After a year or so in the doldrums, Apple’s stock is nearing its all time high set less than two years ago. Not bad for a company that remains near to death every quarter. And speaking of quarterly financial results, what was there not to like about AAPL’s Q1?
Just when the analysts had Apple where they wanted it– down– the company sells more of what everyone predicted they would sell less of, and record iPhone sales, record revenue, record Watch sales, and even record Mac sales shattered the common meme that Apple is doomed.
Is it OK to say Apple is doing alright and not ready to be overtaken by any competitor?
That brings me to what amounts to what can only be deemed as ridiculous analysis by technology writers and critics, as well as market prognosticators. There are many examples and I skewer a few of them from time to time, but it’s also time to put to rest a bunch of these ridiculous memes.
Apple is not doomed. At least, not in the short term, and that term might be decades. In every technology category where Apple dares to compete– personal computers, smartphones, tablets, smartwatches, stream TV devices, media services– the little Cupertino company that could dominates the competition.
Repeat. Dominates the competition.
Even the lowly Mac takes most of the PC industry’s profits. The iPhone takes all of the smartphone industry’s profits. iPad is the best tablet in every way (except sales growth; there’s a problem). Watch has both marketshare and profitshare leads. Apple’s services would be a Fortune 500 company all by itself. In other words, Apple does well everywhere it competes.
So, dear critics and market naysayers, stop the ridiculous analysis already.
Here’s an example I picked up over the weekend. It’s from Mukta Samtani. It reads well, and discusses some of what Apple announced with Q1 financials last week.
First, it was all about the iPhone. The record high sales of 78.3 million units this quarter brought life back to AAPL stock.
Duh. Seven points in a week pushed AAPL to near its high point less than two years ago.
The Apple Mac not only returned to growth, but generated its highest quarterly revenue ever. For the Apple Watch, it was the best quarter ever, in both units and revenues, with holiday demand so strong that the company couldn’t make enough. Tim Cook said that the Apple Watch was the best-selling smartwatch in the world and also the most loved, with the highest customer satisfaction in its category by a wide margin. Cook was confident that the Apple Watch has a great future ahead.
I’m not sure how all of this becomes astute analysis beyond the obvious math, but let’s continue.
But the star of the show, as expected, was Apple Services, which posted the best quarter ever this December with almost $7.2 billion in revenue. Apple Services includes revenue from “Digital Content and Services,” “AppleCare,” “Apple Pay,” licensing and other services. “App Store” customers broke all-time records during the holiday quarter, including $3.0 billion in purchases in December alone.
That sounds good, right? Until you realize that Services remains less than 10-percent of all Apple revenue, but it was nearly identical to the Mac and more than iPad.
Again, just numbers. Not analysis of the numbers. What about Apple TV?
The company started the new “Apple TV” a year ago and management is happy with how that platform has developed, with Apple Inc. having bigger plans for it in the coming days. So far, the new launch has not been able to buoy AAPL stock.
Wait. What? Apple TV has not been able to buoy Apple’s stock price? Should it? Could it? No. Of course not. That’s looney. Nothing Apple does with media anything will replace iPhone revenue, let alone be substantial.
Hey. Why not buy Netflix?
It is quite likely that Apple Inc. would consider making a few acquisitions in the media space, if it is planning to transform itself more as a services company. It would be better for Apple stock if the smartphone maker focuses on becoming a more prominent player in the media space, given the backdrop of the likely saturation in the iPhone market… It may be costly, but acquiring Netflix at a premium may be worth it if Apple wants to compete with the likes of HBO or Amazon.com, Inc. This would take Apple stock to an altogether new level.
There you have it. Analysis. Or, is it? It’s a stock market analyst telling Apple “Do what I tell you to do and the stock will go to a different level.” Note, he didn’t say up or down. Just different. Apple CEO Tim Cook could do that just by raising prices while every competitor lowers theirs.
Samtani’s analysis is a rehash of Apple’s obviously decent numbers, and a rehash of what Apple should do with the $200-billion or so cash in banks at home and abroad. Netflix stock is trading at an all time high, therefore a premium, and the modest market cap makes it a takeover candidate for the likes of those who can afford it, but the P/E ratio flirts with 330 vs. AAPL at just over 15, so I don’t see how Netflix helps Apple’s financials or the stock price.
And that’s what we call analysis of analysis.