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Like many tech companies, Apple is no exception and it lives and dies by its new product cycles. Meanwhile the existing devices (iPhone and iPad) becomes stale and requires refreshed every 12 months in order to keep the competitors at bay. Until late last year the earning momentum has been very strong up till late last year, but its competition is also picking their pace. So what is the next big thing that will change the way we (the consumers) do thing or improve our lives? Apple's contribution to smartphones and tablet PCs are good examples. I am not smart enough to know when is a good buying opportunity, but I would wait for the next new product.
Reply to @Sven: I don't have an investment or interest in any of these names, but -
1 - What Sven said. Apple not only needs new product, but needs to innovate. Iphone 6 and Ipad 4 or 5 aren't innovative, they are tweaks on the core product/initial innovation. I don't want an Iphone because of the small screen - I'd have to get a tablet to read for long periods. Instead, one can get a larger Samsung phone and not have to get a tablet to read. Apple has tweaked this and that with the phone, but they need a larger version.
2. At some point, at least some of the upgrades are not noticeable. It's "somewhat faster!" This goes for all brands. I'm really happy with my Galaxy S2, and I feel no need to upgrade to the S3 or upcoming S4. At some point, some people are going to be satisfied with what they have, and not want to go through the cost and/or effort to upgrade because of "another row of icons" or "somewhat faster."
3. Google glass is interesting, and Google at least has interests in a lot of different areas, from data to ads to android to glass to Youtube to infrastructure (Fiber) etc.
4. Apple is technically a reasonable value, but a lot of people thought that $50 ago. It's a remarkable example of everyone on one side of the boat - the most owned stock in the world. When that was going to turn, it was going to turn big - all the hedge funds, mutual funds and retail trying to get out. It's remarkable that there hasn't been a turn yet, but it speaks to the magnitude of the participation before the turn, I suppose.
5. No one is going to replace Jobs (I've gone back and watched a couple of presentations lately, and he's a remarkable presence on-stage - the bio by Isaacson is also worth reading - it's a long book, but it flies by), but the company - whether it be Cook or the ads (which aren't nearly as memorable or innovative) or in general, the company does not have the razzle dazzle it did a few years ago.
Lastly, the 200 day moving average is at about $368, so that may provide support if it gets there. 50 day is above at $546
I have no idea what the stock should sell for. But on a recent flight, all three of us in the same row were on our iPads. I was reading MFO using in flight wi-fi. Gal next to me was playing games on her's. The kid next to her was watching a movie on one. Their popularity is amazing. I recently updated to a second newer model & they continue to improve these. The built in GPS works well. Lay it on the seat while driving and it tells you where to go. Looks like both Verizon & AT&T have caved and will allow the newer ones to serve as wi-fi "hotspots" the way phones have for years. Haven't tried this yet - but will. Priced Amazon's 4-G enabled Fire for perhaps $100 - $150 less. But the IPad easily won on features. I don't think the Fire even offers GPS. The icloud backup is seamless and can be done directly from ipad now if connedted to wi-fi. The consensus seems to be that security is fine - unless you've got nat security or corporate secrets so stored. Newer models let you install software upgrades directly too. The retnia display is clearly better, but not reason enough to buy a new one IMHO. ... All that said, technology investing has always been fraught with peril. Some day these gizmos will go the way of the Commodore 64 computer and the VHS video tape. And the speed of change is increasing. Additional note: Ipad batteries are not user-replacable. They last a long time (several years). And, you can mail in your Ipad and get battery replaced for under $100. Still, the issue remains one reason to upgrade to newer versions as they come out. FWIW
I have a small long position in AAPL. I think the long/short case rests on (a) the potential for Apple to launch new blockbusters and, in the absence of blockbusters, (b) how well the shift from product-based competition to platform/ecosystem based-competition buffers margin erosion at Apple as the industry matures and competition intensifies. Please do your own DD.
Reply to @BWG: Anyone shorting AAPL at this point is likely asking for trouble, it becomes where to start a long-position and whether or not one has a considerable time horizon, as I think stabilization and a turn higher will take time (and I think things, big picture, remain at the very least moderately fragile in the world economy and quite possibly may for years to come.)
If Apple introduced a "less expensive" iPhone, and they could keep their margins, then Apple would dominate the smartphone space worldwide. The Apple name stands for quality and is a status symbol, especially in China, India and Russia. I've read that Apple's main supplier (Foxconn) is building a factory in Brazil, which will help to get around trade barriers in that country.
The smartphone and tablet space will continue to grow handsomely for a few years yet, but much of this growth will come in the developing world where price is a much greater issue. Apple addressed this opportunity with the lower priced iPad mini, if an "iPhone mini" were launched then I'll slowly add some shares of Apple. Apple's traditional developed world markets are saturated with their current range of products and as Scott said an iphone 7 and ipad 6 just won't work here. Of course I'd like to see another market disruptor introduced into another category as well.
I still kinda like my idea of an Iphone and/or Ipad built for outdoors - tough, metal exterior, maybe enhanced gps/gps features, built in thermometer, waterproof, outdoor apps pre-loaded, enhanced battery and/or ability to swap in extra battery, etc etc. It would essentially be like a Ipad/Iphone toughbook - the ad would be "built for work or play", with someone at work in the city and out enjoying the outdoors with it. I dunno.
