iPhone expectations increasing
Shares of Apple (NASDAQ:AAPL) are still seeing upside this week, this time on renewed optimism for its iPhone 7. Some reports show the company is ratcheting up component orders for the device, while noted Bernstein analyst Toni Sacconaghi sees stronger average selling prices. He suggests that ASPs for the new iPhone could climb to $679 next quarter, ahead of consensus estimates of $659 and far ahead of the $595 ASP it garnered in Q3 2016.
Bank of America analysts also estimate that the device could outsell the iPhone 6 and 6 Plus in the first half of 2017 vs. the first half of 2015, (remember what a big deal the 6 was?).
All of this is to say, expectations are improving for the new device. This is both good and bad. Good in the sense that, if true, demand is heating up for the iPhone 7 and that will drive positive results for Apple. Increased expectations can be bad too though, especially if investors get too high hopes. I don't think we're anywhere near those levels of optimism though.
The stock is still some $20 per share below its highs and investors were right to be dismissive of the company when it introduced the iPhone 6s. Cosmetically, the 7 is not all that different, but its internals are much improved. The question remains, will this be enough of a catalyst to bolster iPhone sales for the next three quarters? (Assuming the last quarter sees a drop as consumers wait for the 10-year anniversary iPhone next year).
All indications at the moment say "Yes, it's enough," and that's good for investors and Apple.
Amazon, the shipping king
According to companies' management, it's not a huge concern. At least for the moment.
From SA News:
"'The level of global investment in facilities, sorting, aircraft, vehicles, people to replicate the service we provide, or our primary competitor provides, is just daunting, and frankly, in our view, unrealistic,' says FedEx CFO Alan Graf."
It's true that building out an entire shipping and logistics network would be quite difficult. And while the company's heavy investments into own logistics network has been impressive, many wonder if the company has the resources to complete the so-called "last mile" of delivery. Or for that matter, if it would want to.
In some instances - say in urban settings - perhaps Amazon would have the ability to build out a network that allows it to deliver a large amount of packages to a lot of people in a smaller area. Given that it's only delivering Amazon packages, perhaps suburban locations could work too. But rural seems like it would be quite difficult and perhaps it would be best for the company to stick with other companies to complete the final leg.
Like I said on Tuesday about the company's Prime Video aspirations, I am not the one to question the management of a company like Amazon. The stock is after all, hitting new all-time highs as we speak.
However, it's obvious that building out a complete, end-to-end delivery network will not be an easy task for anyone, including Amazon. But that doesn't mean there aren't alternatives, especially given the shipping costs the company currently shoulders.
BlackBerry is back?
Shares of BlackBerry (NASDAQ:BBRY) are off its highs Wednesday, but are still up on the day despite posting a 28% decline in sales, which also missed estimates by more than 10%. The $352 million in revenues were almost $42 million short of expectations looking for roughly $394 million.
It wasn't all bad though: Earnings per share of $0.00 came in 5 cents per share ahead of expectations. CFO James Yersh announced that he is leaving the company for personal reasons, while the company also announced that all of its internal hardware development will be outsourced.
Given that both hardware and software badly missed sales expectations - although, it was far worse for the former - one might begin to wonder if it isn't just the end of an era when it comes to hardware, but possibly the end of an era when it comes to BlackBerry as a whole.
The company's software and security has been touted as a strong asset for BlackBerry for the past several years. Basically, since its hardware division began taking a massive nosedive that clearly isn't over yet.
However, with software and services failing to exceed expectations, one has to wonder how many companies and customers really believe in BlackBerry's offerings. For overall sales, the lowest expectations on the Street was $371.3 million. Even by that margin, BlackBerry missed by a ton. As the old saying goes, they couldn't hit water if they fell out of a boat.
At some point, one would think/hope that sales will eventually bottom and allow the company to show revenue growth in the future. It's better-than-expected earnings results is also something to be semi-optimistic about, even if it's just bad instead of horrible.
But as its market share continues to dwindle, it's hard to imagine sales rebounding. Perhaps BlackBerry would be best off abandoning its hardware division altogether and instead focusing on software, services and solutions.
While the stock is rallying, it just seems to me that there are better investment alternatives, rather than putting money in a company and waiting for it to start doing poorly, as opposed to terribly.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.