AAPL Is Trading Like a Junk Bond, Apple Watch vs. Swiss Watch Industry in 2015, Thursday Q&A
Today's Above Avalon stories:
- AAPL Is Trading Like a Junk Bond
- Apple Watch vs. Swiss Watch Industry in 2015
- Thursday Q&A
We kick off today's email by discussing Wall Street's reaction to Apple earnings. AAPL shares are now trading like a junk bond when looking at AAPL's free cash flow yield. After going over free cash flow in detail, we calculate Apple's current free cash flow yield. We then discuss what Wall Street is suggesting by valuing AAPL with such a high yield and why it is similar to a junk bond. We then shift over to the latest data from The Federation of the Swiss Watch Industry. After comparing Apple Watch and Swiss watch sales trends, there are clear signs that the Apple Watch is impacting the Swiss watch industry. We conclude with Thursday Q&A and two questions from members: What's the point of share buybacks? Does Apple keep its foreign cash in USD denominated accounts?
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Apple 1Q16 Earnings Results
Today's Above Avalon email is dedicated to Apple's 1Q16 earnings. There are six sections:
Summary
The Numbers
Major Themes
- A Turning Point
- The iPhone's First Global Recession
- Apple Knows What It Is Doing
- Doubling Down
Additional Musings
Conference Call Notes
Conclusion
The full AAPL earnings review is available for Above Avalon members. To continue reading, click here.
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A New Playbook for Updating Apple Watch, Apple Hires Top VR Researcher, Project Titan at a "Crossroads"
Today's Above Avalon stories:
- A New Playbook for Updating Apple Watch
- Apple Hires Top VR Researcher
- Project Titan at a "Crossroads"
We kick off today's email by discussing the Apple Watch update schedule. Instead of assuming Apple Watch will follow the similar annual update schedule seen with the iPhone, we go over why a different kind of schedule makes more sense. Apple Watch is a unique device and we look at how the way it is updated will likely be just as unique. We then shift to news of Apple hiring Doug Bowman, a leading VR researcher. What do all of these recent hires suggest about Apple's interest in AR and VR? We conclude with a few words on AppleInsider's report saying Project Titan is at a "crossroads."
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Head of Project Titan Is Leaving Apple, Threading the AAPL Expectations Needle
Today's Above Avalon stories:
- Head of Project Titan Is Leaving Apple
- Threading the AAPL Expectations Needle
We begin today's email by discussing news that Steve Zadesky, head of Apple's electric car team Project Titan, is leaving Apple. We go over what we already know about Project Titan, Zadesky's role with the team up to now, and how to think about the longer-term ramifications from this move. We conclude by discussing what I suspect is happening to Project Titan. We then shift over to Apple earnings and conclude our earnings preview by discussing 2Q16 guidance. Management will have the opportunity to thread the AAPL expectations needle in such a way as to come out ahead regardless of tomorrow's results. We explain this strategy and go over how management can accomplish the task.
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4Q15 China Mobile Subscriber Data, Apple 1Q16 Estimates (ASP, Revenue, Margins), Thursday Q&A
Today's Above Avalon stories:
- 4Q15 China Mobile Subscriber Data
- Apple 1Q16 Estimates (ASP, Revenue and Margins)
- Thursday Q&A
We begin today's email by going over new subscriber data for China Mobile. Since China Mobile is currently Apple's most important business partner, 3G and 4G subscriber data serves as relevant information when looking at iPhone sales estimates and growth prospects in China. We then shift over to additional AAPL earnings preparation (iPhone, iPad and Apple Watch average selling price and margin trends, along with overall revenue estimates). We conclude with Thursday Q&A and the following two questions from members:
- "Should Apple be worried about Facebook Messenger supporting chat bots?"
- "Will we see an AR/VR product from Apple in the near-term?"
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ESPN President Talks Apple, Apple Is Moving Beyond the iPhone (Implications for AAPL)
Today's Above Avalon stories:
- ESPN President Talks Apple
- Apple Is Moving Beyond the iPhone (Implications for AAPL)
We kick off today's email by discussing ESPN President John Skipper's interview with the WSJ. It is clear that Disney wants to change the narrative surrounding ESPN and reading in between the lines, Apple may end up playing a pivotal role in Disney's (and ESPN's) future. We then look at my "Apple Is Moving Beyond the iPhone" post from the perspective of AAPL investors and the implications for AAPL.
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Apple Watch, iPad and Mac Sales Estimates
Today's Above Avalon stories:
- Apple Watch Sales Estimate
- iPad Sales Estimate
- Mac Sales Estimate
Continuing with our Apple earnings preparation, today's email includes my Apple Watch, iPad, and Mac sales estimates for 1Q16. We discuss the major themes and drivers behind my estimates for each product category.
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iPhone Sales Estimates
Today's Above Avalon story:
iPhone Sales Estimates
Today's email is dedicated to discussing my updated iPhone sales estimates ahead of Apple's earnings next week. We go over my estimates for 1Q16, 2Q16, 3Q16, and 4Q16. We then discuss the major themes and drivers behind my iPhone estimates. There are three sections:
- The Estimates
- Major iPhone Sales Themes (China Growth, iPhone "S" Cycle, 4-Inch iPhone, iPhone Sales Perspective)
- Conclusion
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Apple & Time Warner, Thursday Q&A
Today's Above Avalon stories:
- Apple & Time Warner (story with five parts)
- Thursday Q&A (How likely is it for Icahn to unwind his large AAPL position?, What are odds of a foreign tax holiday in 2016?
