Google I/O 2016, Apple vs. Google, Thursday Q&A

Today's Above Avalon stories: 

  • Google I/O 2016
  • Apple vs. Google
  • Thursday Q&A

Today's email goes over my thoughts and observations about Google's I/O 2016 keynote. After discussing my overall reactions, we go over some of the products and features introduced onstage. We then take a step back and compare Google's ambition to move beyond devices with Apple's core competency in hardware. The two strategies seem to be at odds with each other. The email concludes with Thursday Q&A (questions from Above Avalon members). This week's questions:

  • "What percentage of Didi did Apple purchase?"
  • "Do you consider Apple Watch to be a Steve Jobs legacy endeavor?'"
  • "What did you mean Buffett's IBM purchase has to do with financial engineering?"
  • "If Apple captures 95% of smartphone profits, how can other companies continue to innovate in the space?"

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Apple TV Unit Sales Estimate, The Skinny Cable Bundle Mirage, Tim Cook Visits China and India

Today's Above Avalon stories: 

  • Apple TV Unit Sales Estimate
  • The Skinny Cable Bundle Mirage
  • Tim Cook Visits China and India

We kick off today's email by discussing Apple TV sales share in the U.S. After looking at the latest trends, we go over my estimate for Apple TV unit sales on an annual basis. The discussion is then broadened to go over why I think the skinny cable bundle will end up being a mirage to many tech companies, including Apple. The email concludes with some thoughts and perspective on Tim Cook's trip to China and India. There is way too much cynicism in the press regarding his trip.    

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Berkshire Hathaway Buys AAPL Stake, Deep Dive into 1Q16 Wearables Market

Today's Above Avalon stories: 

  • Berkshire Hathaway Buys AAPL Stake
  • Deep Dive into 1Q16 Wearables Market

Today's email begins by taking a closer look at Berkshire Hathaway buying a $1 billion stake in AAPL. We discuss the notion that the move suggests Apple is now a value stock. Upon closer examination, Berkshire Hathaway's thought process towards AAPL isn't too mysterious. The email then turns to new data for the wearables market. We look at the latest smartwatch and fitness band sales trends with additional comments about the broader wearables market in 1Q16.

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Apple Invests in Didi Chuxing

Today's email is dedicated to Apple buying a $1 billion stake in Didi Chuxing, China's largest ridesharing company. The email is divided into a number of sections:

  • Didi Chuxing 101 - A Didi Chuxing Primer. 
  • Investment Rationale - The three primary reasons for Apple investing in Didi.
  • The Ridesharing War - A closer look at why the ridesharing industry is turning into an "Uber vs. everyone else" war. 
  • Apple's Game Plan - My theory on Apple's plan for Didi and ridesharing. 
  • What's Next? - Details on what I'm expecting in terms of Apple making additional ridesharing investments.
  • Conclusion

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Project Titan Is Different, Tech R&D Isn't Created Equally, Thursday Q&A

Today's Above Avalon stories: 

  • Project Titan Is Different
  • Tech R&D Isn't Created Equally
  • Thursday Q&A

Today's email builds off my article "Apple R&D Reveals a Pivot Is Coming." We begin by discussing the motivation behind the article and why public reaction surrounding Apple changed two weeks ago with 2Q16 earnings. The email then goes into greater detail on why I think Project Titan is very different from the typical Apple R&D project. This uniqueness is the reason for my very high level of confidence that we will indeed see an electric car from Apple. We then go over some of the R&D data for the tech industry that I collected while researching the article. There are a few interesting observations worth discussing. The email concludes with Thursday Q&A (questions from Above Avalon members). This week's questions:

  • "What is classified as Apple R&D?"
  • "In what year do you believe Apple will no longer be referred to as 'the iPhone company?'"

