It is rather difficult to describe in words the situation when you were sure of a 100% take-off, and the market put everything first upside down, and then all cancer. Well, except for those who had insider information ...
There are 2 types of people I hate in the stock market: vang provocateurs (“hamsters are getting a haircut! the end is near!”) and contemplative whiners (“well, I thought it would be like this”). In 100% of cases, neither of them are the objects of my attention, but yesterday's events caused such activity in their ranks.
And the culprit for all this is a rather unexpected drop in Apple shares. I'm not going to pose as an oracle here. I myself am sitting on paper and the subscribers of my telegram channel (@freeman_invest) are well aware that I even bought more already at the upper values (220) just an hour before the report. I had rather high hopes for paper, because before that I had burned out so well on Facebook. And after all, nothing foreshadowed trouble, but the shares collapsed by as much as 7% in the postmarket.
I could not understand the logic of investors who staged the collapse of this paper. The fact remains that the report was very good, the company reported record profitability, but it did not seem to meet the expectations of investors in long term. The indicators were as follows:
It is possible that the reason for the collapse was the fact that the company decided to no longer report on units of phones sold, Macs and iPads. All indicators will be grouped into a single indicator of the company's profit. This is done to highlight the fact that in addition to phones, tablets and computers, the company has a huge amount of technology that it is ready to sell, which is not so easy to calculate in simple numbers that Apple investors love so much.
In my opinion, this is one of the most stable securities on the market as a whole. When everyone is sausage (remember and), Apple remains a fairly calm haven. Yes, it is difficult to get 12% per month in it, but not everyone needs it, and not everyone is ready to take such risks.
Even Warren Buffett, who has a fairly conservative approach to investing, has invested in it.
"This is an incredible company," Buffett told CNBC.
By the end of June, $46.6 billion of Buffett's money was in Apple. And it is unlikely that something will change in the direction of reducing the share. Rather, it will increase.
Apple stock has been up for most of 2018. Cases of really sharp declines can be called isolated, and their duration was no more than 3 weeks, after which the shares returned to their positions and continued to grow.
The first drawdown was in January 2018. It was connected with the fact that the company publicly announced that it was postponing significant changes in IOS for a year. The fall was about 10%, everything grew back in about 2 weeks.
On 03/16/18 there was another drop when Apple went to the bottom. The reason was that the release of smartphones was suspended for 2 weeks due to a violation of production technologies. The situation was around the use of waterproof components of the device. On the 26th the situation stabilized, on 17.04 the shares reached their previous position, on 10.05 there was a jump that was historical at that time.
On June 14, Apple announced a 20% decline in Iphone production, which caused another drop in the company's shares, on July 9, the share price returned to its previous levels, and on July 25 there was another all-time high. But already on July 26, a rather serious vulnerability was found in the Bluetooth protocol, which also dropped the shares a little, which on August 1 had already rushed up with might and main.
In the future, there were several more soft falls. On October 3, Apple hit its high of $233.47/share. After that, the correction of the entire Nasdaq exchange began, dropping Apple into the average price corridor of 215-220.
Then comes the expectation of the report, where the price of the paper reached $222 per share. And then our ill-fated report comes out ... At the moment, the price is 205.9 (that's right when I write this line). And this is of course sad, but temporary.
My opinion is chic, especially for those who enter at the current price. I have a feeling that Apple pulled the entire Nasdaq with it, everything fell: AMD, which had barely begun to grow, Tesla at its next quarterly highs, Nvidia, which also began to rise from the coffin, and much more. But look at the whole stock market: yes, there may not be the best prospects at the moment, but if you are looking for the most stable paper that will give not only a good income, but also dividends, then I simply cannot offer anything better than Apple.
Now back up my words with facts. Apple is a sales company that lives by selling high-tech devices and technologies. This is not Facebook, which at the moment receives income mainly from the sale of ads on itself and on Instagram, which also has a non-monetizable hanging in the form of Watsap (Who knows how to monetize the messenger? I know only one option - displaying relevant ads, but who then he will use it ??? ...). This is not Tesla, which suffers eternal losses throughout its existence (profitable quarters can be counted on the fingers of one hand). Apple is completely different. And at a time when all the companies that are not very confident in terms of their profitability will fall, Apple will have a more or less stable position.