Today's email is dedicated to Apple & Time Warner. The NY Post is reporting that Apple is interested in Time Warner. This is not the first time Apple has been rumored to be interested in Time Warner, and this won't be the last. We take a deep-dive into the story, breaking it up into five sections:
- Time Warner 101
- Crown Jewel
- Why Buy Time Warner?
- Reality
- Conclusion
We then conclude with Thursday Q&A and two questions (Carl Icahn and foreign tax reform).
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Share Buyback's Growing Importance, The Changing App Store Narrative, PC Industry's Disastrous 4Q15
Today's Above Avalon stories:
- Share Buyback's Growing Importance
- The Changing App Store Narrative
- PC Industry's Disastrous 4Q15
We kick off today's email by focusing on why Apple's buyback program is positioned to play a bigger role going forward. There is a difference between AAPL, the stock, and Apple, the company, and management has a few tools to take advantage of the situation. We then shift over to Apple's recent press release highlighting App Store revenue trends for 2015. Instead of focusing just on the data, the changing narrative found with the App Store is much more interesting. We conclude by discussing two takeaways from Gartner's and IDC's 4Q15 PC shipments estimates.
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Apple Acquires Emotient, iOS 9.3, GM Thinks It Just Won the Electric Car Race
Today's Above Avalon stories:
- Apple Acquires Emotient
- iOS 9.3
- GM Thinks It Just Won the Electric Car Race
We begin today's email by discussing Apple's Emotient acquisition. We go over Emotient's specialties, possible use cases with the current technology, and why Apple is interested in such technology. Next, we shift over to iOS 9.3 and what looks to be a bigger than average release with a few headline features. Two features stood out to me in terms of their long-term ramifications. We then look at the Chevy Bolt and discuss why GM thinks it just beat Tesla (and Apple) to win the electric car race.
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Removing the iPhone Headphone Jack, Apple Music Subscriber Update
Today's Above Avalon stories:
- Removing the iPhone Headphone Jack
- Apple Music Subscriber Update
We kick off today's email by discussing the ongoing rumors that Apple is looking to remove the 3.5mm iPhone headphone jack. Would this be done for iPhone thinness or simply to push legacy technologies to the curb? I suspect there is a different reason at play and it doesn't even have to do with the iPhone. We then shift over to Apple Music. The FT is reporting that the service has 10 million paying subscribers. Is 10 million a strong or weak number, expected or a surprise? What does it mean for Apple's battle with Spotify? We take a deep-dive into this 10 million subscriber number.
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Calling an iPhone Timeout, Thursday Q&A
Today's Above Avalon stories:
- Calling an iPhone Timeout
- Thursday Q&A (How does China devaluing the yuan impact Apple?, Am I surprised there were no Apple leaks during CES?, Why doesn't Apple comment on iPhone supply chain rumors?, Why haven't I talked about the new Star Wars movie considering its tech implications?)
Global markets are in turmoil reacting to The People's Bank Of China devaluing the yuan once again. The Chinese stock market closed after only 30 minutes of trading with the index falling 7%. AAPL looks to open around $98. In today's email, we take an iPhone timeout. People are no longer just concerned about iPhone 6s sales or 2Q numbers. Something has changed. We discuss why there is an iPhone "fire drill" taking place and why I want to call a timeout. We then look at the questions that actually matter when thinking about the iPhone and why this current phase will eventually pass. We conclude with Thursday Q&A.
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iPhone 6s/6s Plus Order Cuts, Strategy Behind Fitbit's Blaze Smartwatch
Today's Above Avalon stories:
- iPhone 6s/6s Plus Order Cuts
- Strategy Behind Fitbit's Blaze Smartwatch
There was a well-circulated report yesterday from Nikkei concerning rumored iPhone 6s and 6s Plus production rates, with implications on overall iPhone sales. We kick off today's email by going over the report in detail and discussing what is likely occurring with iPhone sales since the iPhone 6s and 6s Plus went on sale. Even though there are a few moving parts, there are likely valid explantations for what is occurring. We also briefly discuss iPhone sales estimates for 1Q16 and 2Q16.
We then shift our focus to Fitbit's new Blaze fitness watch. Fitbit shares were down 18% yesterday. Was it due to the Blaze? We go over Fitbit's strategy behind the Blaze and why the Blaze is so problematic.
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GM Partners with Lyft, Thoughts on Tesla's Delivery Rate, Faraday Future Shows Concept Car
Today's Above Avalon stories:
- GM Partners with Lyft
- Thoughts on Tesla's Delivery Rate
- Faraday Future Shows Concept Car
Today's email will have an automotive theme as we have a number of significant developments in the auto space, Apple's next big frontier. First up, we discuss GM's partnership with Lyft. After going over the rationale and logic behind such a deal, we go over how the new players and alliances are stacking up (there are at least seven key players, and likely more). We then shift over to Tesla's latest delivery announcement and tackle the question: Are Tesla delivery rates good or bad? We conclude with Faraday Future's big concept reveal at CES last night. Needless to say, it was...interesting.
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