I have to admit that I've been lured to "sleeping at the wheel" by reading way too much articles about Apple (AAPL) and Samsung (GM:SSNLF) this year instead of doing what I've always done - isolate myself from the "noise and haste" and just trade!
While I certainly do not pretend to be omniscient; I do have to scratch my head when I read articles like these:
- The Apple vs. Samsung verdict was a travesty; apparently, Apple is preventing Samsung from innovating. Let me understand this ... how do you "innovate" if you are only good at shamelessly copying?
- Apple's eventual fall is assured in a year or two. You may get fired by recommending Apple is a "sell."
Before we get to the topic, a bit of a background will be helpful. If you aren't one of my regular readers, may I suggest you read the following articles so you may understand where I'm coming from:
- Apple: It's the week we have been waiting for.
- Apple: If there was one stock that I would buy & hold; this is it!
- Apple: Why is the cult of Mac so misunderstood?
Apple launched the widely expected iPhone 5. Given Tim Cook's comments on "doubling down on secrecy," I found it amusing how the likeness of the iPhone 5 (and the "earpods") were very similar to the leaked version (down to the whining about the smaller dock) months before the release. Sorry Tim, there will always be a willing seller of information. Unless your Chinese factories and suppliers are fully automated, leaks will surface as long as someone is willing to pay the piper. Here is a "leaked" picture of the iPad "mini"; I'd be grateful for an SA reader to translate what the article says.
Not surprisingly, the iHaters had a field day. The iPhone 5 was generally panned as "boring" by pundits. The Street continued to put a lid on it with lukewarm reception and left their targets mostly unchanged. The typical comments came out like clockwork ...
- Innovation at Apple is dead without Steve. Earpods? Really?
- It is just another phone that does not have the same impact as the original iPhone; the competition has caught up. Nothing "Revolutionary" anymore.
- The new connector is annoying and a money grab from an evil empire!
- Androids continue to outsell the iPhone. It has NFC!
- Android phones still have more "cores."
So, let me get this straight ... you've got these pundits who've most likely read "leaked" articles about the iPhone 5 whining that it is boring because there isn't any more surprises! How does that compute? If they couldn't see why the first iPhone was groundbreaking, I am not sure if they would ever see any iPhones to be groundbreaking enough.
Before any iHaters accuse me of drinking too much of the Cupertino Kool Aid, let me assure you that (aside from iOS and Mountain Lion) I still use Windows, Ubuntu, Blackberry (yes, I still have them), Android [on my HTC (GM:HTCXF) and Samsung Galaxy tab], and Fedora. My 2 Blackberries will be replaced with the iPhone 5 in the next few weeks.
Why was this week the week I have been waiting for? I was waiting for this ...
As I've written almost a month ago here ...
Will iPhone 5 deliver on its expectations? What will September 12, 2012 bring? Assuming it does deliver the iPhone 5 and/or the iPad mini, history will suggest that the naysayers will be unimpressed again.
All I care about is looking for Apple to announce that its sales have surpassed the previous generation by "x" factor. Will the iPhone 5 double the 1 million pre-order units that the "lame" 4S generated (it was 600,000 units for the iPhone 4) in the first 24 hours?
The boring iPhone 5 "merely" doubled the sales results from the "lame" iPhone 4S during the first 24 hours. Thank goodness Apple artificially constrains supply in order to create a reality distortion field to herd the iSheeps. Otherwise, there would have been more than two million "gullible" consumers brainwashed by the Cult of Mac! Yes, I was being sarcastic.
What did I take away from the September 2012 Keynote and the initial sales results?
- China Mobile (CHL), with over 600 million users, continues to play "hard to get." Given its massive market clout, it will not be compelled to join the party right away unless China Unicom (CHU) & China Telcom (CHA) continues to win market share and be profitable doing it. Will the iPhone 5 (chart courtesy of Motley Fool) serve as the tipping point for China Mobile to continue losing its 3G base? Is Baidu (BIDU) the other piece of the puzzle that will facilitate the movement?
- The iPad, which accounts for 68% of the tablet market, accounts for 91% of the tablet web traffic. That was a number I didn't expect to be possible given all the Android iterations. Would Microsoft's (MSFT) Surface put any meaningful dent on it?
- Did anyone notice the Clumsy Ninja played on the iPod Touch that now comes with "the loop"? Probably not; most likely, as the game was kinda boring, it was written off. Would I be surprised to see game developers taking advantage of the iPod Touch or the iPhone as a controller to play games via Apple TV's Airplay? Why can't games be on iTunes? Goodbye Wii; with the iPod Touch's new spec, will there be room for PSP or Wii U?