Reply to @scott: I like that idea and maybe something with an enhanced antenna or reception capabilities. Another issue I'd like to see resolved, and I don't know if this is Verizon's or Apple's doing, is the usage plan limitations placed on the iPhone vs. any other phone out there.
Reply to @scott: Agree. But why stop there? Fisherman's version could feature water temp gage and sonar fish locator. Maybe a bait selector? Waterproof and floatable. Golf version would display wind speed & direction along with slope & cut of greens. Maybe a club-selection feature? Crush-proof for when smashed against tree on bad days. Haven't auto makers played this game for years with their "limited edition" vehicles?
Not only waterproof; but market downturn and market-shock proof. All loaded apps would provide all the "algos" to avoid anything related to portfolio losses. Once you have loaded your portfolio holdings, the algos would provide minute details of buys and sells without one's intervention; unless over-ridden in the "manual" mode settings; allowing an investor to think for themselves.
The "old birds" here will understand the full impact of Ron Popeil's tv infomercials as related to the below link.
Apple sub $400 is a great price. I said that at $450 but the deal is getting even sweeter. Still a ton of cash in books. If you back out that cash the P/E is extremely low. When downside market momentum reverses it is time to load up. You can do so by buying Apple directly or buying a couple of technology/ growth fund that is heavy on Apple and play it a bit safer.
The company has very enviable cash flow. Their products are loved except for high costs but high margins embedded in those prices are good for investors. Apple pretty much cornered the high end market while a bunch of players are struggling to make profit at the low end. There is almost no margin in the low end. Apple do not want to play that game.
The company has created a bit if a lock down with an ecosystem. Once you have collected enough apps, songs, videos (some of media is in copyrighted Apple proprietary formats) you have much less incentive to switch to a different platform. It can be done but few actually do it. Besides our company VPN, Mail etc. are best supported on iPhone. Similarly App writers are coming up with iPhone versions first.
I personally waited for iPhone 5 as I did not want to carry two different devices in my pocket for my media and for phone. I could buy a much cheaper Android device but I did not. I suffered with my 7 year old, failing Motorola Razr. But I agree with Scott as well that now I have iPhone 5 I am less likely to rush to iPhone 5S. I might even skip the one following it if the phone is still in good condition. So, the growth is more likely to come in emerging countries where Apple devices are a status symbol. They do not need to lower their margins much to generate the same amount of profit as others.
I agree with Investor. I'd like to see Apple go after the developing world but with a mid-priced phone, not a phone priced for the developed world nor a cheapie Samsung-type phone. Consumers in the developing world would gladly trade up for such an iPhone. Apple would own the space worldwide which would cause the share price to head north once again due to the sheer volume of iPhones being sold at a good margin.
Reply to @Mark: I don't know how people have limited data plans. I use probably 2GB-3GB of data per month, but lately I've started watching shows and watching a few hours of television adds up massively.
Reply to @scott: I have a 1GB plan. If you can defer downloading music/podcast and especially videos to times when you have wifi connection, set your mail check to manual you can live pretty comfortably. I got wifi at home and work, and a lot of businesses I have around also has wifi in Austin area.
The first time I got my iPhone the new podcast app was very buggy. It consumed most of my data plan in a matter of hours. I had to turn off cellular data for the remaining of the month. Nowadays, after several updates podcast app is behaving much better. It respects the controls on not to download in cellular data and if I have been listening a podcast directly without downloading first, it asks if I would like to switch to cellular data to continue.
So, nowadays, I leave data on. I used to check data usage every day now every now and then.
But if you get into downloading big stuff on cellular data, or watch videos over cellular data than you really should get a data plan. Thats what the cell company want you to do as they have huge profit margin on cellular data plans.
If you plan to use tethering for your laptop etc. you also probably need a large plan as well.
Reply to @Investor: I sold mine Apple shares when everyone was hyping it at $1,000/share - same sentiment as Cisco at the height of tech bubble. At today's price Apple is being considered as a "value" stock - no debt, solid cash flow, and low PE. Noted that it appeared in holdings of Artisan Value and TRP Capital Appreciation.
8:13 AM Apple (AAPL) -3.4% to $392.50 as the Street continues digesting the light FQ3 guidance provided with its FQ2 beat. BMO's Keith Bachman has cut shares to Market Perform after recently expressing concerns about iPhone mix. "We think the challenges of 1) increased competitiveness in the smartphone market, which we believe will pressure ASPs and margins – will largely offset 2) improved capital allocation." In a set of charts analyzing Apple's results, Dan Frommer points out the iPad is now 20% of sales, and iTunes/Software/Services 9% (the iPhone is 53%). (previous) (transcript) [Tech, On the Move] Comment! http://seekingalpha.com/currents/post/963111
Comments
1 - What Sven said. Apple not only needs new product, but needs to innovate. Iphone 6 and Ipad 4 or 5 aren't innovative, they are tweaks on the core product/initial innovation. I don't want an Iphone because of the small screen - I'd have to get a tablet to read for long periods. Instead, one can get a larger Samsung phone and not have to get a tablet to read. Apple has tweaked this and that with the phone, but they need a larger version.
