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Deal Addict
Feb 26, 2012
1890 posts
307 upvotes
MISSISSAUGA
komodor wrote:
Feb 27th, 2018 10:32 am
AAPL above $180: ATH! Time to collect?
Last earnings call, they said they plan on letting us know how they plan on spending all the overseas cash. I.e more stock buy back & higher dividends.
Newbie
Nov 23, 2018
79 posts
40 upvotes
I have searched the forum and couldn't find the Apple thread, so I am making one right now.

The stock have been falling recently to their 2018 Q1 level. Which means the whole year of gains have went down the drain.

Warren Buffett's Berkshire initiated their Apple position starting from the first quarter of 2016 with 9,811,747 shares at an average price of ~$100.
Then the position increased by 55.20% to 15,227,702 shares at an average price of ~$100 in the 2nd quarter of 2016.
The 3rd quarter of 2016 is quiet. Then followed by a whopping 276.68% to 57,359,652 shares at ~$114 in the 4th quarter of 2016.

Throughout 2017, the position increased by another 188% to 165,333,962 shares with purchase price at ~$140.

And in the first quarter of 2018, the position increased by another 44.90% to 239,567,633 shares with purchase price at ~$170.
The 2nd and 3rd quarter increase was minimal (~5.5%).

Now that the price have fallen back down to the 1st quarter of 2018, Berkshire could be buying up more shares, or they could be selling them from the height of $223 just a few weeks ago.
I have experienced that with their IBM purchases. The stock hit $180+ and Berkshire started selling them and drove the price down to ~$140.

What do you guys think? Berkshire still buying or are they starting to sell?


Apple's problem is that their phones are getting expensive and people aren't upgrading them as often. Although I have heard about this argument back in 2015 and look where we are now.
They also have a huge problem in China with the Chinese boycotting them, and they couldn't get into the India market.

The services they offer are also available elsewhere, and their superior user interface is debatable.


What do you guys think? Buying here or wait for ~$140 as technical suggested?
Newbie
Jul 30, 2018
17 posts
3 upvotes
I would like to know what everyone thinks too. I have been monitoring this daily
Member
Sep 23, 2010
262 posts
48 upvotes
TORONTO
Interesting theory about Buffett maybe selling out.

What I think about is when parents buy a Samsung tablet or phone for their tween and both end up realizing that the functionality does not justify a $1,000 price differential. What is to stop Apple from becoming HP, Compaq, or Dell on the hardware side? Hardware commoditization is inevitable and unless Apple is able to lock-in customers with some kind of iOS restricted Apple Social Media space, I don't know how they replace hardware profits that are looking at a rocky downward path from the mountaintop.

From a strictly value perspective, if I could get in at 110, I'd buy some shares.
Deal Addict
Nov 9, 2013
2619 posts
1358 upvotes
Edmonton, AB
Asheron wrote:
Nov 28th, 2018 10:31 am
Interesting theory about Buffett maybe selling out.

What I think about is when parents buy a Samsung tablet or phone for their tween and both end up realizing that the functionality does not justify a $1,000 price differential. What is to stop Apple from becoming HP, Compaq, or Dell on the hardware side? Hardware commoditization is inevitable and unless Apple is able to lock-in customers with some kind of iOS restricted Apple Social Media space, I don't know how they replace hardware profits that are looking at a rocky downward path from the mountaintop.

From a strictly value perspective, if I could get in at 110, I'd buy some shares.
Apple is two businesses in one - a hardware business which is somewhat commoditized, as you mention above. In this space, the Apple brand is the moat. Hardware revenue is 85% of total revenues with iPhone dominating this segment. Even going back to last year, when investors were talking about essentially the same thing (check the historical posts in the thread), iPhone revenue was up 18% year over year.

The other business segment - services - is a platform business model. Apple is the middle man that connects supply (apps, music, etc) with the demand (consumers / Apple hardware users). Services segment is growing at ~ 20% per year. The more iPhones there are out there the more likely people are to use Apple services. The more they use Apple services the less likely they are to switch to something else, as it creates a switching cost. The more Apple devices you have, the more services you are likely use, and the less likely you are to switch (this is a device network effect). This further feeds into hardware sales, as you are more likely to update your Apple device in the future, rather than say completely uproot all of your Apple devices and switch to Samsung. At some stage even if iPhone revenues stagnate (i.e. people are keeping their older phones for longer) chances are services revenue will continue to grow at a rapid clip.

In my house hold we have 2 iPhones, 2 iPads, 2 iMacs and one vehicle that uses Apple Car Play. My family make use of all of these devices. How likely are we to switch to an Android phone when we have to upgrade our phones? How likely are we to stop using iMacs and switch to a Windows PC? I think for anyone in my situation (I don't have hard stats but I think most iPhone users have at least 1 additional Apple device) is more likely to stick with Apple rather than switch. Apple would have to do something pretty substantial to destroy their brand moat to cause massive outrage and have people willingly drop their devices.

