Liberty Posted October 2, 2014 Share Posted October 2, 2014 http://9to5mac.com/2014/10/02/2-million-reservations-in-6-hours-china-shows-strong-early-demand-for-iphone-6-and-iphone-6-plus/ I'd say this is a good thing. The official preorders only start on October 10, but the pre- preorders (?!) are at 2 million units in six hours. Link to comment Share on other sites More sharing options...
innerscorecard Posted October 2, 2014 Share Posted October 2, 2014 http://9to5mac.com/2014/10/02/2-million-reservations-in-6-hours-china-shows-strong-early-demand-for-iphone-6-and-iphone-6-plus/ I'd say this is a good thing. The official preorders only start on October 10, but the pre- preorders (?!) are at 2 million units in six hours. If you walk by every carrier store in Shanghai there are signs telling you to order the iPhone 6. At one flagship store there were two ladies in dresses sitting on huge, tall (and dangerous looking) podiums telling everyone to make their pre-orders. Anecdotally I also hear of some people wanting to get an iPhone 5s now, with the price drop. Mother of all upgrade cycles indeed, hopefully. Link to comment Share on other sites More sharing options...
Liberty Posted October 3, 2014 Share Posted October 3, 2014 Good piece: http://www.analogsenses.com/2014/10/02/faster-horses/ Link to comment Share on other sites More sharing options...
ni-co Posted October 3, 2014 Share Posted October 3, 2014 Enjoyed your commoditization discussion. One thing that got lost, though, is how exactly is it going to affect profits. Txlaw, you made a good theoretical argument and fine distinctions between high end consumer companies and low end disruption; but never explained why commoditization should be to the detriment of Apple or at least I seem to have missed it. I think this is what drove Liberty crazy and led to this argumentative circle. Commoditization obviously was no problem for high end car makers. So, why exactly is this not transferable to the smartphone market? Is it because of Apple's US market share or why else? As far as I can see Apple is far from being the worldwide leader in smartphone market share. So, as far as I can see it's only semantics whether Apple is a "high end" company or whether the market is being commoditized. If you can't show how this is going to affect Apple's profits it's of no importance to my investment thesis. After all, cash is what we're interested in, aren't we? I don't care whether Apple makes its profits in a commoditized market or not, as long as they do make them. As far as your valuation argument goes: Why exactly is Apple highly priced? Because of its market cap? Did you account for the still huge cash balance and the very prudent use of it by Apple's management. I don't see any growth fantasies priced into this stock. If Apple can only keep what it's doing now for the next 10 years, the stock still is nowhere into expensive terretory. That's on a DCF basis. I think I don't even need to compare it to the S&P multiple. I do it anyway and what it tells me is that Apple seems to be a company with a far worse than average outlook… Link to comment Share on other sites More sharing options...
Liberty Posted October 3, 2014 Share Posted October 3, 2014 Pre-orders in China now apparently passed 4 million units. http://www.businessinsider.com/apple-may-have-already-racked-up-4-million-orders-for-the-iphone-6-in-china-2014-10 The Chinese news site from Tencent says Apple has received four million reservations for the iPhone 6. It's a bit confusing, but it appears a reservation isn't the same thing as a preorder. A preorder is actually paying for the device. Preorders start Oct. 10 in China. A reservation is putting a hold on the iPhone to pick it up when it's on sale on Oct. 17. As Benjamin Mayo at 9to5Mac notes, if all these reservations convert to orders, and Apple gets more orders on the first day it's on sale, Apple's China launch could meet or exceed the 10 million that Apple sold during its opening weekend launch for the iPhone 6 in the US and around the globe. Link to comment Share on other sites More sharing options...
