AAPL - Apple Inc. (NASDAQ)

[Dona Ferentes]

Forget the crypto crash, the most worrying signal from financial markets came from the stock widely considered among the safest in the world.

Last week, shares in Apple fell almost 5 per cent, taking its year-to-date losses to 19.2 per cent. The slump – which would have been much worse were it not for Wall Street’s dead-cat bounce on Friday night, which helped Apple rise more than 3 per cent – means the tech giant’s stock is now underperforming the S&P 500 for the year.

And with its shares trading at $US147, Apple has a market value of $US2.4 trillion ($3.5 trillion) and is one of the most widely held stocks in the world, accounting for 7 per cent of the S&P 500 and more than 11 per cent of the Nasdaq 100.

 

[JohnDe]

SP is climbing again. As a holder for 2 years, I've recently contemplated selling because my thinking has been that the phone market is saturated and the competition sophisticated. Reading the article below has reminded me that software is the new resource for companies like Apple.

Apple already sold everyone an iPhone. Now what?
The ubiquitous device is becoming a shop window for the firm’s services

Fifteen years after its launch, the iPhone “continues to change the world”, said Tim Cook, Apple’s chief executive, as the company reported quarterly earnings on July 28th. It has certainly changed Apple. In an otherwise bumpy week for technology stocks, the world’s most valuable company beat forecasts to report a modest year-on-year increase in revenue. That was in large part thanks to the iPhone, which generated sales of more than $40bn in the latest quarter.

Yet as the worldwide smartphone market matures, the iPhone’s dominant role in Apple’s fortunes is diminishing. Whereas at its peak the device made up two-thirds of the firm’s revenue, in the latest quarter its contribution was just under half (see chart). In Apple’s flying-saucer-like headquarters in Cupertino, California, engineers are working on all manner of gadgets that might one day succeed the smartphone. But a big part of Apple’s future is already clear: a growing chunk of revenue and an even larger slice of profits will come not from any product, but from services.

For its first three decades Apple Computer made just what its name suggested. In 2006 its Macintosh desktops and laptops were outsold for the first time by something else: the iPod music player earned Apple more revenue. The next year the company launched the iPhone, and dropped Computer from its name. Over the following decade there were times when it could reasonably have been called Apple Telephone: in 2015 iPhone sales amounted to $155bn, twice as much as Apple made from all its other activities combined.
Now, after a decade and a half of expansion, the global smartphone market has plateaued, according to idc, a data firm, which also forecasts no growth over the next four years. Apple still has room to increase its market share. Although in America the iPhone accounts for nearly half of smartphone sales, in Europe it makes up more like a quarter, according to Kantar, a research firm. Nonetheless, the years of rocket-powered annual growth are over.

Apple has brought in new revenue with other devices. Its AirPods have become the market leader in smart earphones and the Apple Watch is the most successful of its kind. Last year these “wearables” and home accessories contributed a tenth of Apple’s revenue. In 2023 the company is expected to launch its first augmented-reality headset, a technology Mr Cook has described as “profound”. Apple is making interfaces for cars and may one day build the rest of the vehicle, too. Some in the company predict that its forays into health care will eventually rank among Apple’s greatest contributions.

As it dreams up more gadgets to sell to more people, however, Apple is employing another strategy in parallel. The company has so far put 1.8bn devices in the pockets and on the desks of some of the world’s most affluent consumers. Now it is selling access to those customers to other companies, and persuading those who own its devices to sign up to its own subscription services. As Luca Maestri, Apple’s chief financial officer, said on a recent earnings call, the Apple devices in circulation represent “a big engine for our services business”.

The strategy is picking up speed. Last year services brought in $68bn in revenue, or 19% of Apple’s total. That is double the share in 2015. In the latest quarter services’ share was even higher, at 24%. Apple doesn’t break down where the money comes from, but the biggest chunk is reckoned to be fees from its app store, which amounted to perhaps $25bn last year, according to Sensor Tower, a data provider. The next-biggest part is probably the payment from Google for the right to be Apple devices’ default search engine. This was $10bn in 2020; analysts believe the going rate now is nearer $20bn. Apple’s fast-growing advertising business—mainly selling search ads in its app store—will bring in nearly $7bn this year, reckons eMarketer, another research firm.

