AAPL after hours!

[NYEXPAT]

Saw the pre-earnings letter Apple released after the market closed. Ouch, down over 7%. Glad I hedged before the close today!

 

[corn18]

Saw the pre-earnings letter Apple released after the market closed. Ouch, down over 7%. Glad I hedged before the close today!

How did you hedge? I am asking because I want to learn.

 

[HF63]

The devices are getting too expensive for most people. I do like them but only upgrade when my son gets a new phone. I get his old one and pass mine to family members

 

[NYEXPAT]

I hedge tech holdings buy buying QID.

 

[corn18]

I hedge tech holdings buy buying QID.

That is one weird ETF. What is your trigger to sell?

And I saw you can buy options on this inverse ETF. If I bought an out of the money put on an inverse ETF, I think I am betting the market will go up? Sure are a lot fo creative ways for people like me to lose money.

 

[mpeirce]

Sounds like it’s mostly China

“Most of our revenue shortfall to our guidance, and over 100% of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” Mr. Cook wrote.

 

[aja8888]

I hedge tech holdings buy buying QID.

I hedged my AAPL shares by selling them at $210 a while back!

 

[NYEXPAT]

That is one weird ETF. What is your trigger to sell?

And I saw you can buy options on this inverse ETF. If I bought an out of the money put on an inverse ETF, I think I am betting the market will go up? Sure are a lot fo creative ways for people like me to lose money.

Yes, that would be correct, but if I thought the market is going higher, I would simply sell my hedge and let my un-hedged securities do the heavy lifting!

 

[corn18]

Yes, that would be correct, but if I thought the market is going higher, I would simply sell my hedge and let my un-hedged securities do the heavy lifting!

That makes a lot more sense.

 

[NYEXPAT]

I hedged my AAPL shares by selling them at $210 a while back!

That's not a hedge, unless you "shorted against the box"!

 

[24601NoMore]

New iPhones aren't great. We upgraded (me from 6s, wife from 5) to the XR because it was the "entry" level iPhone priced at a "reasonable" (ahem) $750 (!!!!) each. I know, I should have switched to Android, but I just wasn't ready to make the leap from iOS as I have so much invested in the Apple ecosystem and switching will be a giant PITA.

Thankfully, we got the "get one free" on the T-Mobile 55 and over plan, so we "only" paid $750total for two phones, but still..

Not loving the XR. It's HUGE and weighs way too much. The 6 was the perfect form factor. Wife jokes she's talking into a tablet everytime she holds the gigundo XR..

Net, the new phones (generally) suck, and are WAY overpriced - like everything else Apple. That's what's hitting them and the stock, not just "China"..

Tim Cook is definitely no Steve Jobs. Of course, no-one is. But Cook is too much of a bean counter and not enough of a visionary. Could be tough times ahead for Apple unless they figure out how to make things the consumer actually wants, at a price they are willing to pay..

 

[aja8888]

That's not a hedge, unless you "shorted against the box"!

Correct, I just sold them as I saw that the sky was about to fall with AAPL after they decided to not report unit sales for iPhones. I guess I got lucky and will probably buy the shares back once the smoke clears (whenever that is?).

 

[Running_Man]

The amazing thing about Apple after 2012 Apple decided to buy shares of stock back like crazy. They made 283 billion from 2013 through 2018 estimates. They have purchased 220 billion dollars in shares buybacks and 71 billion in dividends they have paid more for stock and dividends over the last 6 years than they have made. The have funded the business in this time with 109 Billion in added debt.

While Apple is a highly profitable company, the profits have been used for nothing other than to prop up the stock options of company executives and weaken the balance sheet.

 

[corn18]

The amazing thing about Apple after 2012 Apple decided to buy shares of stock back like crazy. They made 283 billion from 2013 through 2018 estimates. They have purchased 220 billion dollars in shares buybacks and 71 billion in dividends they have paid more for stock and dividends over the last 6 years than they have made. The have funded the business in this time with 109 Billion in added debt.

While Apple is a highly profitable company, the profits have been used for nothing other than to prop up the stock options of company executives and weaken the balance sheet.

I'm not the best at reading balance sheets, but I think AAPL's looks great.

https://finance.yahoo.com/quote/AAPL/balance-sheet?p=AAPL

 

[NYEXPAT]

The amazing thing about Apple after 2012 Apple decided to buy shares of stock back like crazy. They made 283 billion from 2013 through 2018 estimates. They have purchased 220 billion dollars in shares buybacks and 71 billion in dividends they have paid more for stock and dividends over the last 6 years than they have made. The have funded the business in this time with 109 Billion in added debt.

While Apple is a highly profitable company, the profits have been used for nothing other than to prop up the stock options of company executives and weaken the balance sheet.

I'm not the best at reading balance sheets, but I think AAPL's looks great.

https://finance.yahoo.com/quote/AAPL/balance-sheet?p=AAPL

I think you are both right! AAPL has a very strong balance sheet although it has deteriorated as RM points out. I have not owned an apple product since 1985. I do own a couple percent of AAPL in my portfolio and intend to buy more over time. Hoping for the high 80's but would probably start to accumulate in the 130 range.

 

[Chuckanut]

IIRC Apple used a lot of its recent tax savings to buy back shares at a price much higher than today's.

I have felt uneasy about APPLE since they announced their new campus building. It seemed to me to be vastly over done and a very expensive statement of how wonderful they are. Alas, as an Apple customer, it's of no value to me. $1000 iPhones and expensive iMacs with slow hard drives, rather than fast SSD drives, just does not cut the mustard these days. I could go on but you get my drift.