txlaw Posted October 3, 2014 Share Posted October 3, 2014 Enjoyed your commoditization discussion. One thing that got lost, though, is how exactly is it going to affect profits. Txlaw, you made a good theoretical argument and fine distinctions between high end consumer companies and low end disruption; but never explained why commoditization should be to the detriment of Apple or at least I seem to have missed it. I think this is what drove Liberty crazy and led to this argumentative circle. Commoditization obviously was no problem for high end car makers. So, why exactly is this not transferable to the smartphone market? Is it because of Apple's US market share or why else? As far as I can see Apple is far from being the worldwide leader in smartphone market share. So, as far as I can see it's only semantics whether Apple is a "high end" company or whether the market is being commoditized. If you can't show how this is going to affect Apple's profits it's of no importance to my investment thesis. After all, cash is what we're interested in, aren't we? I don't care whether Apple makes its profits in a commoditized market or not, as long as they do make them. I think I did explain it. Smart phone profit pool and profit share can change based on commoditization of a product market. Let's say that Apple has close to 90% of profit share in the market, as per IDC's numbers earlier this year. Let's further assume Apple sells 180 million iPhones this year at an ASP of $700 and with a net margin of 25% for the biz line. That means $32 billion in profit for Apple from iPhone, which translates to close to $36 billion profit for the smartphone industry. The question is, what does the profit pool look like going forward? We know smartphone unit sales will grow at a rapid clip. But what will the absolute profit pool look like? Will it increase? At what rate? And will "good enough" products take market share away from Apple such that Apple loses profit share? After all, manufacturers will not go on losing money forever, right? So now let's assume smartphone unit sales grow at 20% per annum and profit pool grows by 10% per annum. And because of commoditization -- which leads to lower ASPs and lower margins for the market -- and Apple's strategy of remaining in the "high end," Apple's smartphone profit pool share falls to 50%, similar to the high end of the auto industry, except that Apple is the sole "high end" player (as per the Apple partisan's unrealistic view of iPhone). Smartphone profit pool goes to $53 billion in 5 years. Apple's profit share as the sole "high end" provider, assuming 50% profit share, goes to $27 billion. Which is less than what they're earning today. These are just numbers I put together quickly. But is it now clear that the profit pool and share of that profit pool matters to the "high end" providers? As far as your valuation argument goes: Why exactly is Apple highly priced? Because of its market cap? Did you account for the still huge cash balance and the very prudent use of it by Apple's management. I don't see any growth fantasies priced into this stock. If Apple can only keep what it's doing now for the next 10 years, the stock still is nowhere into expensive terretory. That's on a DCF basis. I think I don't even need to compare it to the S&P multiple. I do it anyway and what it tells me is that Apple seems to be a company with a far worse than average outlook… I would not say that Apple is definitely highly priced or overvalued. I would say that, at best, it is fairly valued -- i.e., a great business trading at a reasonable price. And that if they allocate capital well -- e.g., through buybacks and the creation of new biz lines -- the stock could easily compound at a rate nicely above the S&P 500. However, there is an unappreciated downside risk because of the heavy reliance on smartphone sales for profit. And that risk depends on how the whole smartphone market evolves over the next decade. If we have pretty much hit the point of diminishing returns for hardware and OS innovations, and the true innovation comes in the software/services layered on top, then the profit pool for smartphones could change as described above. If Apple earns, say, $7 per share on average going forward, and we say there is excess cash of $100 million for distribution (taking into account tax, necessity of keeping big cash balance for acquisitions and tooling, etc.), then we get a cash-adjusted earnings yield of what -- around 8.5%? For a non-diversified tech company with the downside risks described, perhaps that is the right earnings yield for Apple to trade at. It's a judgment call on valuation here. Like I said, at a $300 million market cap, I'd be buying the company hand over fist. At $600 million, I will tend to go elsewhere because I am more of a deep value investor. Link to comment Share on other sites More sharing options...
ni-co Posted October 3, 2014 Share Posted October 3, 2014 Thanks, txlaw, now I get your point. I agree with most of it but not with the crucial point, I guess. Because what I find unconvincing is that Apple is supposed to lose profit share. That's not how commoditization in the automobile industry worked out (if I remember correctly). Furthermore, I think that the market very much appreciates the iPhone risk. There is no other explanation for the discount at all. A company with this track record in generating enormous free cash flows, conservatively financed trading at a discount to the S&P is only explainable by the very risks you see and mentioned here. Link to comment Share on other sites More sharing options...
tengen Posted October 6, 2014 Share Posted October 6, 2014 Anyone concerned about the potential for the EU to hand Apple a multi-billion euro fine for "illegal state aid"? Having skimmed through some articles, it seems the case against Apple is not quite as clear as the European regulators might like us to believe. On the other hand, there seems to be a mood in several places to stick it to corporations that are viewed to be evading paying their fare share of taxes. Link to comment Share on other sites More sharing options...