2. At some point, at least some of the upgrades are not noticeable. It's "somewhat faster!" This goes for all brands. I'm really happy with my Galaxy S2, and I feel no need to upgrade to the S3 or upcoming S4. At some point, some people are going to be satisfied with what they have, and not want to go through the cost and/or effort to upgrade because of "another row of icons" or "somewhat faster."
3. Google glass is interesting, and Google at least has interests in a lot of different areas, from data to ads to android to glass to Youtube to infrastructure (Fiber) etc.
4. Apple is technically a reasonable value, but a lot of people thought that $50 ago. It's a remarkable example of everyone on one side of the boat - the most owned stock in the world. When that was going to turn, it was going to turn big - all the hedge funds, mutual funds and retail trying to get out. It's remarkable that there hasn't been a turn yet, but it speaks to the magnitude of the participation before the turn, I suppose.
5. No one is going to replace Jobs (I've gone back and watched a couple of presentations lately, and he's a remarkable presence on-stage - the bio by Isaacson is also worth reading - it's a long book, but it flies by), but the company - whether it be Cook or the ads (which aren't nearly as memorable or innovative) or in general, the company does not have the razzle dazzle it did a few years ago.
Lastly, the 200 day moving average is at about $368, so that may provide support if it gets there. 50 day is above at $546
http://stockcharts.com/h-sc/ui?s=AAPL&p=W&b=5&g=0&id=p01587758552
Older...http://aswathdamodaran.blogspot.ca/2013/02/apple-redux-thoughts-on-value-price-and.html#links
Recent..http://brooklyninvestor.blogspot.ca/2013/04/newtons-apple.html#links
I have a small long position in AAPL. I think the long/short case rests on (a) the potential for Apple to launch new blockbusters and, in the absence of blockbusters, (b) how well the shift from product-based competition to platform/ecosystem based-competition buffers margin erosion at Apple as the industry matures and competition intensifies. Please do your own DD.
BWG
The smartphone and tablet space will continue to grow handsomely for a few years yet, but much of this growth will come in the developing world where price is a much greater issue. Apple addressed this opportunity with the lower priced iPad mini, if an "iPhone mini" were launched then I'll slowly add some shares of Apple. Apple's traditional developed world markets are saturated with their current range of products and as Scott said an iphone 7 and ipad 6 just won't work here. Of course I'd like to see another market disruptor introduced into another category as well.
Wish I'd bought more in 2009...
Not only waterproof; but market downturn and market-shock proof. All loaded apps would provide all the "algos" to avoid anything related to portfolio losses. Once you have loaded your portfolio holdings, the algos would provide minute details of buys and sells without one's intervention; unless over-ridden in the "manual" mode settings; allowing an investor to think for themselves.
The "old birds" here will understand the full impact of Ron Popeil's tv infomercials as related to the below link.
But, wait there's more
Hey "Investor-Matic" that's one hell of a machine. I'll take one.
Skeeter
http://www.fool.com/investing/general/2013/04/20/why-is-verizon-still-selling-so-many-old-iphones.aspx
Ignore the last paragraph.
The company has very enviable cash flow. Their products are loved except for high costs but high margins embedded in those prices are good for investors. Apple pretty much cornered the high end market while a bunch of players are struggling to make profit at the low end. There is almost no margin in the low end. Apple do not want to play that game.
The company has created a bit if a lock down with an ecosystem. Once you have collected enough apps, songs, videos (some of media is in copyrighted Apple proprietary formats) you have much less incentive to switch to a different platform. It can be done but few actually do it. Besides our company VPN, Mail etc. are best supported on iPhone. Similarly App writers are coming up with iPhone versions first.
I personally waited for iPhone 5 as I did not want to carry two different devices in my pocket for my media and for phone. I could buy a much cheaper Android device but I did not. I suffered with my 7 year old, failing Motorola Razr. But I agree with Scott as well that now I have iPhone 5 I am less likely to rush to iPhone 5S. I might even skip the one following it if the phone is still in good condition. So, the growth is more likely to come in emerging countries where Apple devices are a status symbol. They do not need to lower their margins much to generate the same amount of profit as others.
I like that idea and Hank's idea for personalized outdoor apps.
The first time I got my iPhone the new podcast app was very buggy. It consumed most of my data plan in a matter of hours. I had to turn off cellular data for the remaining of the month. Nowadays, after several updates podcast app is behaving much better. It respects the controls on not to download in cellular data and if I have been listening a podcast directly without downloading first, it asks if I would like to switch to cellular data to continue.
So, nowadays, I leave data on. I used to check data usage every day now every now and then.
But if you get into downloading big stuff on cellular data, or watch videos over cellular data than you really should get a data plan. Thats what the cell company want you to do as they have huge profit margin on cellular data plans.
If you plan to use tethering for your laptop etc. you also probably need a large plan as well.
At present we are planning to try out the iTV.
With regards Apple as an investment - Steve Jobs is dead.
peace,
rono
http://seekingalpha.com/currents/post/963111