when i see people with other phones. i immediately think poor. they’ll always say, I DIDNT GET THE PIC. PLZ send through whatever messaging tool non compatible people have. that inconvenience alone should convince other to switch back. my phone just reached 2 yrs old and its just not enough storage i literally had to subscribe to icloud storage cuz of too many vids, pics, and apps.
coincidentally. 2 years ago i bought a samsung edge cuz i live life on the edge. before a week was even up. i returned it cuz i just could not deal with the major differences. apple imo has a brand now. and there is no replacement for being a baller…
also i have whats app. but the only time i ever used it was when i went on a date with sum russian figure sk8r from canada that was only here cuz sum dude at manhattan beach flew her there to stay in his condo. lol what a cuck.
MLA, I was thinking about that today… about how itunes has been replaced and more. Personally, I’m not getting anything but an iphone but I could see some people getting a cheap phone, downloading the apps and calling it a day. Worrying stuff.
The thing that worries me the most about this stock in the short/mid-term is if they spend a ton of a cash on a stupid acquisition (haven’t seen anyone mention that today).
I can’t get over how good the valuation looks, the company generates so much cash but that could change. To get it back to where it was from this point, they need to launch something meaningful, which I don’t have any insight into.
Stocks gone down like 40% from it’s peak… if you exclude the cash, the enterprise value went down a good amount more than that. I’m using pricing as another way to look at this, not as my main source of value but I don’t think there was THAT much growth built into the stock like the other tech co’s, so the price decline seems excessive. People i think really fear that they’re turn into Nokia and Motorola back in the day but I think unless something comes out that is such a huge step up that Apple can’t copy it or compete somehow, that risk is overblown. The Apple universe still exist. People buying apple watches and airpods in 2018 aren’t going away anytime soon, hopefully.
If I wasn’t already in it, since 2015/2016, I’d buy at these levels.
Their gross margin is like 35% or so yet iPhones have a gross margin of about 60% and are about 2/3 of the business. In other words a lot of their business is running negative gross margin (mostly scaling software, etc). The shadyness around cutting back product volume disclosures running into this should be a huge red flag to anyone. This is not a company embracing its destiny. What I want to see is someone model out what this company’s valuation looks like on a 35% iPhone gross margin if device turnover slows further causing another 15% drop in volumes and then argue the buy case on that. Because that is really the question that need to be answered. This company has not been the best at returning cash to shareholders unprompted and I wonder what they will do with that cash as things slow on them. Also the admission about slowing old models (within a year of this drop) was not coincidental.
I’m not saying its a sell, I’m just saying I’m not convinced its a buy. It’s also not my sector and my primary phone is a flip phone.
music is not as spectacular as you guys think. consider spotify, which has a 36% market share (and they actually have the non profitable free model), is only worth 18b vs apple’s 725b or rouhgly 2% of the business. In addition, apple music, which is the spotify equivalent and ranked 2nd, has a market sahre of 20%. in terms of premium subscribers, which is the only profitable portion, apple has about 45m vs spotify’s 87m. apple music is also more popular than spotify in north america, which lets be honest is the only profitable segment, the others are shithole countries where they charge far less.
i dont undetsand why would you estimate the iphone gross margin at 35% when its been over 60% for a long time and they actually tried to expand it by raising prices. also the fact that volume is dropping is not really surprising when you raise prices. what is concerning is revenue falling yoy for the most important quarter, which it did. but this could just as easily be a sign of the times. recessions are often declared far after a bear market, and though the stock market is not down 20% from its peak yet, im pretty sure it will be soon.