Most of the rest comes from a range of subscription services: iCloud storage, Apple Music and Apple Care insurance are probably the biggest, estimates Morgan Stanley, an investment bank. More recent ventures like Apple tv+, Apple Fitness, Apple Arcade and Apple Pay make up the rest. New services keep popping up. Last November Apple launched a subscription product for small companies called Apple Business Essentials, offering tech support, device management and so on. In June it announced a “buy now, pay later” service. The company claims a total of 860m active paid subscriptions, nearly a quarter more than it had a year ago.

Services are a juicy business. Some, notably tv, are costly for Apple and seem to be partly about burnishing the company’s image (successfully so, if its “best picture” Oscar for “Coda” in March is any indication). Others, though, particularly the app-store business and “Google tax”, contribute handsomely to the bottom line. In the latest quarter Apple’s gross margin on its products was 35%, whereas on services it was 72%. In 2021 services accounted for 19% of Apple’s revenue but 31% of its gross profit.

Apple’s business model “is evolving from maximising unit growth to maximising installed-base monetisation”, believes Erik Woodring of Morgan Stanley. He argues that pushing further into services could add another $1trn to the company’s $2.6trn market capitalisation. The average Apple user spends about $10 a month on Apple services (including app-store purchases), much less than they might spend on subscriptions to services like LinkedIn or Peloton, points out Mr Woodring, suggesting plenty of “runway” for growth.

For now the market treats Apple as a hardware business. Its shares trade at an 18% discount to tech platforms such as Google’s parent company, Alphabet, and a 49% discount relative to streaming services like Netflix, calculates Morgan Stanley. Apple seems to be nudging investors towards thinking of it as a services firm. It has, for instance, increased disclosures in recent years about its estimated number of “active” devices. Mr Cook declared recently that integrating Apple’s services with its hardware and software was “at the centre of our work and philosophy”. Soon it may even sell its hardware on a subscription basis. In March Bloomberg reported that Apple was working on an iPhone subscription plan, offering regular hardware updates for a monthly fee.

Pushing into services carries risks. Consumers are not used to subscribing to devices (though many already pay for their phone in instalments, which isn’t so different). Apple would need to find a way to offer subscriptions without alienating the retailers and mobile-phone operators through which it currently sells 85% of its iPhones, points out Mr Woodring. Services face particularly acute regulatory risks, as European trustbusters circle the app store. And although subscriptions offer steady income, not all services are recession-proof. Apple warned on July 28th that growth in services revenue would decelerate in the next quarter, partly owing to what Mr Cook called the “cloud” hanging over digital advertising.

Hardware will probably always be Apple’s main business. It may even be that one of the secret projects in the Cupertino flying-saucer turns into another iPhone-like smash-hit. But with nearly 2bn Apple devices in circulation, there is a big and only partially tapped opportunity to sell people things to do with them. Consumers will doubtless keep buying Apple’s shiny gadgets. From now on, when they do so, they will be acquiring not just swanky new devices for themselves but tiny digital storefronts for Apple.

 

[Dona Ferentes]

Another path to 'own' the customer.

The tremendous early success in the US of Apple’s 4.15% annual rate savings product, run from an iPhone (and banked in a Goldman Sachs branch in Arizona) has already seen $US1 billion or more of new deposits via more than 240,000 new accounts opened by owners of the ubiquitous phone.

That this surge of fresh money comes at a time when bank deposits are flowing out of small and medium US banks and into larger ones – and Apple’s product – tells us how trusted the iPhone maker has become for millions of Americans.

The Commonwealth Bank said into a Senate inquiry into the influence of international digital platforms that “time is of the essence” when it comes to giving the Reserve Bank new powers to regulate Apple, and urged the federal government to take a leading role targeting big tech platforms entering the financial services sector to ensure they face the same rules as banks and other payment providers.

CBA said in its submission that payments with digital wallets on smartphones continue to surge and are more popular in Australia than many other countries.

 

[JohnDe]

Apple's SP has been steadily climbing since February. I've been thinking about selling to finance a new project, but with the launch of Apple's new product I'm in two frames of mind. Apple’s Vision Pro is a technical marvel. Will anyone buy it?

