Tesla Earnings, The iPhone Reality Distortion Field (additional thoughts), Thursday Q&A
Today's Above Avalon stories:
- Tesla Earnings
- The iPhone Reality Distortion Field (additional thoughts)
- Thursday Q&A
We kick off today's email by analyzing Tesla's 4Q15 earnings. Specifically, we discuss Tesla's results from the perspective of Apple. What can Apple management learn from Tesla's performance? It is becoming clear that Tesla's honeymoon period is over. We look at what Tesla is doing right and what Tesla is doing wrong, including why there are growing concerns surrounding the company. We then discuss the background to the "iPhone Reality Distortion Field" post, including the Apple product that got me to rethink the definition of success. At the end of the update, we go over Thursday Q&A and the following question: Is Apple bidding for sports programming rights in order to have better leverage against content providers?
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Disney's Frustration, Andy Rubin's Next "Android"
Today's Above Avalon stories:
- Disney's Frustration
- Andy Rubin's Next "Android"
We begin today's email by taking a deep-dive into Disney's 1Q16 earnings and CEO Bob Iger's latest comments about ESPN and the cable bundle. We are starting to get a better sense of ESPN's future. There is much value in tracking Disney's changing narrative for ESPN when thinking about Apple's TV plans. We then shift over to Wired's profile on former Android chief Andy Rubin and his new focus (Playground Global). In some ways, Rubin is taking Android's strategic weakness and using it to rethink a new computing paradigm. We discuss Rubin's goals with Playground Global and two takeaways related to Apple.
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Bringing Apple Services to Android, Apple Showing Interest in NFL Streaming Rights, Cracked iPhone Screen Upgrade Program
Today's Above Avalon stories:
- Bringing Apple Services to Android
- Apple Showing Interest in NFL Streaming Rights
- Cracked iPhone Screen Upgrade Program
We kick off today's email by circling back to one of Tim Cook's comments from his recent Apple Town Hall meeting. How realistic would it be for Apple to offer additional services on Android? With a renewed focus on the "Apple, the services company" narrative, we take a closer look at the scenario of Apple bringing additional services to Android. How would Apple's business model be impacted? We then shift over to news that Apple is showing interest in NFL streaming rights. We conclude by looking at the rationale behind Apple expanding its iPhone trade-in program to include cracked iPhone screens. There is more to the move than just pushing iPhone upgrades.
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Tim Cook's Town Hall Meeting, iPhone 7 Design vs. Aging "S" Cycle
Today's Above Avalon stories:
- Tim Cook's Town Hall Meeting
- iPhone 7 Design vs. Aging "S" Cycle
We begin today's email by taking a deep-dive into Tim Cook's Town Hall meeting at Apple HQ following Apple's 1Q16 earnings. We focus on nine of Cook's claims including Apple Watch, iPad and Apple TV sales, in addition to iPhone's future and Apple services on Android. We then switch over to reports that the iPhone 7 may not see much of an external design change. Instead of assuming the lack of much external change is a negative in regards to iPhone upgrades and sales, it is important to think about the iPhone 7 in relation to the aging "S" cycle. There is increasing evidence of a revised iPhone development strategy taking shape.
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The iPhone Is Stifling GoPro, User Apathy Toward Apple Software Quality, Thursday Q&A
Today's Above Avalon stories:
- The iPhone Is Stifling GoPro
- User Apathy Toward Apple Software Quality
- Thursday Q&A
We kick off today's email by discussing GoPro's 4Q15 earnings report and conference call. The company appears to be doubling down on its current strategy despite evidence showing that the iPhone is GoPro's ultimate problem. We then switch over to deteriorating Apple software quality and why Walt Mossberg's latest piece stood out to me. The most important topic concerning Apple software has more to do with user apathy. We conclude with Thursday Q&A and two questions from members: "Are there any implications for Apple related to Xerox being split into two companies?" and "Should Apple replace Citizens Financial Group and handle the financing associated with the iPhone Upgrade Program?"
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Amazon Brick-and-Mortar "Bookstores," Judging Apple Share Buyback Success
Today's Above Avalon email includes the following stories:
- Amazon Brick-and-Mortar "Bookstores"
- Judging Apple Share Buyback Success
We begin today's email by going over one of the more intriguing stories to hit the tech space in a while: Amazon is looking to open 300-400 "bookstores." We take a deep-dive into the rumor and discuss why Amazon would open hundreds of brick-and-mortar locations and how it would impact Apple and the broader retail and consumer tech space. We then switch over to Apple's share buyback program to judge how successful management has been with share repurchases. After going over management's buyback history, including average prices paid for shares since 2012, we discuss how success is measured with buybacks and if management has been making the right decisions.
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Apple's Broken Narrative (Additional Perspective), Apple Looking to Sell Refurbished iPhones in India
Today's Above Avalon stories:
- Apple's Broken Narrative (Additional Perspective)
- Apple Looking to Sell Refurbished iPhones in India
We kick off today's email by going over additional commentary related to yesterday's "Apple's Broken Narrative" post. Specifically, we address management's reaction to slowing iPhone sales, the need to change Apple's narrative, and the topic of Wall Street losing confidence in management. We then switch to news indicating Apple is interested in selling refurbished iPhones from China in India. There are a few major implications from this strategy including how it may work from Apple's perspective and if this can serve as a model for selling the iPhone in other emerging markets.
