Hello everyone. In today's update, we will tackle additional questions that came in from members over break. The first topic is related to Nikkei Asia's article on Apple product demand. We will then turn to AAPL volatility. The discussion includes a broader examination of Apple’s current valuation metrics based on both earnings and free cash flow. We also go over various stress test scenarios involving different EPS and forward P/E multiples.

Let's jump right in.

Nikkei Asia Stokes Apple Demand Fears

In an article published on January 2nd, here's Nikkei Asia:

“China's tech supply chain is heading into the new year facing the twin challenges of slumping demand and staffing chaos caused by Beijing's abrupt U-turn on COVID controls.

In a sign of the gloomy outlook for consumer electronics, Apple has notified several suppliers to build fewer components for AirPods, the Apple Watch and MacBooks for the first quarter, citing weakening demand, according to Nikkei Asia's supply chain checks with several component suppliers.

‘Apple has alerted us to lower orders for almost all product lines actually since the quarter ending December, partly because the demand is not that strong,’ a manager at an Apple supplier told Nikkei Asia. ‘The supply chain in China is still trying to cope with the latest abrupt policy turns, which brought a shortage of laborers because of the sharp COVID surges.’”

This article managed to travel quite far last week even though Wall Street was only starting to return to the office following the December break.

My initial impression reading the article was that there may have been something lost in translation. Having an unnamed source claim “demand [for all Apple product lines] is not that strong” isn’t exactly a compelling or convincing rumor.

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