In the end, I myself have a whole bunch of Apple gadgets at my personal disposal and I'm not going to refuse them. And I'm hardly the only one)))
Many of my readers ask how I invest. I answer with a link to . The thing is cool, and I recently added my review to the latest changes.
The November sales report was the first wake-up call. The company published a disappointing forecast for the next quarter (and this is taking into account the period of the New Year holidays).In addition, market participants did not like the company's decision to stop publishing data on sales of individual types of devices (unit-sales figures) and "focus on the big picture" in future reporting. Observers and analysts considered that this move testifies to the failed sales of new gadgets.
This was indirectly confirmed by the situation with Apple's counterparties. So Lumentum Holdings (LITE), which develops 3D laser sensors (used in FaceID for iPhone), lowered its sales forecast for the quarter by 17%, citing a decrease in orders from a "major client"
On a conference call with investors from Lumentum CEO Alan Lowe, the unnamed major customer first asked for a delay in deliveries and then lowered order volumes. Later, the company's financial director called this customer the largest for the company, and from the previously published annual report of Lumentum it follows that Apple was such for it - it accounted for 30% of all sales.
In addition, Qorvo lowered its financial quarterly forecast. The company owns factories for the production of components for smartphones. Apple is a major customer of the company, according to annual report it accounts for up to 36% of revenue.
The authors of an analytical note on Yahoo Finance explain this by the changed interests of investors. They made money on stocks technology companies during the late-summer rally, and have now switched to equities from institutions in more traditional sectors. For example, stocks rise in price
At the close of trading, Apple shares were worth $ 216.7 - this is the maximum since the beginning of November last year, Bloomberg.
The main news of the presentation for many was the cost of a subscription to the Apple TV + streaming service, which the company promised to launch on November 1. The subscription will cost $4.99 per month. By comparison, the most popular Netflix subscription plan costs $12.99, while the upcoming Disney+ service costs $6.99. In addition, Apple promised to give a year of free subscription to those who buy a new device from the company.
After this announcement, the shares of other companies operating in the streaming industry fell in price. Price valuable papers Netflix after Apple's announcement fell by more than 3%, but then the paper won back part of the losses and fell by 2.16% at the close. Disney shares by the end of the day fell in price by 3.04%. Shares in TV set-top box maker Roku, which competes in this space with Apple TV set-top boxes, fell to 12%, and by the close of the exchange showed a drop of 10.49%.
“We didn't expect [gaming service] Arcade and especially Apple TV to be so aggressively priced. The company understands that once consumers join the ecosystem, they don't leave,” Ben Bajarin, an analyst at Creative Solutions, told Reuters. Managing Director at financial company Wedbush Securities Michael James Names Price for Apple TV+ pleasant surprise” and stressed that it is because of this announcement that the shares of other streaming companies are getting cheaper. "It's definitely good news that people were happy to hear," he told the agency.
Investment bank Piper Jaffray notes that the services will not bring revenue to Apple for "a few more years," writes The Wall Street Journal. But their launch itself shows that Apple is aiming to become less dependent on iPhone sales, the bank points out.
At the same time, consumer interest in Apple TV + can be hit by a limited amount of content, emphasizes Piper Jaffray. CNET journalist Joan Solsman also writes about this. She points out that Apple TV+ will feature a total of nine original shows or series at launch, with five more to come out in the coming months. Disney+ will launch with a library of 300 movies and 7,500 episodes of various series and shows. Netflix will run 32 original shows by the time Apple TV+ launches, notes Solsman.
In addition to services, at the September 10 presentation, Apple, following a tradition that has continued since 2017, introduced three new smartphones - iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max. Smartphones with the Pro prefix were the first in the Apple line with a triple camera: smartphones have three lenses of 12 megapixels at once, which improves the quality of pictures taken in low light. On top of that, the iPhone 11 Pro lasts four hours longer than last year's XS, while the Max lasts five hours longer. Also included for the first time will be fast charging.
Prices for iPhone 11 will start at $699, for iPhone 11 Pro - from $999, iPhone 11 Pro Max - $1099.
