese economy (this is also old news).
IMHO, it could well be the product and the price. Especially the XR, starting at $750 (for a laughable 64GB). Frankly, when it was introduced, my reaction was “meh, some candy-colored overpriced crap”. Apple did something similar before (5s? 6s?) and those colored phones did not do well, IIRC. And, while I did buy the Xs Max, I can’t say it does anything different or better than the X that I bought last year. Interestingly, two people in my family have no interest upgrading from their iPhone 8, and one had to be bribed to switch to my X (so that I could get the Xs Max).
I think the XR — I have not seen one in the wild yet! — could well be history in the next product iteration. And Apple had better get on the 5G game asap, or the next product cycle could be tough too.
The trade tariffs may be "old news", but the effect it - along with the recently intensified witch hunt of Huawei - has had on the Chinese is not. I submit that the Chinese consumer has turned much more against American products than folks, including executives at AAPL, thought. The average AAPL Chinese consumer thinks the US initiated trade war and pursuit of Huawei is completely unjustified and is doing his/her bit to fight back against the "American aggressor". How? By buying Chinese (e.g. Huawei) and shunning American products.
Apple is "collateral damage" in Trump's ill-conceived trade war that only his simple mind thinks is "easy to win".
I don't think it's product and price at all. If that were the case, how do you explain the record or near record sales in other regions? IMHO, you're letting your personal opinion of Apple's products cloud overall judgement. BTW, the "colored" phone that didn't do well was the 5c. If you bought an Xs Max this year and an X last year, you're clearly in the minority (of people with too much money and too little sense). And, at the very least, if you're being disingenuous by saying it does nothing different/better: it has a friggin' bigger screen! That's *different*.
Finally, according to AAPL, the Xr was Apple's best-selling phone this xmas quarter. That alone invalidates your opinion that its destiny will be similar to the 5c.
Mike; this was a truly excellent piece of work. I agree with one of the other folks who suggested that you get into the mainstream media with with the insight that you have shown here. I am more shocked by the vitriol and animus that his been cast at Apple on Apple Insider Clearly some of these people are Apple haters and are probably being paid by third parties to write these comments. But I also believe many of them are Apple users who are just plain whining. If they think Apple’s products are inferior, or too expensive, and they should just not buy them. It’s very simple. And if they are worried that the stock price will keep dropping, they should sell, now.
You are also absolutely spot on when you mention the fact that Apple has exce eded all expectations in other categories, and that it’s profit margin is not changing. I think it was quite brave for Tim Cook to get out in front of the game, even if it does mean that Apple can buy back some stock sooner . In this particular case Apple buying stock back at a cheaper rate is nothing short of spectacular. Buying Netflix or Disney for Tesla is not what they need to do right now. But they need to do is what they been doing: transforming themselves into a company that does more than simply manufacture iPhones. And by the way, since when is making $84 billion in 1/4 a bad thing?
While everyone is reacting to the here and now, remember Wall St. is forward looking. The concern is that this is the beginning of a trend of reduced earnings and struggles with selling product in developing markets.
Apple has saturated the the market for premium phones. iPhone owners are delaying replacing their phones. Developing markets can’t afford Apple’s premium priced iPhones and overwhelming turn to Android phones. Is Apple capable of delivering a truly new and innovative product that can propel revenue growth? They missed a huge opportunity with smart speakers and are playing catch-up. Can they develop services offerings that are compelling and revenue/profit rich? These are the factors driving the share price.
the trade issues with China will eventually work their way through. But for now there is much uncertainty, which is always a negative on Wall St. Apple is at risk relying on China for manufacturing and this needs to be addressed. The Chinese market is not a free market and Apple cannot count on growth there due to government interventions.
Overall Apple will continue to be a highly successful enterprise but they will struggle with the double digit growth the market became accustomed over the past decade.
Wall Street hasn't been forward-looking in over 20 years.
Awesome write up Mike! Too bad it will fall on many deaf, irrationally panicked, and hair-on-fire ears. As someone with a military background, and especially as a submariner, you undoubtedly recognize that the worst possible thing an individual or a crew can ever do in a difficult situation is to panic and start flailing about wildly. Adversity requires level headed thinking and strong leadership. I see those qualities in Tim Cook. I do not see those qualities amongst a wide swath of the analyst community, in the flock of chicken littles, or at the top of our political and financial chain of command. If any company can weather a little storm it will be Apple. Let's just hope that the overall environment, domestically and internationally, doesn't collapse. If that ship sinks we all go down with it together.
I would probably characterize Wall Street (and shareholders in general) as lacking long term, big picture perspective. They are forward-looking, where "next quarter" is the full extent of the time frame of the vision.
The overreliance on China for manufacturing and growth put company earnings at risk. What bugs me is Tim Cook was on an advisory council to the White House, so he should’ve seen the tariffs and trade issues coming from far away and spent more time trying to insulate Apple from the inevitable.
This is an idiot comment from a long term AI member. Apple does not manufacture iPhone by itself. Foxconn and several other Taiwanese companies do. If you wish Apple manufacture iPhone in India, tell me what Indian company is capable of doing that like Foxconn? India has a literacy rate of only 71% compared to China's 96%. Does assembling iPhone require a literate worker? I think so. And it also needs cheap worker. India cannot do that because it cannot find enough qualified worker.