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Apple's Record Stock Buyback in 1Q16, Apple Building Secret AR/VR Team
Today's Above Avalon stories:
- Apple's Record Stock Buyback in 1Q16
- Apple Building Secret AR/VR Team
We begin today's email by examining Apple's share buyback activity in 1Q16. Upon closer examination, management did not repurchase any shares during December. While some have taken this fact and concluded management may have slowed down buyback due to weaker iPhone sales, there are a few reasons why I'm skeptical of that line of thinking. We discuss how management is buying back shares like there is no tomorrow. We then shift over to the FT's report on Apple building an AR/VR team numbering in the hundreds. How should we think about this development? What would be Apple's goals by assembling such a team? We focus on these questions and how AR/VR would fit within Apple's big picture.
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AAPL Is Trading Like a Junk Bond, Apple Watch vs. Swiss Watch Industry in 2015, Thursday Q&A
Today's Above Avalon stories:
- AAPL Is Trading Like a Junk Bond
- Apple Watch vs. Swiss Watch Industry in 2015
- Thursday Q&A
We kick off today's email by discussing Wall Street's reaction to Apple earnings. AAPL shares are now trading like a junk bond when looking at AAPL's free cash flow yield. After going over free cash flow in detail, we calculate Apple's current free cash flow yield. We then discuss what Wall Street is suggesting by valuing AAPL with such a high yield and why it is similar to a junk bond. We then shift over to the latest data from The Federation of the Swiss Watch Industry. After comparing Apple Watch and Swiss watch sales trends, there are clear signs that the Apple Watch is impacting the Swiss watch industry. We conclude with Thursday Q&A and two questions from members: What's the point of share buybacks? Does Apple keep its foreign cash in USD denominated accounts?
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Apple 1Q16 Earnings Results
Today's Above Avalon email is dedicated to Apple's 1Q16 earnings. There are six sections:
Summary
The Numbers
Major Themes
- A Turning Point
- The iPhone's First Global Recession
- Apple Knows What It Is Doing
- Doubling Down
Additional Musings
Conference Call Notes
Conclusion
The full AAPL earnings review is available for Above Avalon members. To continue reading, click here.
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A New Playbook for Updating Apple Watch, Apple Hires Top VR Researcher, Project Titan at a "Crossroads"
Today's Above Avalon stories:
- A New Playbook for Updating Apple Watch
- Apple Hires Top VR Researcher
- Project Titan at a "Crossroads"
We kick off today's email by discussing the Apple Watch update schedule. Instead of assuming Apple Watch will follow the similar annual update schedule seen with the iPhone, we go over why a different kind of schedule makes more sense. Apple Watch is a unique device and we look at how the way it is updated will likely be just as unique. We then shift to news of Apple hiring Doug Bowman, a leading VR researcher. What do all of these recent hires suggest about Apple's interest in AR and VR? We conclude with a few words on AppleInsider's report saying Project Titan is at a "crossroads."
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Head of Project Titan Is Leaving Apple, Threading the AAPL Expectations Needle
Today's Above Avalon stories:
- Head of Project Titan Is Leaving Apple
- Threading the AAPL Expectations Needle
We begin today's email by discussing news that Steve Zadesky, head of Apple's electric car team Project Titan, is leaving Apple. We go over what we already know about Project Titan, Zadesky's role with the team up to now, and how to think about the longer-term ramifications from this move. We conclude by discussing what I suspect is happening to Project Titan. We then shift over to Apple earnings and conclude our earnings preview by discussing 2Q16 guidance. Management will have the opportunity to thread the AAPL expectations needle in such a way as to come out ahead regardless of tomorrow's results. We explain this strategy and go over how management can accomplish the task.
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4Q15 China Mobile Subscriber Data, Apple 1Q16 Estimates (ASP, Revenue, Margins), Thursday Q&A
Today's Above Avalon stories:
- 4Q15 China Mobile Subscriber Data
- Apple 1Q16 Estimates (ASP, Revenue and Margins)
- Thursday Q&A
We begin today's email by going over new subscriber data for China Mobile. Since China Mobile is currently Apple's most important business partner, 3G and 4G subscriber data serves as relevant information when looking at iPhone sales estimates and growth prospects in China. We then shift over to additional AAPL earnings preparation (iPhone, iPad and Apple Watch average selling price and margin trends, along with overall revenue estimates). We conclude with Thursday Q&A and the following two questions from members:
- "Should Apple be worried about Facebook Messenger supporting chat bots?"
- "Will we see an AR/VR product from Apple in the near-term?"
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ESPN President Talks Apple, Apple Is Moving Beyond the iPhone (Implications for AAPL)
Today's Above Avalon stories:
- ESPN President Talks Apple
- Apple Is Moving Beyond the iPhone (Implications for AAPL)
We kick off today's email by discussing ESPN President John Skipper's interview with the WSJ. It is clear that Disney wants to change the narrative surrounding ESPN and reading in between the lines, Apple may end up playing a pivotal role in Disney's (and ESPN's) future. We then look at my "Apple Is Moving Beyond the iPhone" post from the perspective of AAPL investors and the implications for AAPL.
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Apple Watch, iPad and Mac Sales Estimates
Today's Above Avalon stories:
- Apple Watch Sales Estimate
- iPad Sales Estimate
- Mac Sales Estimate
Continuing with our Apple earnings preparation, today's email includes my Apple Watch, iPad, and Mac sales estimates for 1Q16. We discuss the major themes and drivers behind my estimates for each product category.
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