Because as explained above, margins are dying. They’ve failed to maintain the innovation, hence replacement cycles are lengthening and price competition has opened up. They are now losing share to Huawei in their core growth market overseas. What comes next amidst tanking volumes will be margin concessions. This is a pivot point for iPhone margins. The margin expansion failed to take and looking backwards to model forwards because its always been is a losers game, especially in tech. Analysts are being short term that haven’t seen enough of these tech cycles turn are holding margin static and moving volumes. They’re also the ones puzzling over valuations. If you want to stress value it looking forward for any long holding period, you take iPhone margins to 35%, if it holds value there you buy, volumes down another 10%. If you want to fair value it looking forward you take 45% volumes down another 10%. This isn’t BlackBerry, but it’s not Steve Jobs’ Apple, either.
i guess what im asking is why choose 35%, you can choose 40, 30, 25, 20. are you using an old benchmark? is this samsung’s gm right now? or is it what happened to blackberry/nokia on their downturn?
also what exactly is happening? is it because they are starting to lower their prices substantially due to peak phone volume and competition? or their cost to produce the product skyrockets due to lower volume and economy of scale issues?
lol everyone should read this oiriginal aapl thread though:
Ok, my bad. Also I should not have been testy, it’s just my DNA. My understanding is gross margins for most of the computer hardware industry is about 35%. It may wind up 45% long term (to my point above about 35% being bearish), I’m using these numbers as proxies. I just don’t think the industry leading 60% is defensible once the innovation edge it was built on begins to erode. I don’t think costs are skyrocketing, I think this is primarily that prices will have to drop or volumes will drop and you will wind up at the same place. BlackBerry noteably never really surrendered its gross margin, but their volumes dwindled gradually at first and then very quickly to nothing. Again, I don’t think this is BlackBerry which was a technology competition issue, I think this is more of an industry maturing environment.
Every time Apple sells a phone it competes against two primary competitors. Existing iPhones (for upgrade demand) and essentially, the field. Right now, they’re losing on two fronts in two different ways. On their home market, they’re losing to team Existing iPhones as the marginal tech advantages simply aren’t enough to justify the high prices required to maintain gross margins on new technology given the marginal cost. The two are out of sync older model iPhones actually carry a higher gross margin when sold today than the new ones. So they’re caught in a bind in their home market, either 1) continue to try to push out marginal hardware upgrades to cameras at high incremental cost that aren’t able to generate the marginal price to hold margin and let the margin slip 2) keep pushing out the upgrades to cling to industry tech leadership and hold your pricing, losing volumes and hurting the upgrade cycle or 3) stop pushing out new upgrade versions and see both the volumes slip and tech leadership while holding margin. Tangentially, they already got caught slowing down models in circulation with software patches everyone knew was happening. The reality is, most computing and storage happens in the cloud / on server side and will increasingly with new 5G so while usage will go up, the need for device side processing isn’t climbing at the same pace, so low hanging fruit is gone. People are grinding out minimal upgrades mostly boiling down to commoditized offerings like screens, batteries, cameras and emojis.
In the emerging market, (their growth market) you face a price sensitive consumer and none of the advantages of installed capacity in the US. For instance, people mentioned difficulty sending images from an iPhone to non-iPhone and integration with other Mac hardware and existing iTunes and cloud. These are all great if you already have an existing consumer base you’ve saturated to defend your position. But in emerging markets (iPhone 8% of China market share) they’re competing from scratch against Huewai, LG, Samsung, and those phone companies know the stakes (winning existing market position) and wont’ let the US scenario repeat. In China, iPhone’s market share grew from 8% in 2017 to a whopping 8% in 2018. In that same year, handsets by the top four domestic producers rose from 64% to 80% led by Huawei which rose from 19% to 25%. Similar things are happening across Asia ex-Japan (not growing) and China Inc will not let its domestic champions fail given the stakes if Apple becomes embedded. They’re competing on price and commoditized hardware and they’re winning bigly and Apple has yet to come out of the closet about it, the same way they were coy about device volumes no longer being indicative literally a quarter before blaming a miss on device volumes and the same way they whitewashed their device slow downs. The result is this industry is slowing for them on two fronts and they face a choice between margins, volumes and tech leadership in the home market (not their main problem) and a price fight in their growth market (their main problem).
While Tim Cook, Apple’s chief executive, blamed China’s economic slowdown for weakening sales that hurt its global revenue in the past quarter, the company’s problems run deeper than that. The Cupertino, Calif., tech giant may have underestimated how competitive domestic smartphone makers have become, analysts say.
