Apple Investor Weekly works to curate some of the more relevant articles and information related to the company’s financial outlook. This week it contains information iPhone 6 sales being halted in Beijing, what announcements at WWDC are financially important, an update on the App Store vs. Google Play and two analysts expressing concerns about the iPhone. With Friday’s closing price of $95.33 the shares were down for the week ($3.50 or 3.5%) and underperformed the S&P 500 which was down (1.2)% and the NASDAQ’s decline of (1.9)%. (Note that I own Apple shares).
Maybe Carl Icahn was right
Carl Icahn announced that he had sold his Apple stock on April 28 due to concerns about China and two days after the company announced its March quarter results. While China had recently forced Apple to shut down iTunes Movies and iBooks these were very small portions of the company’s business. However this past Friday it came to light that the Beijing Intellectual Property Office in Beijing had ruled that Apple had to stop selling the iPhone 6 and 6 Plus in Beijing which led to the stock being down $2.22 or over 2% on Friday.
Source: Apple
Apple told multiple news organizations that “The reports aren’t accurate. Here’s our comment: iPhone 6 and iPhone 6 Plus as well as iPhone 6s, iPhone 6s Plus and iPhone SE models are all available for sale today in China. We appealed an administrative order from a regional patent tribunal in Beijing last month and as a result the order has been stayed pending review by the Beijing IP Court.” While it appears that iPhone sales shouldn’t be impacted it does reinforce the concern that various China government agencies could change the rules that Apple has to play by. But keep in mind that since Apple’s suppliers have tens of thousands if not hundreds of thousands of employees if the government were to significantly decrease the company’s sales it would directly affect its citizens.
WWDC hit its low expectations
Apple held its annual Worldwide Developers and there weren’t many surprises. Here is a link to The Next Web’s overview of the conference. Probably the biggest announcement from a financial perspective is that Apple Pay will be on the desktop with OS X Sierra. Additionally the company announced that it was making Siri, iMessage and Maps open to third party developers.
Apple’s App Store generating almost twice as much as Google Play
App Annie released an analysis that Apple’s App Store generates 90% more revenue than Alphabet’s Google Play even though Google Play had twice as many downloads in the March quarter. App Annie also calculated that time spent on Apps worldwide has more than doubled since the March 2014 quarter.
Source: App Annie
Apple paid about $15 billion to developers just in 2015 while earning over $6 billion for itself. This was an increase of about 50% year over year so it is not surprising that Apple is making additional applications open to developers.
Two analysts expressed concerns that are well known
Credit Suisse and JP Morgan expressed concerns about the upcoming iPhone 7 that are fairly well known. Each one changed his fiscal 2016 EPS by a penny. While Kulbinder Garcha at Credit Suisse cut his fiscal 2017 EPS from $9.64 to $9.15 he introduced a calendar 2018 EPS forecast of $12.32 based on an iPhone 8 super cycle. This is allowing him to maintain his $150 price target and Outperform rating.
Rod Hall at JP Morgan decreased his price target from $125 to $105 but kept his Overweight rating based on the firm’s system that Apple should outperform the average total return of the stocks in Hall’s coverage. The other 23 companies he covers include Blackberry, Cisco, EMC, F5 Networks, HP Inc,, Hewlett Packard Enterprise, Juniper Networks, NetApp, QUALCOMM, Seagate Technology and Western Digital.
Hall also expects Apple to only sell 68 million iPhones in the December quarter which would be down from the almost 75 million that it sold in the last two holiday quarters. He increased his fiscal 2017 EPS estimate from $8.72 to $8.79 but that is less than 2% higher than his fiscal 2016 EPS projection of $8.65.
One wild card in iPhone estimates is how will the SE do since its lead-times are finally starting to decrease. However the SE could be cannibalizing iPhone 6 and 6s sales more than expected. We won’t have a read on that until July when Apple announces its June quarter results.
Stock’s valuation
At a closing price of $95.33 the shares are at a PE multiple of 11.5x on fiscal 2016 EPS of $8.27 and 10.5x on fiscal 2017 EPS of $9.08. When you take into account my estimate of $19 in excess cash per share the PE multiples become 9.2x and 8.4x.
Apple 3 year chart. Trending neutral.
StockCharts.com shows the shares came close to its 50 day moving average (blue line) two weeks ago and fell back. Both of its overbought/oversold indicators fell into slightly oversold territory with the downturn this week. Its RSI (Relative Strength Index, the top third of the chart) is at 39.36 (last week was 53.1) and its MACD (Moving Average Convergence Divergence, the bottom third of the chart) is at -3.265 (last week was -0.133). As you can see from the changes in the RSI and MACD these can move quickly which means these are short-term indicators.
Source: StockCharts.com
Ewan Spence’s roundup of Apple consumer oriented news
Ewan Spence rounds up the rest of this week's consumer news from Cupertino in Apple Loop here on Forbes.
Apple Investor Weekly strives to compile some of the most relevant and interesting investor oriented news. You can find last week’s Weekly here.
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