04 August 2015

Apple, iPhone Vulnerability, Product Concentration, $AAPL Unsustainability

"Growth rates are “mathematically unsustainable,” said Toni Sacconaghi, an analyst with Bernstein Research. He forecasts iPhone sales to grow 3% to 237.6 million units in the fiscal year starting October. “It’s highly debatable whether there will be any iPhone growth next year,” said Mr. Sacconaghi. “The market realities will catch up with Apple.”" (source: Wall Street Journal)
UPDATE September 3, 2015: Apple's dependence on iPhone (below) and China at a time when smartphone sales decline in China--
See also: Apple's Dependence on China Could Be Dangerous - Bloomberg View
UPDATE August 28, 2015: Apple Music Exec Abandons Ship, China Smartphone Market Declines--
  1. China’s Moves Won’t Help U.S. Tech Firms - WSJ"Weaker yuan will make American gadgets more expensive in China, and Chinese ones cheaper abroad"-- Smartphone shipments in China fell 4% in the second quarter year on year, Gartner Inc. said, marking the first-ever decline there.
  2. Apple loses key music streaming executive - FT.com: "The architect of Apple’s online radio strategy has resigned two months after the launch of its Beats1 radio service, said people familiar with the matter. Ian Rogers was part of the executive team that joined Apple last year when the company acquired Beats, the audio group started by Dr Dre and Jimmy Iovine, for $3bn."
  3. iPhone 6S or 7: super-strength new iPhone 'too expensive' | The Week UK: "Apple will either have to charge more for the new iPhone, risking a dip in sales, or absorb the additional cost itself, denting its profit margin."
UPDATE August 26, 2015: The bad news in China is bad news for Apple $AAPL -- China waves trigger soul-searching on Apple"Because Apple is large, bad news in China translates to bad news for Apple to expand there, and then that has an impact on the entire market," University at Buffalo finance professor Cristian Tiu told USA TODAY in an email. China is [was] a key growth market for Apple." (emphasis added)

UPDATE August 25, 2015: Desperate Apple CEO Tim Cook, apparently trying to reverse the recent collapse in Apple Nasdaq: AAPL shares, may have violated SEC rules yesterday, see: Apple CEO Tim Cook may have violated SEC rules with Jim Cramer email - MarketWatch.com. See also:
China to Flood Economy With Cash - WSJ: "...“big-name Chinese technology companies are reporting softening markets ... Phone maker Xiaomi Corp. [domain name: mi.com], which had ridden the wave of first-time smartphone buying in China to rack up triple-digit growth in recent years, now has to look for such growth elsewhere. For the first time in six years, China’s smartphone sales are declining."
UPDATE August 21, 2015: Apple has 19 Apple Stores in China but none in India -- Smartphone Sales Fall in China, Market Saturated, but India is Booming

UPDATE August 20, 2015: Four 'scary-looking' $AAPL charts:

UPDATE August 17, 2015: The way people buy smartphones is changing. Is Apple competitive?  Business Insider"... the way consumers are purchasing smartphones is changing. Earlier this month, Verizon announced that it would be doing away with contracts altogether for new customers. Now, new Verizon customers must purchase their phones outright, pay for them in installments, or bring over compatible devices they've purchased elsewhere (like the new Moto X). They can cancel their service at any time, and if their handset supports it, use their device on a different network. Under this system, an unlocked phone with support for a wide variety of networks is much more attractive, as a handset lacking support for other carriers limits its owner's choices." But while the new Moto X is priced at $399.99, "buying an unlocked iPhone 6 means spending $649 or more up front -- a tall order for many."
A live TV service would provide a new revenue stream at a time when Apple is under pressure to bolster its long-term growth outlook. With iPhone sales slowing, the world’s most valuable company is projected to grow revenue just 5.3 percent in 2016, down from 28 percent this fiscal year. Shares have fallen 13 percent since reaching this year’s high of $133 on Feb. 23. (source: Bloomberg, infra)
UPDATE August 13, 2015: Apple Said to Delay Live TV Service to 2016 as Negotiations Stall Bloomberg via @business $AAPL (check Apple stock price now NASDAQ:AAPL)

UPDATE August 10, 2015: Eddy Cue told “USA Today” that only 11 million people signed up for Apple Music subscription--even though it's free--first 90 days free trial subscription.  11 Million Subs - Lefsetz Letter: "Apple Music [is] a disaster ... a me-too product ... [only] 11 million people on this planet of billions??? Apple Music is FREE and most people don’t want it." See also: "Apple Music is a nightmare and I’m done with itand


UPDATE August 5, 2015: Apple stock Nasdaq:AAPL downgraded by analysts including Bank of America Merrill Lynch--principal reasons for the downgrade as reported by The Street include:
  1. Near-term slowdowns in revenue growth from the iPhone and no significant growth from new products like the Apple Watch
  2. Uncertainty in China
  3. The company's stock price is tied too closely to gross profit dollars, which he thinks will decelerate
  4. The magnitude at which Apple beats Wall Street's expectations is decreasing, leaving little room for failure
  5. The iPhone 6S and 6S+ aren't supposed to receive significant updates, which Mohan worries might draw in little demand
  6. There aren't any expected capital return announcements besides what has already been announced
UPDATE August 4, 2015: Apple, the iPhone maker, has dropped more than 13 percent since hitting its all-time high in February, entering correction territory on Monday and then falling below its 200-day moving average for the first time since 2013. Apple stock Nasdaq:AAPL closed today at $114.64 DOWN $3.80 (-3.21%).


Video above: Bloomberg’s Michael Regan and Julie Hyman examine Apple’s moving average with Bloomberg’s Alix Steel on “Bloomberg Markets” Aug 3, 2015 (Source: Bloomberg)

Apple 3-month stock chart: NASDAQ: AAPL
Apple 3-month stock chart: NASDAQ: AAPL (chart source: google.com)
"It is precisely due to non-existent switching costs that investors are skeptical of the sustainability of success at major smartphone companies such as Apple (NASDAQ:AAPL). It is no secret that Apple's near-term success is highly dependent on its iPhone franchise. The franchise has consistently comprised of 60%-70%-plus of revenues in recent years and thus it is fair to say that the tech mammoth has serious product concentration." [Which is a serious vulnerability.] Read more at: Apple | Seeking Alpha

"Despite analysts' enthusiasm for the market's strong acceptance of the iPhone 6 models, Apple Q2 results were a disappointment to many who had visions of growth in China propelling Apple to a recovery of market share it had lost in recent years. Apple did have very strong sales in the robust China market, but nonetheless saw its market share drop to 12% [see chart below], well behind industry leader Xiaomi who surged to 18%, and eclipsed by a resurgent Huawei who now holds 16% of the China market." Read more at: Is Apple More Vulnerable Than Microsoft To Trends In Mobile? Probably | Seeking Alpha

Apple Stock: (check price now at link) NASDAQ: AAPL

See also on Domain Mondo:

Infographic: The iPhone Is More Vital Than Ever to Apple's Success | Statista
Chart illustrating Apple's growing dependence on the iPhone - Source: Statista

Infographic: The State of the Global Smartphone Market | Statista
Global Smartphone Market Share Based on Units Shipped Q2 2015 - Source:Statista
Smartphone Market Share in China
Smartphone Market Share in China: Data Source IHS Technology via Bloomberg
Infographic: How the iPhone Changed Apple in Just 8 Years | Statista
Source: Statista




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