Comments
You can see this again in the streaming service they're releasing. They're way late to the game and they're coming without any real IP's or studio know how. They're going to spend a billion dollars on a flop
Same thing with the iPad Pro. There's no reason for it not to have a file manager, mouse support, a desktop browser, and be able to support external hard drives.
They're too slow to make changes and until they become more nimble, they will continue to stumble.
IMHO, it could well be the product and the price. Especially the XR, starting at $750 (for a laughable 64GB). Frankly, when it was introduced, my reaction was “meh, some candy-colored overpriced crap”. Apple did something similar before (5s? 6s?) and those colored phones did not do well, IIRC. And, while I did buy the Xs Max, I can’t say it does anything different or better than the X that I bought last year. Interestingly, two people in my family have no interest upgrading from their iPhone 8, and one had to be bribed to switch to my X (so that I could get the Xs Max).
I think the XR — I have not seen one in the wild yet! — could well be history in the next product iteration. And Apple had better get on the 5G game asap, or the next product cycle could be tough too.
The only thing I missed out on was not selling at the high point, missing a quarter of dividends, & re-purchasing. WS understands that - be sure they unloaded a lot of stock during the last quarter - need those profits. Have you ever noticed how Analysts like the middle of the road (fence). One analyst comes out with a buy recommendation and another analysts comes out the same week or even day with a sell recommendation. If you bought the belief in a company for the short run, you probably made a mistake unless you are a day trader.
Apple still made an enormous profit. The manufacturers, etc, did not fair as well, but they were warned - i.e., Apple adjusted requirements. It will happen again. If you get sloppy, you get wet.
One thing I don't like is the increase in selling price of the products. One would think the price of technology would come down or remain the same. Apple cannot sell the lowest priced product or they will be like everyone else - but they cannot overprice the products either.
This is a good Article.
The trade war with China intensified fairly quickly. Strong words on both sides. Just as the US has gung-ho "patriots" joining the President in his MAGA nonsense, so do the Chinese. From what I've read, anti-American sentiment has grown rapidly - individual citizens have begun buying more Chinese goods - some companies have begun actively forbidding the use of Apple smartphones at work. Some folks describe the sales slide as a side effect of a cooling Chinese economy - I don't think so. It's an anti-American sentiment that has developed solely because of the Trump tariffs.
I’m sure Apple realise this as well but Cook can’t openly say “people in China think we over charge compared to the competition and don’t like buying American phones”
Also, I see many people at work now who used to have iPhone 6 and 7’s (UK) with Huawei phones which I never did a year ago. Same for OnePlus phones. People are realising that top end androids cost HALF what apple charge.
Service revenue will not continue to grow for long (unless they raise prices there too) if the use base starts to shrink down. The two are intrinsically and proportionally linked.
So unless something changes at Apple , expect more bad news. Hence why the share price has been falling and took last nights dive.
I sold old all my Apple stock at $227 (thank god!) and contemplated getting back in several times since (thankfully didn’t). I’m sure it will make money again in the long term , but expect a few gains and drops on the way. Is it worth the stress ? The dividend isn’t exactly great.
Wouldn't it be nice if the headlines read "Apple's Second best quarter ever despite all the turmoil in the financial markets" but no, the tech media loves any opportunity to bash Apple.
I'd love to know if Tim is going to buy back even more AAPL than he'd planned on now.
The trade tariffs may be "old news", but the effect it - along with the recently intensified witch hunt of Huawei - has had on the Chinese is not. I submit that the Chinese consumer has turned much more against American products than folks, including executives at AAPL, thought. The average AAPL Chinese consumer thinks the US initiated trade war and pursuit of Huawei is completely unjustified and is doing his/her bit to fight back against the "American aggressor". How? By buying Chinese (e.g. Huawei) and shunning American products.
Apple is "collateral damage" in Trump's ill-conceived trade war that only his simple mind thinks is "easy to win".
I don't think it's product and price at all. If that were the case, how do you explain the record or near record sales in other regions? IMHO, you're letting your personal opinion of Apple's products cloud overall judgement. BTW, the "colored" phone that didn't do well was the 5c. If you bought an Xs Max this year and an X last year, you're clearly in the minority (of people with too much money and too little sense). And, at the very least, if you're being disingenuous by saying it does nothing different/better: it has a friggin' bigger screen! That's *different*.
Finally, according to AAPL, the Xr was Apple's best-selling phone this xmas quarter. That alone invalidates your opinion that its destiny will be similar to the 5c.
You are also absolutely spot on when you mention the fact that Apple has exce eded all expectations in other categories, and that it’s profit margin is not changing. I think it was quite brave for Tim Cook to get out in front of the game, even if it does mean that Apple can buy back some stock sooner . In this particular case Apple buying stock back at a cheaper rate is nothing short of spectacular. Buying Netflix or Disney for Tesla is not what they need to do right now. But they need to do is what they been doing: transforming themselves into a company that does more than simply manufacture iPhones. And by the way, since when is making $84 billion in 1/4 a bad thing?
I would probably characterize Wall Street (and shareholders in general) as lacking long term, big picture perspective. They are forward-looking, where "next quarter" is the full extent of the time frame of the vision.