“Apple this year has been much more clear about who a particular smartphone is designed for. Apple 11 will suit the average user who needs a battery that lasts longer. The iPhone Pro is designed for those who are willing to pay for more power, a camera and video tools,” writes The Wall Street Journal journalist Joanna Stern.
The bet on the massive iPhone 11 is very strong in communication with Forbes and the head of Hi-Tech Mail.ru Dmitry Ryabinin. He noted that the model runs the risk of becoming the best-selling smartphone of the pre-holiday quarter, despite the fact that the technical characteristics are rather banal for the market as a whole.
While the Russians were celebrating with might and main New Year, Apple stockholders read an alarming letter from the CEO, in which he admitted that the already not the most optimistic forecast for the end of 2018 will have to worsen a little more. The originally expected $89-93 billion for the first fiscal quarter of 2019 (in the US lasts from October almost to the end of December and is considered the most profitable time due to the Christmas holidays) turned into $84 billion by January 2 - minus 4.9 percent compared to 2017 -m. It's all about the timing of the release of the new iPhone, Cook justified himself: the previous model X was presented in the first quarter of 2018, and its slightly more advanced versions Xs and Xr - already in the fourth quarter (from July to September), which means by the last three months of the year The calendar hype has already cooled down.
There were other reasons: too strong dollar, which ate two percent of the turnover when converting foreign revenues, trade restrictions, problems with demand for emerging markets and even unprecedented a large number of presented new products, which consumers simply did not have time to digest. And thanks to the discount program for replacing batteries, they began to extend the life of their old gadgets and ignore the new ones.
The main losses occurred in the Chinese market - in other regions, Apple earned, though not much, but still more than a year earlier, and in the USA, Canada, Germany, Italy and some other countries - it even set its own record. Moreover, even including China, global global income in the first quarter of 2019 will be positive (plus 19 percent) if smartphone sales are excluded from it. Separately, the company is proud of the success of its paid services: Apple Music, Apple TV, iTunes, iCloud - their total quarterly revenue amounted to $ 10.8 billion. Another positive moment is the growth of the total number of active devices by more than a hundred million units per year.
“As we wrap up a challenging quarter, we are more confident than ever in the fundamental strength of our business. Apple has always used periods of adversity to rethink its approach to business, apply its flexibility, creativity and as a result become better, ”Cook tried to reassure investors. But they did not believe him and continued to sell shares: after the letter was published on the Apple website, quotes fell by almost ten percent. Most of this fall was won back in the following days, but the papers of the company are still going through hard times.
But until recently, Apple boasted of records - in July, its total capitalization (total market price of all issued shares) to the trillion dollar mark (the second time in history and an unprecedented result for American companies), but did not stop there and after three months reached a figure of 1.2 trillion. The cost of one share then reached $233, after Cook's January announcement, it fell to $142, and the total capitalization - to 671.6 billion, that is, almost twice compared to October.
The summer sharp growth was led by the same thing that the company has now gone sideways - the data of a fresh quarterly report. Only, unlike the current situation, then they turned out to be positive. Revenue beat analysts' expectations and rose immediately by 17 percent to $53.3 billion (a noticeable spread between quarters is a common occurrence, which is explained by the peculiarities of Apple's business and seasonal factors).
Even the reduction in the total number of devices sold did not interfere - it was compensated by high demand for more expensive models worth more than a thousand dollars. The numbers from the report confirmed the main thing: contrary to the forecasts of skeptics, the most expensive iPhone X in the line became the best-selling model and sold 41.3 million units worldwide in one quarter. And this made it possible to bypass the main competitors in terms of revenue - South Korean Samsung and Chinese Huawei, leading in terms of the number of gadgets sold.
Apple's success has become a logical reflection of the state in which last years resided the entire American stock market. After the global crisis of 2008-2009, the Fed kept the base rate (on which the level of rates in the debt market depends) for a long time at an extremely low level, thereby giving businesses the opportunity to borrow money cheaply and stimulating the population to spend it - due to the unattractiveness bank deposits and bonds.