Palantir Posted October 6, 2014 Share Posted October 6, 2014 ^Finally a use for all that offshore cash. ;D Link to comment Share on other sites More sharing options...
Liberty Posted October 7, 2014 Share Posted October 7, 2014 http://www.tuaw.com/2014/10/02/apple-pay-an-in-depth-look-at-whats-behind-the-secure-payment/ Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 9, 2014 Share Posted October 9, 2014 Leon Cooperman: Apple stock 20% undervalued http://www.cnbc.com/id/102070646?trknav=homestack:topnews:9 Link to comment Share on other sites More sharing options...
intothebreach Posted October 9, 2014 Share Posted October 9, 2014 Carl Icahn just posted a (long) public letter offering his analysis of Apple, praising Tim Cook and asking Apple to do a massive tender offer while promising not to tender his own shares in the process. http://www.shareholderssquaretable.com/sale-apple-shares-at-half-price/ Link to comment Share on other sites More sharing options...
Liberty Posted October 13, 2014 Share Posted October 13, 2014 http://www.macrumors.com/2014/10/13/iphone-6-china-20-million-carriers-jd/ Apparently, iphone 6 preorders reached 20m in china. Link to comment Share on other sites More sharing options...
sriraja Posted October 14, 2014 Share Posted October 14, 2014 Not sure if this was ever discussed in the 400+ pages. But read Booth Laird's 2014 Q3 letter and realized they wrote about this float back in 2013. http://www.boothlaird.com/2013/01/apple-what-most-people-are-missing/ Link to comment Share on other sites More sharing options...
Liberty Posted October 14, 2014 Share Posted October 14, 2014 The roll-out continues very quickly. https://www.apple.com/pr/library/2014/10/13iPhone-6-iPhone-6-Plus-Arrive-in-36-More-Countries-and-Territories-This-Month.html Apple® today announced that iPhone® 6 and iPhone 6 Plus, the biggest advancements in iPhone history, will arrive in 36 additional countries and territories across Europe, Asia, the Middle East, Latin America and Africa by the end of October. iPhone 6 and iPhone 6 Plus will be available in a total of 69 countries and territories by the end of the month and are on track to be available in more than 115 countries by the end of the year, making this the fastest iPhone rollout ever. Link to comment Share on other sites More sharing options...
portfolio14 Posted October 15, 2014 Share Posted October 15, 2014 Not sure if this was ever discussed in the 400+ pages. But read Booth Laird's 2014 Q3 letter and realized they wrote about this float back in 2013. http://www.boothlaird.com/2013/01/apple-what-most-people-are-missing/ Interesting read. This reminds me this: http://fundooprofessor.wordpress.com/2012/12/06/httpsdl-dropbox-comu28494399blog%20linksfloats_and_moats-pdf/ Link to comment Share on other sites More sharing options...
sriraja Posted October 15, 2014 Share Posted October 15, 2014 Certainly !! I think this Moat of Apple compared to the technical wizardy of the Apple product is more interesting for the value investor in me :) So as Apple sells more and more devices, they actually get interest free loan on their COGS. Although this is insignificant now, in an environment where interest rates are not as low as now, this could mean a significant amount. Anybody has done some work on how much this negative CCC can impact in valuation? I don't have Dell's financials before they were bought out, but I read somewhere that they too had a negative Cash Conversion Cycle. Link to comment Share on other sites More sharing options...