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The Swiss Watch Market Is Collapsing, Fossil on Traditional Watch Market: It's Awful, Good Signs for Apple Watch

Today's Above Avalon stories: 

  • The Swiss Watch Market Is Collapsing
  • Fossil on Traditional Watch Market: It's Awful 
  • Good Signs for Apple Watch

Today's email has a watch theme. We begin by taking a closer look at the latest Swiss watch market export data. Not only do things look quite negative but the situation is worsening. We go over the current situation and all of the moving parts. The discussion is then expanded to include Fossil's 1Q16 earnings and management's commentary on the watch market. By looking at both Fossil (sells watches for many luxury brands) and the Swiss watchmakers, we end up with a complete view of the traditional watch market. We conclude with Apple Watch and a few good signs that have appeared for Apple's newest product category. 

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iPhone Development 101, Thoughts on iPhone 7 Rumors

Today's Above Avalon stories: 

  • iPhone Development 101
  • Thoughts on iPhone 7 Rumors

We kick off today's email by discussing iPhone development, namely the four primary drivers responsible for the vast majority of change seen year to year in the iPhone business. This "iPhone Development 101" course allows us to then look at the latest iPhone 7 rumors with a different perspective. With increased attention put on slower iPhone upgrade rates and longer iPhone life cycles, many are becoming nervous that the iPhone 7 may not lead to any significant improvement in demand trends. In an effort to address that concern, we look at Apple's likely motivation with the iPhone 7 and why we need to consider Apple's iPhone plans in 2017 and 2018 to completely understand the iPhone 7.  

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Alphabet Partners with Fiat Chrysler for Self-Driving Cars, GoPro Is Up to Something

Today's Above Avalon stories: 

  • Alphabet Partners with Fiat Chrysler for Self-Driving Cars
  • GoPro Is Up to Something

We begin today's email by taking a closer look at news of Alphabet partnering with Fiat Chrysler to make self-driving cars. We look at the motivation guiding each company in this partnership and why I remain skeptical. Next, we compare Alphabet's strategy for self-driving cars to Apple's and Tesla's strategies. We are getting a number of clues as to how various new players are thinking about the auto industry. The email then turns to GoPro's 1Q16 earnings. Even though GoPro is facing a number of daunting challenges given the current environment, it appears GoPro may be looking to change its camera strategy for long-term survival. 

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Elon Musk Doubles Down on Manufacturing, Fitbit 1Q16 Earnings, Thursday Q&A

Today's Above Avalon stories: 

  • Elon Musk Doubles Down on Manufacturing
  • Fitbit 1Q16 Earnings
  • Thursday Q&A

We begin today's email by taking a closer at Tesla's 1Q16 earnings call. Elon Musk had plenty to say about the Model 3 production and his goals for Tesla. We discuss Musk's desire to double down on auto manufacturing, including why he made that decision and the implications for Apple's electric car project, Project Titan. We then switch over to discuss Fitbit's 1Q16 earnings. Fitbit remains the best company to observe clues about the wrist wearables market. After comparing some Fitbit vs. Apple Watch metrics, I explain why I think the Fitbit and Apple Watch dynamic is changing.

The email concludes with Thursday Q&A, where I answer questions from Above Avalon members. This week's member question/topic:

You have consistently said the iPhone's biggest competitor is last year's iPhone. Is it possible that the iPhone 6s just hasn't competed well versus the iPhone 6? If the rumor is that the iPhone 7 won't be too different from the iPhone 6s, why should we be confident that the iPhone 7 will compete any better with the iPhone 6s or even the iPhone 6?

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Tim Cook's Questionable Interview with Jim Cramer, Apple Hits Another Roadblock in India

Today's Above Avalon stories: 

  • Tim Cook's Questionable Interview with Jim Cramer
  • Apple Hits Another Roadblock in India

We begin today's email by taking a closer at Tim Cook's interview with CNBC's Jim Cramer. Cook wanted a second chance to explain Apple's 2Q16 earnings. However, the interview just didn't hit the mark. We also discuss an observation I had regarding how Cook handles financial-related questions. This trend may explain why Apple seems to be having such a difficult time coming up with a new Wall Street narrative. The email then turns to news that Apple's application to sell remanufactured iPhones in India has been rejected. We go over the implications of this development and what it may mean for Apple's plans in India. 