The next iPhone, or the next Newton?

Tom Wainwright
Technology and media editor

Who on earth is going to pay that much? The technology is impressive, sure, and it looks cool. But this gadget just seems to do things that you can already do with other devices. Millionaires and Apple superfans will love it, but I can’t see many people needing one.

Those were my thoughts after watching an Apple presentation 16 years ago, when Steve Jobs launched a little invention called the iPhone, which has gone on to become somewhat more successful than I imagined. It is too soon to know whether Apple’s Vision Pro, the headset it launched this week, will be another iPhone. But, as our leader explains, “spatial computing” is here to stay. And there are three lessons from history worth considering before reaching conclusions.

First-generation flops can give way to third—or fourth—generation hits. I wasn’t alone in my scepticism of the iPhone, which sold only 12m units in its first full year on sale (last year it sold more than 200m). Sales of the iPod music player were anaemic on its launch in 2001; it took seven years for it to reach its peak of over 50m units a year. The Apple Watch sold more than 50m last year, and in some years has outsold the entire Swiss watch industry. Yet for a long time it was considered a dud.

Second, those slow starts happen because new tech often arrives without an obvious purpose. I didn’t buy an iPhone in 2007 because it didn’t do anything I really needed. Today I use it for everything from making payments to finding a taxi. Discovering those uses takes time. For now, the Vision is just an expensive way to look at your photos and make video calls. As developers (who I think are the real target market for this first-generation device) start making software for it, expect more persuasive uses to emerge.

Third, the price. The Vision’s cost of $3,499 seems extraordinary. But a product’s value depends on what it can do. People baulked at the iPhone’s launch price of $499, which was far higher than that of other mobile phones. Today they spend triple that on the highest-end iPhone, because the device has evolved into more than a phone. Apple justifies the Vision’s price by comparing it to the combined cost of a TV, sound system, computer, camera and multiple displays, which it supposedly replaces. Few consumers will be persuaded. But if enough killer use cases emerge, people could adjust their expectations of what a headset should cost, just as they have regarding phones.

The Vision could yet be a flop. Consider the Newton, an Apple mobile device launched in 1993 that fizzled out after selling only a couple of hundred thousand units. But my scepticism about the Vision has to contend with the constantly buzzing, beeping reminder in my pocket of the last time I underestimated Apple.

Please continue to give us your thoughts at thebottomline@economist.com.

Fast fact: Nearly 36m Americans—equivalent to more than a tenth of the population—use a virtual-reality headset at least once a month, according to Insider Intelligence, a data company.

 

[Value Collector]

Apple's SP has been steadily climbing since February. I've been thinking about selling to finance a new project, but with the launch of Apple's new product I'm in two frames of mind. Apple’s Vision Pro is a technical marvel. Will anyone buy it?

View attachment 158054

Not to mention the enormous $90 Billion share buy back, which is mind blowing that’s about the market cap of Fortescue metals, Woolworths and Coles combined. That’s a lot of shares disappearing off the market, and it is growing the remaining shareholders share of the business substantially.

 

[Dona Ferentes]

... with the launch of Apple's new product I'm in two frames of mind. Apple’s Vision Pro is a technical marvel. Will anyone buy it?

The 10th Man chimes in...
.. . .

How to Argue About Money​

You might have heard that Apple recently introduced a VR headset—we will get to that in a second…

But first, if you were to neatly summarize what I do for a living, it would be that I argue about money. I argue about money on Twitter; I argue about money in my newsletters—I am constantly trying to be persuasive when it comes to money decisions.
The Greeks practically invented arguing. This was an evolution from beating people over the head with a stick. When they debated, it typically took three forms:

• Logos, or arguing through logic. You might say that Apple (AAPL) is in the 95th percentile of its valuation throughout history and, therefore, is overvalued and should be sold short.
• Ethos, or arguing through credibility. You might say that you have 24 years of experience in the markets and used to be a tech analyst at Goldman Sachs—and therefore, you have a lot of credibility when it comes to AAPL.
• Pathos, or arguing through feeling. You might say that AAPL’s VR headset is at the forefront of a technological revolution. It is the future, and if you don’t participate in it, you will get left behind.