 

[NW-Bound]

The only Apple device we ever used was iPhone 3, handed down from my kids. We have been using Google Nexus 5, which is about 5-year-old. They work well enough for us, so we are not looking to upgrade any time soon. I suspect a lot of consumers feel the same.

I think it may not be realized that the public at large may not be so enamored with expensive high-tech as some people are, or care to have the best and latest. Does my mother care about the Tesla 0-60 acceleration? If I tell her, she would ask "Who the hell cares about that? What fools do drag race out on the streets?" She would care if it could drive her safely to her Macy's store, which it cannot do right now.

I used to care about the CPU power of my PCs, because I used them for work, and processing speed allowed me to get things done faster. Now in retirement, why do I need an 8-core CPU? To make posts here?

 

[copyright1997reloaded]

The world is coming to an end.

First the top-line: Revenues expected around $84B vs the previous guidance of between $89B to $93B. At the prior mid-point (which was given when the stock was $232), this would be a $7B miss, or 7.7% miss on the revenue line. Gross margins are pretty close to what the original guidance was (38% vs 38.5 or so %). In the letter:
"Based on these estimates, our revenue will be lower than our original guidance for the quarter, with other items remaining broadly in line with our guidance. "

What is clear is that China is decelerating rapidly (and not just for Apple). In terms of Apple, "Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline. "

What hasn't been discussed here:
1. Install base of active devices at a new high, and grew 100 million in the TTM.
2. Revenue's for non-iPhone are growing nicely, +19% YoY.
3. $10.8B (billion with a B) in services revenue in the quarter
4. Wearables (e.g. Apple Watch and Air Pods) up 50% YoY in latest quarter
5. iPad revenues growing double digits due to new Ipad Pro (YoY)
and
6. Apple will be announcing record earnings per share
and
7. they have net $120 Billion in cash (estimated as of end of quarter).

So, using TTM earnings (which Apple just said they would beat) and 4.77B shares outstanding (also in the letter) puts them at $146/11.87 = 12.3 PE (TTM) and a market cap of $696 Billion. Taking away the $120B NET cash puts us at $576 Billion and a $120 per share (net of cash), or a 10.1 PE ratio (net of cash).

I dunno, I think I'd rather have Apple at 10X vs. a bunch of other companies out there who will also be impacted by any continued China downturn.

If I didn't own so much of this, I would be hoping for a big blow-off and downdraft on this one, hoping to see if I could pick up a bunch of it in the mid 130's (under 9.5X).

 

[Lsbcal]

Very interesting comments here. We were Android users (me with a Nexus 6P and DW previously in Nexus 5) for years and finally threw in the towel. Bought iPhone XR's and we are very impressed with the ease of use and performance. Our iPads have been worry free and were good values. I read that many Android users have switched to XR's.

Is this AAPL selloff an opportunity? It is clear they are very much behind in voice recognition. I often use Google Assistant on my iPhone. But it seems Apple has recognized this failing and hired a key Google exec. Might Apple come out with something unexpected? Well we can't really know that but they have a large and growing R&D budget.

I looked at Value Line and the relative PE to market was 0.79 in 2018. In 2015 that same number was 0.64. Value Line had an estimated earnings for 2019 of $13.65 which at 144 puts the estimated PE = 10.6. Estimated dividends are 3.12 which would mean 2.2% yield.

If one were to buy some AAPL where would you pull the trigger and why?

 

[audreyh1]

I hedged my AAPL shares by selling them at $210 a while back!

I tried to convince DH to sell some at $230. He wouldn’t go for it.

 

[aja8888]

I tried to convince DH to sell some at $230. He wouldn’t go for it.

Ouch! I felt the writing was on the wall, but sat for a while before pulling the trigger out of it.

Maybe Apple will pull a rabbit out of their hat once the smoke clears, but I'm not holding my breath on it. If we ever slide into a recession, even a small one, those $1000 phones will sit in stores. Plus, the China thing scares me.

 

[MichaelB]

There’s no doubt a slower rate of growth in China has an impact. I wonder, though, if part of the problem is Apple pricing it’s latest iPhones too high, impacting sales, and using China as an excuse.

 

[nash031]

If I didn't own so much of this, I would be hoping for a big blow-off and downdraft on this one, hoping to see if I could pick up a bunch of it in the mid 130's (under 9.5X).

I own a lot in the form of total market index funds, but also still own a number of individual stock shares, though I reduced my position by about half at ~$220 earlier this year. I agree with your post, and am hopeful about a further decline. I'll have to run my own valuation numbers, but am guessing they'll come nearly in line with yours and I may shake some cash free to buy back in on the cheap.

 

[NW-Bound]

There’s no doubt a slower rate of growth in China has an impact. I wonder, though, if part of the problem is Apple pricing it’s latest iPhones too high, impacting sales, and using China as an excuse.

I saw that just 2 months ago, Tim Cook had high hopes for the year-end season. He expected revenues to grow 5% relative to the same period in 2017. Turned out it was 5% down, year-over-year.

I don't think China sales was an excuse. The weakness there is real, and cannot be hidden. Looks like what caught Apple by surprise was the sales decline. I wonder if it was because of China's consumer sentiment. The Chinese are nationalistic, and the trade war may have cause them to buy more domestic products, particularly with the recent Huawei fiasco.

Many US companies were expecting growth to come from sales in China. They may be disappointed in the months ahead.

 

[Chuckanut]

Putting all one's eggs in the China basket is a mistake, IMHO. Whether it is the manufacturing basket or the sales basket.