- The A6 chip, according to AnandTech (not confirmed with a tear down yet), shows that Apple is serious about its chip design capabilities as I've written here. It is only a matter of time before it limits or eliminate its dependency on Samsung. Apple most likely designed this chip to do precisely what its devices wants and no more (typical Apple efficiency). I've been waiting to see more proof of how well Apple has integrated the companies they have acquired in the chip design space (PA Semi and Intrinsity). We got our answer with the A6.
- Did you notice the specs on the iPod Touch (now with Retina display and A5 chip)? What better way to introduce a newbie into the ecosystem than this affordable mini computer? It looks and acts like an iPad Nano to me! My gut tells me that this "rebooted" Nano will further disrupt the handheld gaming market.
Understandably, with Apple trading at all time highs ($701 at the time of writing), we've got pundits trying to make a name for themselves by calling a "top" on the stock. Who can blame them? The genius who "cries wolf" may ultimately be right one day. Personally, I don't see it happening anytime soon. Assuming the iPhone 5 turns out to be another blockbuster hit (early indication seem to support that notion), we can see that:
... despite outperforming them in Net Income growth.
Go figure ... Apple has "bigger" numbers to hurdle over and yet, it gets rewarded with utility like PE ratio. If Apple is a "bubble," what should I call the other three? If you argue that the whole market is a "bubble"; I'm not sure what you are doing wasting your time here reading SA articles. What do you think will happen if Apple gets rewarded with Google like PE? All it takes is a shift in market mentality.
2. Technically, I can understand why one may be tempted to sell at these prices. I've been guilty of taking money off the table too often too soon waiting for retracements. So far, due to its overall uptrend, I've been able to scale back in easily. Will it continue? Nothing ever goes up in a straight line but I do know we have the wind on our back as the fundamentals align with the upcoming product launches (iPhone 5 and maybe the iPad mini). Unless a macro gong show arises, I doubt we would see any meaningful sell-offs like we did earlier this year due to its earnings "miss."
I found it interesting that Apple made a triple top breakout on September 13; the day after the iPhone 5 was announced. When fundamentals align with technical signals, I usually pay attention.
3. From a Product release perspective, given that the iPhone 5 represents Apple's largest revenue driver, it would difficult not to imagine Tim guiding up again for the next quarter. If the iPad mini does get released in October, Apple will most likely have their best quarter ever.
The 4S sold 37 million units during the holiday season; if "Schiller's Law" holds true, hang on for a great ride!
4. Asia isn't a pipe dream anymore. Guess which two Asian countries have been included in the iPhone 5 launch that was not included in the 4S launch? Singapore and Hong Kong. If you have traveled in Asia, you will know why I'm stoked about them being included in the initial launch.
5. Marissa Mayer keeps on teasing with her moves. Let's see ... Apple hates what Google did to them; Marissa used to bleed Google but jumped to Yahoo (YHOO) on a short notice. A "lifer" bailing on a company she started with to join a rival. What does Yahoo have the Apple needs to replace Google?
7. Siri is evolving; why do you think Apple released it in "Beta"? How do you think Google or Facebook collected all the info it has now? They just didn't label it beta when they started!
But what about the recent missteps like:
- Apple starting to cut staff hours ...
- Corruption at an Apple Store.
- Unhappy Core; how to train a Genius gets released!
- The whining continues with new iPhone's apparently smaller dock.
- The new MagSafe gets blamed for someone's carelessness. Makes me wonder how some people get on with life ...
- Recent Ads were considered "horrible."
- EPEAT Gong show ... now, I'm out ... oops, no ... I'm back in!
- French Apple employees threatening to go on strike.
The pundits argue that if you took all these "isolated incidents," they add up to Apple going from "great" to merely "good." They would argue that these "elementary" mistakes would have never ever happened under Steve Jobs. Who knows?
Let us take the recent gong show happening at some of Apples' retail outlet. It is not uncommon for a typical manager to have the following logic:
"We have so many staff at our retail outlets; they also represent our biggest expense line item. How can we increase profit per square foot? Conventional wisdom dictates we either "manage" hours we give to our staff and/or introduce "selling" to them!"
Given that Apple retail employees were NEVER profiled/hired to be "sales" orientated, what do you think would happen? You guessed it! A backlash. John Browett needs to understand these blue shirts, like the Cult of Mac, marches to a different drum.
Just like the stock, I would argue that Apple currently is in a transitional phase with Tim at the helm; it is going from an "autocratic" style to one that encourages empowerment. Do you know of any CEO who would forego $75M? That is rare in the corporate world that is usually ruled by incompetent snakes in suits. Ironically, it is because of these snakes in suits that has made Apple what it is today. Google and Samsung's betrayal will always be a huge motivating factor for Apple to succeed.
I've added more Jan 2014 700C and will most likely go "all in" after they report in October.