What I’ve found in the financial industry is that most people argue with logos. They are good with the numbers. They know the numbers and can blind you with science and statistics and beat you into submission with calculations.
I tend to do the opposite. I tend to argue with pathos, evoking strong feelings with my writing style that compels people to action. I also think that the financial markets basically run on pathos and that the numbers don’t matter much, except at the extremes.
Some people can argue through ethos. I can, a little bit—by this point, I have lots of experience. A guy like James Grant can go on a podcast and speak with lots of ethos because he has the most-respected newsletter in history.

We’re All Going to Have These Headsets​

I said I would get back to the headset.
Someone recently posited to me a theory on AAPL’s headset… that this product development marks a sentiment top in the stock. Well, the stock is on the highs. But I’ve seen this before—I remember when the iPhone 5 launch was supposed to be the top in the stock. It was, for a while. And the market didn’t seem to be too impressed with the product launch the next day.
Let me put it this way: Zuckerberg bet his entire company and his entire fortune on the idea that VR would be the future. I remember when he bought Oculus VR for a billion or so—everyone thought that Zuckerberg was just an entertaining oddball. This is the same guy who made 500X on Instagram. I take these sorts of things seriously.

For example, when the iPhone was invented, did you think that you would be able to one day hail a cab with it? Here’s an application nobody thought of: I recently bought an app to tune the strings of my new guitar. I can’t even imagine the possibilities of these headsets, and I think that AAPL will be the leader in them. The reviews are pretty great.

Pathos​

See, there I am again, arguing through pathos.
Logos tells you what is happening today. It looks at the data in a static fashion and tells you what is going on right now. When you are arguing with pathos, you are arguing about the future. And everyone loves to argue about the future...

 

[Value Collector]

The 10th Man chimes in...
.. . .

How to Argue About Money​

You might have heard that Apple recently introduced a VR headset—we will get to that in a second…

But first, if you were to neatly summarize what I do for a living, it would be that I argue about money. I argue about money on Twitter; I argue about money in my newsletters—I am constantly trying to be persuasive when it comes to money decisions.
The Greeks practically invented arguing. This was an evolution from beating people over the head with a stick. When they debated, it typically took three forms:

• Logos, or arguing through logic. You might say that Apple (AAPL) is in the 95th percentile of its valuation throughout history and, therefore, is overvalued and should be sold short.
• Ethos, or arguing through credibility. You might say that you have 24 years of experience in the markets and used to be a tech analyst at Goldman Sachs—and therefore, you have a lot of credibility when it comes to AAPL.
• Pathos, or arguing through feeling. You might say that AAPL’s VR headset is at the forefront of a technological revolution. It is the future, and if you don’t participate in it, you will get left behind.

What I’ve found in the financial industry is that most people argue with logos. They are good with the numbers. They know the numbers and can blind you with science and statistics and beat you into submission with calculations.
I tend to do the opposite. I tend to argue with pathos, evoking strong feelings with my writing style that compels people to action. I also think that the financial markets basically run on pathos and that the numbers don’t matter much, except at the extremes.
Some people can argue through ethos. I can, a little bit—by this point, I have lots of experience. A guy like James Grant can go on a podcast and speak with lots of ethos because he has the most-respected newsletter in history.

We’re All Going to Have These Headsets​

I said I would get back to the headset.
Someone recently posited to me a theory on AAPL’s headset… that this product development marks a sentiment top in the stock. Well, the stock is on the highs. But I’ve seen this before—I remember when the iPhone 5 launch was supposed to be the top in the stock. It was, for a while. And the market didn’t seem to be too impressed with the product launch the next day.
Let me put it this way: Zuckerberg bet his entire company and his entire fortune on the idea that VR would be the future. I remember when he bought Oculus VR for a billion or so—everyone thought that Zuckerberg was just an entertaining oddball. This is the same guy who made 500X on Instagram. I take these sorts of things seriously.

For example, when the iPhone was invented, did you think that you would be able to one day hail a cab with it? Here’s an application nobody thought of: I recently bought an app to tune the strings of my new guitar. I can’t even imagine the possibilities of these headsets, and I think that AAPL will be the leader in them. The reviews are pretty great.

