This Time It Matters: Why Apple Is Falling

Preface
Apple Inc (NASDAQ:AAPL) is dropping hard after its event to announce the new series of hardware, in particular the new iPhone 8, 8 Plus and X as well as the Apple Watch 3.

It’s Different This Time
Normally when Apple stock dives on lukewarm product reviews we stand firmly in our position that the stock market reaction is over blown. Our simple thesis for that response is to look at demand, which is hypnotically strong, every time. That is not the case this time.

A New Risk is Not Obvious But is Enormous
Apple announced a more complicated lineup of iPhones this time around. It introduced the iPhone 8 series which is an upgrade to the iPhone 7, and then it announced the highly anticipated iPhone X (pronounced iPhone Ten).

Then the company made the iPhone 8 available this month, but pushed delivery of iPhone X to early November, which pre-orders stating in late October. That has created a risk.

It turns out that Apple hyped the iPhone X so much, and poured so much new technology into it, that it has left the demand for iPhone 8 lackluster in Apple terms. Here’s what we mean.

If you go to the Apple Store, and try to purchase an iPhone 8, the wait time is essentially 1-3 days for the smaller memory version. Here is an image:

That is for the iPhone 8, in Los Angeles, on Verizon’s (NYSE:VZ) network. The other networks are essentially the same. A normal wait time for a new iPhone release is usually several weeks, let’s say 2-4 depending on where you are in the world.

There are also reports that in store lines are much smaller than before, with one report pinpointing Sydney Australia, where only 30 people were camped out for the new release. Reports from China are similar.

Here are links to two stories:

Turnout for iPhone 8 Launch in Australia “Bleak” as Customers Hold Out for Upcoming iPhone X
The iPhone 8 launch in Sydney saw “a bleak turnout,” reports Reuters, with fewer than 30 people lining up outside of the Sydney Apple Store on George Street. In past years, hundreds of people have lined up for new iPhones on release day.

Apple Falls After Analyst Report Indicates Weak iPhone 8 Demand
Consumers pre-ordered about 1.5 million handsets on Chinese retail website JD.com in the first three days, compared with about 3.5 million for the comparable period of iPhone 7 orders.

Tim Cook just said he “couldn’t be happier” with the iPhone release (and Apple Watch 3). While sales are lower than prior models, there is one reason, a big reason, that he may actually be telling the truth.

Is There a Plan?
One of the headlines that surfaced from the Apple Event was that the iPhone X was very expensive, starting at $ 999 and climbing to $ 1,200 based on the configuration.

It’s possible, maybe even likely, that Apple decided to release the iPhone 8 for less to make it appear that it was not forcing Apple loyalists to buy a far more expensive phone by offering a reduced priced new model (iPhone 8).

In fact, it does appear that even in the bearish analyst notes, each tends to comment on the fact that demand reduction for the iPhone 8 is simply a reflection of the outsized demand for the iPhone X.

If that’s true, then Apple will have an average selling price significantly higher than in prior times, and if demand is in fact to the point where Apple also sells more units, then that would bring a windfall of profits larger than any company has ever seen in one quarter. If that sound overly bullish, it’s just the choice of words — Apple already has the largest earnings ever in one quarter, so this would be a breaking of its own record — also known more simply as, “growth.”

Back to Risk
While there is a rather bullish narrative to wrap around this odd iPhone selection, there is also, in earnest this time, a reasonable bearish thesis.

Apple won’t be delivering its iPhone X until well into November, and if demand is very strong, it might not even be able to deliver before the holiday season in the United States. And while, certainly, if all of those sales simply occur later in the year (or early 2018), then that’s fine, but to consider that a foregone conclusion is a step we are not willing to take with blind faith.

Some consumers, perhaps many consumers, will not wait. And while Apple loyalists may stick around for a later date, the all-important “Android switchers” (those smartphone Android owners that switch to Apple) may not — and that is a real risk and worthy of a stock drop, until proven otherwise.

Apple’s market share in the United States is jumping as Android loses market share — an under reported but critical phenomenon. On January 11th, 2017, 9TO5Mac wrote iPhone market share grows 6.4% in USA, takes share from Android in most markets.

Apple gained 9.1% in the UK, mostly at the expense of Windows phones.

The iPhone grew its market share in Australia, France, Italy, Japan, Spain, the UK and USA, with Android seeing its own share drop in all of these countries bar Italy, where its growth was less than half that of iOS.

Those are Android switchers and Apple may have just put that group, or at least that trend, in serious jeopardy.