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The iPhone Story Has Become Complicated, The Math Behind My FY2016 and FY2017 iPhone Estimates

Today's Above Avalon stories: 

  • The iPhone Story Has Become Complicated
  • The Math Behind My FY2016 and FY2017 iPhone Estimates

We begin today's email by continuing the discussion raised by my weekly article "iPhone Warning Signs." We go over my thought process that led to the article and why Apple management's narrative surrounding iPhone growth reminds me of the way Apple discussed iPad's growth a few years ago. The email then turns to the math behind my iPhone unit sales estimates for FY2016 and FY2017. We also go over my calculations used to show that the iPhone upgrade cycle is getting longer. 

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FY2016 and FY2017 AAPL Estimates, AAPL's Current Valuation, Takeaways from AAPL's 2Q16 10-Q

Today's Above Avalon stories: 

  • FY2016 and FY2017 AAPL Estimates (Mac and Apple Watch unit sales, Revenue, EPS)
  • AAPL's Current Valuation
  • Takeaways from AAPL's 2Q16 10-Q

We begin today's email by going over my Mac and Apple Watch unit sales, overall revenue, and EPS projections for FY2016 and FY2017. Last Thursday's email went over my iPhone and iPad projections. The email then turns to AAPL valuation metrics and my thoughts on what type of iPhone unit sales growth is reflected in Apple's share price. We conclude with key takeaways from Apple's 2Q16 10-Q filed late last week.   

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Apple 2Q16 Earnings Review: Details, New iPhone and iPad Sales Estimates, Thursday Q&A

Today's update is the second part of my Apple 2Q16 earnings review. Yesterday's update was focused on the major themes.

We begin by focusing on the more granular details from Apple's earnings call. Ten topics are covered, including:

  • iPhone upgrade rates
  • Apple's iPhone channel inventory reduction
  • China and India commentary

The update then turns to my revised iPhone and iPad unit sales estimates for FY16 and FY17. We go over the numbers and why I am becoming more cautious across the board when it comes to Apple hardware sales. The update concludes with Thursday Q&A and a question from an Above Avalon member:

"Where will iPad sales bottom?"

The full note is available for Above Avalon members. To continue reading, click here.

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Apple 2Q16 Earnings Review: Major Themes

Today's Daily Update is focused on reviewing Apple's 2Q16 earnings. Along with a big picture overall of the quarter and management's outlook, the email covers four major themes from the report and conference call: 

  • Apple's 2Q16: Pretty Brutal
  • Walking Back the Services Narrative
  • Increasing iPhone Doubt
  • iPad's Ongoing Implosion
  • Apple Watch Sales Miss
  • A Few More Things...

Tomorrow's Daily Update will include additional thoughts and observations on Apple's tough quarter. 

The full earnings review is available for Above Avalon members. To continue reading, click here.

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Apple Watch 2.0 to Include Cellular Connectivity?, iPhone Upgrade Program Expands Online, The Music Industry Is Broken

Today's Above Avalon stories: 

  • Apple Watch 2.0 to Include Cellular Connectivity? 
  • iPhone Upgrade Program Expands Online
  • The Music Industry Is Broken

We begin today's email by taking a closer look at the WSJ's claim that Apple is working on including cellular connectivity in its next-generation Apple Watch. We go over the reasons that initially give me pause believing this rumor, followed by one factor that makes the claim a bit more believable. We then discuss Apple's iPhone Upgrade Program being extended to Apple's online store and why this is such a big deal for Apple's ability to extract iPhone profit from the smartphone industry. We conclude with a few thoughts on how album exclusives show that the music industry is broken. 

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