Once a top-seller in China, Apple has slipped to the fifth-biggest phone seller in that country, trailing four domestic producers that have all been growing in popularity. Despite developing more features targeted at Chinese consumers, Apple’s market share has stagnated. Chinese rivals including Huawei Technologies Co. and Oppo and Vivo, which are owned by BBK Electronics Corp., have rolled out popular features such as camera functions designed for users to take better selfies.
Falling Behind China’s four biggest domestic smartphone makers have been gobbling up market share while Apple’s iPhone has stagnated. “The others are a little closer to the pulse of what matters to Chinese consumers,” said Mark Natkin, managing director at Marbridge Consulting in Beijing. Moreover, Apple’s iOS operating system is proving less “sticky” for Chinese consumers than in other markets because smartphone users spend a large chunk of their phone time insideWeChat , a chat, payments and social-media app from Tencent Holdings Ltd.
^ exactly. it is all about ease of communication, which is literally the purpose of a phone. Apple’s closed software system will result in a meaningful user dropoff. while not likely to be a full wipeout like BlackBerry, Apple has two choices - open up its ecosystem to Android which will erode Apple’s key market advantage of “we have a better communication systema” or don’t open up the ecosystem and watch users gradually leave the ecosystem for a better one that is effectively developed by the masses for the masses and is functional on all devices. android killed blackberry. it should kill apple too, eventually. might take 20 years and may not be a complete killing but blackberry exists as 1/20th of its current self. why can’t apple one day have a valuation of $60 billion. would that be so shocking in 20 years. it shouldn’t be.
WSJ article from 2 days ago pointed out how Samsung was the #1 smart phone maker in China 5 years ago. However, today they have less than 1% market share. What? The factors were some kind of national pride/anti Korean wave, and also some really bad PR from the time Samsung’s batteries exploded. The point overall is that any company can very quickly change from a market leader to also-ran.
Apple is in a better position than Samsung was, since their software platform is not completely generic and they have better brand recognition in general. However, both of these advantages are tenuous. China’s users use mostly shared platform apps, and a wave of anti-US sentiment could quickly erode Apple’s brand desirability. I don’t know how useful valuation metrics are to Apple when their sales projections, and therefore their valuation model inputs, can suddenly drop 10% like they did last week.
I’m not saying China is the only important market to Apple or the company’s only potential location for future growth. This country was, however, central to Apple’s original growth plan. China currently provides 20% of Apple’s revenue. I’m sure Apple planned for this to be 40% or more at some point in the future.
I am not an expert in fundamental analysis. So maybe I’m wrong, but lots of people are getting concerned about Apple’s business prospects for these reasons.
Regarding “returning cash to shareholders”, Apple used to be a hoarder, but is now starting to aggressively reduce their cash balance. Last year, they had like $250 billion - now they have like $135 billion, and Tim Cook just said he wants to bring it to near zero. They’re just using the cash to buy back shares, rather than issue dividends. Once Apple is “cash neutral”, I don’t know what the implications will be in terms of capital buffering or other things, if any.
I’m only 24, and don’t know where I can buy stocks or short them. Do I need to buy them from certain companies? Or financial apps like Robinhood? And how can I start building my performance history (want to start with my own money)?
Black Swan why would you be bullish on basic materials and chemicals when there is a reasonable case that the global economies may be slowing/weakening? Have they been clobbered of late or otherwise undervalued.
Yeah most of those names are down bigly YTD, many of them down >20%, some well over 30% down. Supply for the most part is rational, plants are all refurbished and running at low cost reliably and cash flows are solid. Because of the basic materials meltdown during the last China scare in 2016, a lot of these guys cut their debt levels to extremely low levels, rationalized inefficient capacity and streamlined organizations, invested to improve plants to run lower cost and more reliably and now are under leveraged with good cash positions and still throwing off free cash flow yields >10% that has to go somewhere. M&A and expansion appetite remains minimal. All of the headlines have run ahead of the reality on the ground with good cash outflows and shareholder returns. The key is to buy quality names with good cost positions.