Liberty Posted October 15, 2014 Share Posted October 15, 2014 http://www.patentlyapple.com/patently-apple/2014/10/interbrand-lists-apple-as-the-top-global-brand-again.html Interbrand has just released its 15th annual Best Global Brands report, the definitive guide to the world's most valuable brands. For the second year in a row, Apple claims the top position. Valued at USD $118.9 billion, the company increased its value by 21% year-over-year. Apple has appeared on Interbrand's Best Global Brands since 2000, when the report first debuted. In 2000, Apple ranked #49 and had a brand value of USD $5.5 billion. Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 15, 2014 Share Posted October 15, 2014 Apple Steals Its Own iPad Thunder With Photo Before Event http://www.bloomberg.com/news/2014-10-15/apple-steals-its-own-ipad-thunder-with-photo-before-event.html Link to comment Share on other sites More sharing options...
Liberty Posted October 16, 2014 Share Posted October 16, 2014 Watched the event. No major surprises, but I'm pleased overall. They just made more of their big products even better, and that's all they needed to do there. I was hoping for a retina Macbook Air and something on Apple TV, but chances are that all the production capacity in China is trying to meet iPhone demand, so not surprised they're taking their time. Best to release something when it's ready and when you can actually ship it than launch just to launch... Link to comment Share on other sites More sharing options...
Liberty Posted October 17, 2014 Share Posted October 17, 2014 As usual, anyone with an interest in the Mac (and much more Apple-related) should read the canonical, book-length review by John Siracusa: http://arstechnica.com/apple/2014/10/os-x-10-10/ Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 20, 2014 Share Posted October 20, 2014 Apple ® today announced financial results for its fiscal 2014 fourth quarter ended September 27, 2014. The Company posted quarterly revenue of $42.1 billion and quarterly net profit of $8.5 billion, or $1.42 per diluted share. These results compare to revenue of $37.5 billion and net profit of $7.5 billion, or $1.18 per diluted share, in the year-ago quarter. Gross margin was 38 percent compared to 37 percent in the year-ago quarter. International sales accounted for 60 percent of the quarter’s revenue. Apple’s board of directors has declared a cash dividend of $.47 per share of the Company’s common stock. The dividend is payable on November 13, 2014, to shareholders of record as of the close of business on November 10, 2014. “Our fiscal 2014 was one for the record books, including the biggest iPhone launch ever with iPhone 6 and iPhone 6 Plus,” said Tim Cook, Apple’s CEO. “With amazing innovations in our new iPhones, iPads and Macs, as well as iOS 8 and OS X Yosemite, we are heading into the holidays with Apple’s strongest product lineup ever. We are also incredibly excited about Apple Watch and other great products and services in the pipeline for 2015.” “Our strong business performance drove EPS growth of 20 percent and a record $13.3 billion in cash flow from operations in the September quarter,” said Luca Maestri, Apple’s CFO. “We continued to execute aggressively against our capital return program, spending over $20 billion in the quarter and bringing cumulative returns to $94 billion.” Apple is providing the following guidance for its fiscal 2015 first quarter: • revenue between $63.5 billion and $66.5 billion • gross margin between 37.5 percent and 38.5 percent • operating expenses between $5.4 billion and $5.5 billion • other income/(expense) of $325 million • tax rate of 26.5 percent Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 20, 2014 Share Posted October 20, 2014 As for device sales: iPhone was 39.3 million, well above 33.8 million a year ago. iPad was 12.3 million, shy of 14.1 million a year ago. Mac was 5.52 million, above the 4.6 million a year ago. And the iPod was 2.64 million, down from 3.5 million. Link to comment Share on other sites More sharing options...
Palantir Posted October 20, 2014 Share Posted October 20, 2014 Asia has disappointed....was expecting more there. Maybe next year. Link to comment Share on other sites More sharing options...
DCG Posted October 20, 2014 Share Posted October 20, 2014 iPads are going to be tough to grow to grow at this point, as they don't have the same 2-year upgrade cycle as phones, and the newest iPads don't give much of a reason to upgrade from other newer models. They're still seem to be selling every iPad 6 they can produce, as they are still difficult to find. Link to comment Share on other sites More sharing options...
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