sacto joe

Woke up at 4:00 AM with this thought:

It suddenly all makes sense. Apple has to have been out of the market for some time, principally because they wanted at all costs to avoid any appearance of taking advantage of this down market. And that absence in turn explains why Apple dropped so precipitously, and then refused to rebound.

But hi-ho, look where that leaves them now! They’ve literally pre-announced their earnings, because they waited until the quarter was over – which means they aren’t subjected to the requirement to hold off buying AAPL in advance of earnings!

And THAT means that not only are they going to be back in the market, but they are going to be back in with a vengeance – just when AAPL bottoms out with news of a (fairly moderate, all things considered) earnings miss. And not only that, but they’re back in the market when most of the short term profiteers have been wrung out of AAPL. And finally, they have inadvertently kept their powder dry to the tune of at least $130 B, which means that over the next three full months Apple can buy back AAPL until the cows come home!

Folks, if I wasn’t on fixed income, I’d be buying AAPL like crazy during this dip, because it’s now practically a sure bet Apple will be!

Just posted this on https://www.ped30.com/2018/12/12/trade-war-zacks-apple/ :

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Completely off-topic, but here’s a link posted today on Braeburn Group that is very much Apple-related:

https://abcnews.go.com/Health/apple-watch-told-46-year-man-irregular-heartbeat/story?id=59726093

This story is about a 46 year old man who found out via his Apple Watch that he had a-fib. It struck a chord with me because I also found out via my Apple Watch that I had a-fib and atrial flutter. In this man’s case it was because he just tried out the new ECG capability for the heck of it. In my case, it was the Watch’s heart rate monitor that alerted me that I had a racing heart.

But there’s a bit more in my case to the story. I was scheduled for a procedure called atrial ablation this coming Monday, and in prep for that went through a special heart scan test. In the process of THAT test, I found out this morning that I also have a hiatal hernia. That will require yet another surgery, and must be done before the heart procedure.

So directly or indirectly, Apple is responsible for diagnosing two serious health issues of mine over the past few months. Apple is taking care of me in more ways than just being a stockholder….

Thanks, Apple!

One note of caution:

I do have a-fib. I found out just recently (my Apple Watch caught an abnormally high heart rate), and will be undergoing a procedure called atrial ablation very soon now. I just tested the Apple Watch approach. The first reading I got did not show a-fib (sinus rhythm). The second reading, I made sure not to touch my left hand with my right and only touch the crown. It caught the a-fib. Tried it again, purposefully touching my other hand. Sinus rhythm. One more time, being careful not to touch my other hand. A-fib.

entropys said:

I guess this could be spun as Apple wanting to emphasise the growing importance of services as a revenue stream, making hardware less important as revenue.  The thing is though, much, much more than any other company providing services, ultimately Apple will have to rely on sales of that hardware to grow services revenue.

As a general rule, all Apple services require an Apple device. If you don’t own an Apple device you are unlikely to use Apple services. Apple Music on android is about the only one I can think of off hand, and I bet that isn’t that popular.

Moving hardware prices up into the Burberry market, and the limits that places on hardware growth, ultimately threatens services revenue growth. You can only extract additional revenue from existing hardware owners to a point. Ultimately in Apple’s business model, hardware purchases have to expand to also grow services revenue.

"...more than any other company providing services, ultimately Apple will have to rely on sales of that hardware to grow services revenue."

It's true, but with an important caveat. In his article "Lasts Longer" http://www.asymco.com/2018/09/13/lasts-longer/ , Horace Diedu points out the error of thinking about Apple in terms of "market share" rather than "installed base". Robert Paul Leitao put it this way recently on ped30.com:

"The violent sell-off in Apple illustrates a clear and pervasive misunderstanding of Apple’s emerging revenue model and a knee-jerk unwillingness to forego conventional approaches to the valuation of the company.
Apple has entered a “post-iPhone era” in which revenue and profit growth will be driven less by reported device unit sales and more by an expanding global base of device owners leveraging the most advanced eco-system of devices and services on the planet.
The robust global market for pre-owned iPhones through both formal and informal channels is not reflected in Apple’s quarterly unit sales. It is, however, reflected in the fast growth of Services revenue.
Nothing about Apple’s fundamentals has changed. The company reported record September quarter revenue, net income and earnings per share. Despite very heavy forex pressures, management is guiding to the highest quarterly revenue in the company history in the December quarter which will deliver record quarterly revenue, net income and earnings per share (again)."

So it's NOT true that "Moving hardware prices up into the Burberry market, and the limits that places on hardware growth, ultimately threatens services revenue growth." At least not for Apple.

retrogusto said:

sacto joe said:

(From one of my posts on ped30.com)

Okay, some numbers to play with this weekend:

• Apple appears to have bought back about 81 M shares last quarter. I’m assuming a flat 4.8 B shares outstanding.
• Net income was $14.125 B for the quarter, and $59.531 B for the fiscal year.
• EPS thus equals (59.531/4.8=) $12.40/share.
• At the present price of $205.65, that’s a “real” (backwards looking) P/E of (205.65/12.40=) 16.6.

I don’t think we need any clearer indication of how utterly stupid this selloff of AAPL is, but I couldn’t be more delighted, because Apple is in the market, buying back 20% of the stock that’s up for sale each and every day at fire sale prices, and consequently handing Wall Street it’s head on a platter.

What utter and complete vindication for Apple’s long term business plan.

Yeah, for a long-term shareholder, it’s kind of a win-win situation—no problem if the share price drops for no good reason, because we’re essentially buyers through the buyback program, and low prices enable Apple to buy back more shares for the same money. Now is a critical time, because they will be buying back shares at an accelerated rate until they get to a “cash-neutral” position. 

Exactly. Apple is approaching 30% of it’s shares bought back since 2013. If you’d bought and held since then, if you’d owned 1% of Apple (don’t I wish!), at a 30% reduction in stock “float”, you’d own (1/70=) 1.43% of Apple today.

Sinking Apple’s valuation is like throwing Br’er Rabbit into the briar patch. Good luck with that.