Now What?
We believe the iPhone X is going to be a knock-down drag-out mega hit, and the elevated price will make it yet an even larger success. But, the risk that Apple took, as of right now, is hurting the company both with iPhone 8 sales, and potentially, with Android switchers. And that is not a false narrative — it is accurate.

That risk means the stock should drop, and is dropping.

But, we’re not done yet. What we did not show you, and is easily missed unless you are really looking, is how hard Apple is focusing consumers on the iPhone X over the iPhone 8 — in our opinion.

I recorded a 45 second video arriving on the Apple Store and looking at iPhones. I have turned to video to allow you to make your own decision, as opposed to snapshots, which are too selective and an be used to weave any narrative the author likes.

When you watch this video (below), decide for yourself if you feel that Apple is purposefully pointing people to the iPhone X over the iPhone 8. Here we go:

[embedded content]

That’s hardly headline grabbing footage, but we found it noteworthy.

Apple Watch 3
There have been some pretty poor reviews of the Apple Watch 3 surrounding its LTE connectivity and its battery life. This is one of those times where the reviews are meaningless. Demand is strong and that’s all that matters.

Here is a snapshot from the Apple Store for that product:

We see the Watch becoming a runaway success as people learn to use that wearable device as a standalone product — leaving the phone at home on runs, meetings, swims, hikes, and whatever other times such a convenience could be desired.

Conclusion
We maintain our Top Pick status on Apple, but have certainly tempered our bullishness with an undeniable new risk. It might work out very well, but, it might not, and that is a new risk to Apple stock.

The author is long shares of Apple Inc (NASDAQ:AAPL).

Thanks for reading, friends.

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Disclosure: I am/we are long AAPL.

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Apple Plans Exclusively to Sell Apollo “Personal Cloud” Products

From this June the Apollo “personal cloud” the product of Promise Technologies will be available in Apple stores for general consumers along with Apollo Cloud App to use it from anywhere.

appoloGreatResponder.com  Promise Technologies announces that its brand new product Apollo “Personal cloud” will be available in Apple stores from this June for the consumers. The announcement was made by Promise in Computex in Taiwan.

The device is designed for families and small businesses; Apollo is a sleek, quiet appliance that allows users to privately and securely store their data. Apollo’s simple set-up and file management is performed from just one single app which enables users to share files from virtually any device and from anywhere in the world.

Additional members can easily be added, who can then each have their own storage space on the owner’s Apollo.  Each member has complete privacy and security from other members. At Computex, Promise is excited to debut Apollo through an interactive user experience area where visitors can see first-hand how easy it is to share and manage files through the Apollo app.

“Promise has a relentless commitment to innovating new solutions that improve how we live and work,” said HC Chang, GM of Promise Technology APAC. “Apollo is our latest innovation; however, it is just the beginning as we are looking at building a whole new line of solutions for the IoT market. We are looking forward to showcasing Apollo to the many users passionate about technology and we are excited to hear their innovative ideas on what the next generation of Apollo should offer.”

While the device certainly won’t replace cloud storage as we know it, Apollo is not even recommended as a sole backup device, it is part of a larger trend of personal cloud storage for users who want to take “control” of their privacy. Of course, with any Internet-enabled devices, there are still security risks, but it could provide peace of mind for certain users.

The device sounds ideal for families or friends who want to share photos or videos without putting them on Facebook, Instagram or another photo-sharing website or cloud-based service. There doesn’t seem to be much of a business application for the device.

Apple has been making efforts in recent months to bolster its position in the cloud marketplace, and this latest effort would appear to be a move towards the consumer market.

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Apple Co-founder Steve Jobs Died at 56

Apple Co-founder Steve Jobs Died at 56

Apple Co-founder Steve Jobs Died at 56

Greatresonder.com – 2011-10-05 – On Wednesday, the technology giant Apple made the very sad announcement that the company’s co-founder Steve Jobs has passed away at the age of 56.

“We are deeply saddened to announce that Steve Jobs passed away today,” The company said in a brief statement. “Steve’s brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve.”

In late August, Steve Jobs resigned from the position of CEO of Apple as he had to deal with the effects of an unspecified illness.

Jobs was diagnosed with pancreatic cancer is 2004 and has been receiving treatment for if.
Steve Jobs’s celebrated career has had numerous and very significant series of twists and turns. Jobs started out his career in an increasingly fast rising company in the late 1970s and 1980s. This was followed by a dim hardship in the ’90s that led to his rise to the status of tech guru.

Jobs was known and respected for his business planning and an almost mystic power to foretell where tech trends are heading. Jobs was described by some as proud, moody and brutally honest about employee performance.

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