As a result, companies invested a lot in their development, citizens provided demand for their products, profits grew, and with them stock prices on the stock exchanges. For example, the S&P 500 index, which includes both Apple and other major US high-tech companies such as Facebook, has soared 325 percent since 2009. According to the laws of the economy, which provide for the cyclical nature of all processes, such growth could not continue forever. And the longer it lasted, the more inevitable the decline was.
Photo: Julien Mattia / Globallookpress.com
Facebook was the first to feel it: in one trading session on July 25, the shares of the social network lost 23 percent of their value. This was caused by weak (in the opinion of investors spoiled by the growing market) reporting, and the scandal surrounding the leak of data that allegedly influenced the outcome of the US presidential election. The company tried to reassure shareholders by assuring them that it was upgrading its personal data protection system. But the effect turned out to be exactly the opposite: investors were afraid that this would greatly increase costs and the company's shares went down again. The example of Facebook is very important, because the social network is part of a group of companies known as FAANG (Facebook, Amazon, Apple, and). In recent years, they have been leaders in growth, and the problems of one company could spread to others.
In the end, this happened, albeit with some delay. First, the success of Apple Amazon - its capitalization briefly reached a trillion dollars in early September. However, then Tim Cook on traditional presentation showed the public two new items: iPhone Xs and iPhone Xs Max. Everyone is already used to the slight differences between models with the S prefix from their “original”, but this time there were even fewer changes, not counting the gigantic size of the iPhone Xs Max. A month and a half later, the iPhone Xr went on sale - a budget version of the X and Xs models, almost in no way inferior to them.
Apple hoped that the average price of 23 thousand rubles lower than the iPhone Xs (depending on the amount of built-in memory) would attract buyers from the middle class, and called it the best-selling iPhone of all time, but in reality already in November (less than than a month after going on sale) was forced to produce it.
The official wording sounded dry: "The main customer has notified that he does not need so much product." Experts named several reasons for the unpopularity of the Xr, the main of which is a too weak screen, the brightness and contrast indicators of which are inferior to the same Xs. Because of it, the smartphone, which is quite powerful in other respects, is no longer so attractive in the eyes of buyers (although some are sure that the display is actually not inferior to more expensive counterparts). Apple was even forced to sell the "original" version of the iPhone X, which became the best-selling smartphone of 2018.
It is impossible to check how things are with sales in reality: since 2011, Apple has been publishing unified statistics on sales of flagship licensed models and models with the letter S that come out a year later. In addition, in the fall, the company announced that it would not report at all from the new year about sales, and this applies not only to smartphones, but to all products. After this warning, the shares went down: from $222 in November to $156 by the end of December. At the same time, the entire market was falling, and there were several reasons at once: the Fed's rate hike (the regulator is pleased with the recovery of the US economy after the last crisis and is afraid of its overheating), the government's work for an indefinite period due to disagreements on the federal budget.
The trade war with China, which Tim Cook spoke so actively about, also had an effect - it increased the cost of companies on duties and hit demand. It also affected Apple's business: many components and gadgets are made in China and are subject to increased duties as foreign goods when imported into the United States. At the end of December, several stock exchanges collapsed so rapidly that Treasury Secretary Steven Mnuchin had to call the heads of the country's largest banks to make sure they were able to issue loans. Then there were comparisons of the situation with the Great Depression of the 1930s and talk about the possible dismissal of Mnuchin himself, with whom President Donald Trump was allegedly very dissatisfied.
At the beginning of 2019, the crisis worsened: after Cook's letter to Apple in fourth place in terms of market capitalization, ahead of Amazon and Alphabet (Google's parent holding), now the company's shares are worth $720 billion. Analysts do not advise selling Apple shares yet: it has a solid margin of safety in the form of accumulated cash. For the most part, this is foreign revenue, which the company was in no hurry to return to its homeland due to too high taxes (a year ago, Trump, as part of his reform, raised the rate from 35 to 15.5 percent).
But economists also acknowledge that improvements are not to be expected any time soon: the slowdown in Chinese growth, which is called the main threat to the global economy, will inevitably lead to a further drop in demand in this important market. The preferences of the Chinese will most likely be influenced by Washington’s policy towards their companies: the US has already had restrictions against competitors from Huawei and ZTE for several months, and Huawei’s top manager Meng Wangzhou is awaiting trial on charges of collaborating with Iran in defiance of sanctions.