If anything, from an investor point of view the biggest problem with Apple is the quality of their devices - namely the quality is so high that the product lifecycle is low. One of our iMacs is nearly 5 years old yet it works so well we haven't even thought about replacing it. My B-I-L is using a 12 year old iMac that runs exactly like the day he purchased it. Long product life cycles generally equates to low consumption. On the other hand, over the span of decades the reputation for quality and ease of use has been a major contributor to the brand moat.

In terms of valuation, Apple trades at a current market cap of $836 billion, with $237 billion cash still on the balance sheet. If you were to buy the whole company and then pay yourself out the cash, you'd essentially be paying $599 billion for the company, which is about ~$127 / share. Based on $11.88 TTM EPS, you're paying a P/E of about 10. Yes, Trump Tarrifs may create a headache for Apple and lead to reduced revenues but in 5 years who is more likely to be here - Apple or President Trump?


At current prices you get high quality management, growing dividends, share buybacks, a brand moat, and a growing network effect services moat. Personally I think that's a pretty good deal.
Jr. Member
Dec 25, 2015
100 posts
26 upvotes
Canada
These arrows represent institutions selling......
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Deal Addict
Aug 17, 2008
1766 posts
920 upvotes
+1 @treva84 for doing your own analysis and not squawking someone else's opinion.
Deal Fanatic
Jun 17, 2013
5120 posts
1486 upvotes
Montreal
@treva84 I disagree with some of your statements. Especially about quality. I've been saying for awhile Apple is due for some sort of correction. Even with this drop it is pretty high. But it's dropped by roughly 80usd. Down Almost 110 Canadian per stock? The fanboys said it wouldn't happen.

I think it will be Rocky for Apple going forward. They will eventually recover more than likely, but I think you'd need a crystal ball to predict the next moves.

If it dropped to 100 I might even buy in. But at the current prices it is still too high I think. Too much stuff is happening in regards to Apple products and there is a large shift away from people's traditional thinking of what Apple is. This drop we are seeing, is the result of that. It's been a long time coming.
Deal Addict
Nov 9, 2013
2619 posts
1358 upvotes
Edmonton, AB
MrEmoji wrote:
Jan 3rd, 2019 8:28 am
@treva84 I disagree with some of your statements. Especially about quality. I've been saying for awhile Apple is due for some sort of correction. Even with this drop it is pretty high. But it's dropped by roughly 80usd. Down Almost 110 Canadian per stock? The fanboys said it wouldn't happen.

I think it will be Rocky for Apple going forward. They will eventually recover more than likely, but I think you'd need a crystal ball to predict the next moves.

If it dropped to 100 I might even buy in. But at the current prices it is still too high I think. Too much stuff is happening in regards to Apple products and there is a large shift away from people's traditional thinking of what Apple is. This drop we are seeing, is the result of that. It's been a long time coming.
That's fine that you disagree with me, there are many people who think Apple is a valuable brand and makes high quality products (Apple was ranked #1 in the world for most valuable brand in 2018). Nonetheless a difference of opinion is what makes a market. As investors we also don't have to agree on everything or follow the exact same path to make money.

Stocks in general are rocky. Volatility is real and inescapable. Many of the points I made in Nov still stand, even with the recent revenue back track. I agree they will eventually recover and I agree you can't predict the future (not just for Apple, but for any corporation).

Progress is lumpy. Humans and companies both take steps forward and backward and it's generally never a straight line to a long term goal. Personally I think the current narrative ("Apple is a one trick pony going the way of Nokia") is driven by fear and largely irrational, but as mentioned who knows what the future holds?
Deal Addict
Apr 5, 2016
2951 posts
1681 upvotes
Calgary/Vancouver
It's like heaven to me when Apple drops. Time to buy in. Apple is transitioning to software and services. Hardware won't be their main bread and butter in the future. The streaming service is going to launch soon.
Current Fido customer.
Ex Koodo customer.
Deal Fanatic
Feb 9, 2009
7052 posts
4044 upvotes
treva84 wrote:
Jan 3rd, 2019 1:40 pm
Also, note that Apple made $1.8 Billion in app store revenue just over Christmas and New Years, setting a new record. What do you think the margins are on this revenue?
I've read Apple takes 30% and developers/musicians, etc take 70%.

Its not a big part of their business tho. I believe the app store is only 4-5% of their revenues... while that could grow, if hardware goes down, that will have a much bigger effect.
Deal Fanatic
Feb 9, 2009
7052 posts
4044 upvotes
bomber17 wrote:
Jan 3rd, 2019 4:53 pm
It's like heaven to me when Apple drops. Time to buy in. Apple is transitioning to software and services. Hardware won't be their main bread and butter in the future. The streaming service is going to launch soon.
Hardware is still their biggest business... if they can transition and grow software and services that would be nice but its not there yet.
Member
Apr 21, 2010
231 posts
19 upvotes
bomber17 wrote:
Jan 3rd, 2019 4:53 pm
It's like heaven to me when Apple drops. Time to buy in. Apple is transitioning to software and services. Hardware won't be their main bread and butter in the future. The streaming service is going to launch soon.
This doesn't quite add up though ... apple's software ecosystem is closed ... that is unlike other products that run on any and all platforms (e.g. spotify) apple software runs only on apple products; Unless you think they're going to change that, if they don't sell their hardware they have no market for their software ...

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