Pathos​

See, there I am again, arguing through pathos.
Logos tells you what is happening today. It looks at the data in a static fashion and tells you what is going on right now. When you are arguing with pathos, you are arguing about the future. And everyone loves to argue about the future...

People seem pretty excited about them, and they seem to be quite a bit more advanced than anything else on the market.

 

[sptrawler]

Have you tried them yet @Value Collector ? Everyone seems pretty excited about them.

Maybe Rowan Atkinson was using them? ?




At $5,500 no one in Australia will be able to afford them.

 

[Value Collector]

Have you tried them yet @Value Collector ? Everyone seems pretty excited about them.

Maybe Rowan Atkinson was using them? ?




At $5,500 no one in Australia will be able to afford them.

No I haven’t tried them myself, but I watched a bunch of reviews.

It will be the same as the rest of the Apple products, those people that have the money will buy the Apple product, and those without will buy the cheaper Samsung knock-off and then annoy us all for the next 5 years talking about how their Samsung knock-off is better in some weird way that none of us care about,.. hahahaha.

But in reality I think the head set is going to be a pretty niche market, I think I will get a pair just to try them, but from the sound of it the people that will get the most out of it are people that work on their computers a lot, video editors seem especially excited by some of the features they saw at the demo.

 

[JohnDe]

Ready Player One (2018) - IMDb

Ready Player One: Directed by Steven Spielberg. With Tye Sheridan, Olivia Cooke, Ben Mendelsohn, Lena Waithe. When the creator of a virtual reality called the OASIS dies, he makes a posthumous challenge to all OASIS users to find his Easter Egg, which will give the finder his fortune and control...

www.imdb.com

 

[sptrawler]

But in reality I think the head set is going to be a pretty niche market, I think I will get a pair just to try them, but from the sound of it the people that will get the most out of it are people that work on their computers a lot, video editors seem especially excited by some of the features they saw at the demo.

Personally the wife and I have talked about this for years, no joke, the wife is high functioning autistic but she doesn't know it because there wasn't such a thing when we got married in 1976 and I tell her she is normal with an intolerance of people. ?
But moving on, for a long time I have been going on about how the education standards are falling and they are dumbing down kids and I used to get very angry about it.
The other half years ago said, they have to do it so that people can be comfortable without ambition and goals, they will have to learn to live in a virtual world, where everything is done through a virtual reality.
Well I must admit, there appears to be a transition happening, most young people now are far more interested in virtual contact, rather than actually going out to meet someone.
They are far more interested in gaming, than going out to the park and kicking a ball with friends.
Rather than fix obvious deficiencies in the education system, they just make the tests easier and differentiating a pass from a fail more vague.

So as virtual reality is more closely aligned with real reality, will future generations decide it is better to have a virtual holiday, than go through all the crap of carrying luggage through airports, fins a taxi and a hotel to stay in, worry about being robbed, getting scammed? Will they say it is easier to be on a living wage, than having to go to work every day?
Interesting times, I think the missus is well ahead of the curve and probably why I'm still married after 47 years. ?

 

[mullokintyre]

Apple took a bit of hit on weak Iphone sales and declining revenues.

Mick

 

[Dona Ferentes]

Yes, it's slowing. Or something. Bloomberg commentary

Lost the 3 trillion MC.

 

[Dona Ferentes]

But the punters have bid it up, year after year.

PE

PRICE TO SALES

But things are slowing. Ding a ling.

 

[Knobby22]

Apple has been fined €1.8bn (£1.5bn) by the EU for breaking competition laws over music streaming.

The European Commission's decision was triggered by a complaint by Swedish music streaming service Spotify, which was unhappy about the restriction and Apple's 30% fee..

Apple fined €1.8bn by EU for breaking streaming rules

It comes after Spotify complained about a block on telling users about cheaper alternatives to app store.

www.bbc.com

 

[Garpal Gumnut]

Indeed @Knobby22 there would appear to be some strong headwinds affecting AAPL presently.

There is talk of others, Japan and Australia to name two, following the Europeans in applying reins to Apple. As @Dona Ferentes intimates they are masters of survival and whether this is a pause or a reversal in fortune must be exercising the minds of the great. Today's price action saw an immediate gapping down in price at the open.