Under these conditions, local brands are gaining popularity in their homeland: in addition to Huawei, these are Xiaomi and Oppo, and old iPhone models were banned due to patent disputes with the American one. She is suing Apple around the world, alleging that her technologies used in the production of chips were stolen and got to, which has been installing its components on the iPhone since 2011. Qualcomm has already won litigations in Germany and China, and if in the first case the losses were small and affected only two iPhone models in 15 German stores, then Chinese consumers are weak, so there is a big impact on the overall financial indicators it will not, but in our country we can expect a further drop in sales - by the way, mainly because of the high cost.
Over the past two months, prices have risen twice: in October (without explanation) and in early January - by 1.7 percent due to the increase in VAT. Due to falling demand, the company is once again cutting smartphone production, this time by 10 percent. And at the same time he comes up with non-standard moves in the hope of attracting buyers. The other day there was a patent for a “smart” fabric with built-in electrical components that can connect to gadgets, and a smartphone with three cameras on the back is expected to be released in the fall.
And only President Trump has a simple recipe: “Apple will be fine, it's a great company, they just need to build their factories, big beautiful factories that stretch for miles, in the USA. Now China is the main beneficiary of their activities.” For the head of state, such a scenario would be excellent opportunity to keep the election promise and create new jobs in the country, but such a position is unlikely to find understanding among the top management of Apple.
The capitalization of Apple is about $900 billion. This is far from over $1 trillion, as it was last summer, but we still have one of the largest companies in the world.
Warren Buffett gave the "apple giant" about 25% of the portfolio of Berkshire Hathaway, based on investments in shares of public companies. However, in February it became known that Berkshire had reduced its positions in Apple.
In the fall of 2018, AAPL shares lost about 40%. Since January, the paper began to recover actively. Before us is no longer a 100% “growth story”, but not a full “share of value”. Is it worth investing in Apple now, or is it better to play on the fall? This review will provide an answer to the designated question.
Financial indicators
Published at the end of January reporting for the first financial quarter inspired investors to buy. Formally, the data cannot be called strong. But market participants were relieved as they feared more negative news following the company's weak guidance and negative reports from its suppliers.
Quarterly revenue decreased by 5% compared to the same period a year earlier, to $84.31 billion. Profit decreased from $20.07 billion to $19.97 billion. This happened for the first time in the last 10 years in the first quarter fiscal year when Christmas and new year holidays. One of the factors behind the decrease in revenue was the devaluation of the currencies of many developing countries, especially the Turkish lira. In response to the current situation, Apple management decided to reduce the price of the iPhone in countries with a weak national currency, said the head of the company Tim Cook.
Source: zerohedge.com
iPhone revenue fell 15% year-on-year to $51.9 billion. Cook said the weakness in China's economy hit sales in the region, which is the world's largest smartphone market. In the first financial quarter, the revenue of the Chinese direction of Apple decreased by 26.7%. The company also said that sales in the current quarter are likely to be lower than Wall Street analysts expect, indicating continued weakness in iPhone demand, especially in China.
Source: zerohedge.com
Other segments of the company were more successful. Services revenue reached a record high of $10.9 billion, up 19% year-on-year previous year. This segment accounted for 14% of Apple's revenue, while the iPhone accounted for 63%. Mac and wearables, home goods and accessories also reached record highs, up 9% and 33% respectively, while iPad revenue rose 17%.
Dividends and buybacks
As a result of the tax reform, Apple was able to repatriate "foreign cash" at a preferential tax rate. The funds are used to pay dividends and implement the buyback program. Previously, for this purpose, a scheme was used with the placement of bonds at ultra-low interest rates within the US. As a result, the company has about $101 billion of bonds in circulation, and in the first financial quarter, it finally began to repay its debt.
Source: Reuters
Median analyst target for Apple for 12 months. is $195. Proceeding from this criterion, the securities have already been quite fairly priced by the market.
There are risks, however, the company is financially stable and rich in cash. It is quite possible to buy on Apple's drawdown. For medium-term purchases, I would expect at least $180. The $165 level will allow you to more confidently enter long positions.
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Apple chart since 2017, daily timeframe