On the chart below I've drawn a thin blue line not far from present price action which seems to take in recent support and resistance areas over the last two years. A fall below this may make it a sell. I note the divergence of the RSI from price action recently which I have noted often to signal the end of a bull run once new highs have been reached but not breached.

The Cathys and Warrens of this world will no doubt have their own motley takes on AAPL. The Magnificent 7 have managed to make the NASDAQ a market for experts buying dips and increased the pot of investors. Now that AAPL has managed to join TSLA in retracing there may be a knock on effect should any more falter. The latter has fallen 33% since before Christmas. I haven't held AAPL for some time now and won't until price action settles and moves sideways.

gg

 

[Chipp]

 

[JohnDe]

Apple shares had a nice 5.13% increase today, and a dividend coming soon.

iPhone sales drop, services segment thrives in Apple’s better-than-expected Q2 2024 results​

Apple’s fiscal second-quarter earnings report for 2024 presented a mixed picture. While overall revenue dipped slightly and iPhone sales declined, the company’s services segment continued its impressive growth trajectory.

One of the key highlights of Apple’s quarterly report was the decline in iPhone sales, a cornerstone of its business. Despite high anticipation surrounding the release of new models, iPhone sales experienced a notable drop of 10.5% to $45.96 billion. This decline has been attributed to various factors including market saturation and stiff competition, as well as a “tough comparison” with the previous year. To provide a reminder, in the second quarter of 2023, Apple had witnessed increased demand for the iPhone 14 Pro and Pro Max. With this surge normalized in the current year, iPhone sales appear to have settled at a lower baseline.

While the iPhone faced headwinds, other hardware segments presented a mixed picture. Mac sales enjoyed a modest 4% year-over-year increase to $7.5 billion, fueled by the recent launch of the M3-powered MacBook Air. This suggests a continued appeal for Apple’s premium laptops amongst creative professionals and students. Conversely, iPad sales experienced a steeper decline of 17% to $5.6 billion. This can be attributed to the absence of a recent refresh cycle for the iPad lineup.

Apple’s Greater China sales, encompassing regions like Hong Kong and Taiwan, witnessed an 8.1% decline to $16.37 billion. This development is unsurprising, given the troubles faced by the Cupertino-headquartered tech behemoth in the Asian country. Still, the company’s global footprint remains strong, and revenue records were achieved in various countries and regions, including Latin America, the Middle East, Canada, India, Spain, and Turkey.

Another star of the show for Apple was its services segment. Encompassing offerings like Apple Music, iCloud storage, Apple TV+, and App Store revenue, this segment registered a stellar 14.2% year-over-year growth to reach a staggering $23.9 billion. With over 1 billion paid subscriptions across its services, Apple has successfully built a loyal customer base that consistently generates recurring revenue. This growth trajectory is expected to continue, with Apple forecasting similar double-digit growth rates for services in the upcoming quarter. This is in contrast to Apple’s revenue for the quarter, which dropped by 4% annually to reach $90.8 billion. Its net income for the same period amounted to $23.6 billion (an annual decrease of 2.47%), while its EPS clocked a YoY growth to reach $1.53. Last but not the least, Apple also announced a $110 billion share buyback – the largest in the company’s history.

“Today Apple is reporting revenue of $90.8 billion for the March quarter, including an all-time revenue record in Services,” Tim Cook, Apple CEO, commented on the matter. “During the quarter, we were thrilled to launch Apple Vision Pro and to show the world the potential that spatial computing unlocks. We’re also looking forward to an exciting product announcement next week and an incredible Worldwide Developers Conference (WWDC) next month. As always, we are focused on providing the very best products and services for our customers, and doing so while living up to the core values that drive us.”

 

[Garpal Gumnut]

Apple shares had a nice 5.13% increase today, and a dividend coming soon.

I was surprised by the market's reaction, I guess the buyback and a promise of increased revenue over the next 12 mo. was enough to satisfy.

gg

 

[Chipp]

I was surprised by the market's reaction, I guess the buyback and a promise of increased revenue over the next 12 mo. was enough to satisfy.

gg

AAPL was actually getting very close to what you'd call a value buy with multiples very close to many top 20 ASX stocks AAPL is not really that speculative anymore