Posts Tagged ‘Apple’
Earnings estimates for Microsoft Corporation (MSFT) are going up and the stock, which recently accelerated, finally looks like it has broken out of a 13-year consolidation.
Microsoft has been an income play for quite a while. Currently yielding three percent, the company’s forward price-to-earnings ratio is around 12.5 and is not dissimilar from many other blue chips.
Then there’s Intel Corporation (INTC). This company has been struggling for capital gains, but it’s yielding 3.6% and isn’t expensively priced.
What these technology companies illustrate so well is the business cycle, both in terms of operational growth and also as equity securities. Getting the cycle correct (the right place/stock at the right time) is the toughest thing for any investor or businessperson.
Regarding stocks, both Microsoft and Intel’s long-term charts clearly show how extremely overpriced their share prices were during the bull market of the 90s. Intel’s long-term stock chart is featured below:
Chart courtesy of www.StockCharts.com
The benefit of the very long term is that it provides a normalized but still decent rate of return with these kinds of stocks. No enterprise or investor can escape the business cycle, whether it is industry-specific, a local reality, or the general economy.
Railroad stocks have been super hot over the last several years, but for long periods of time, they were not. The solid dividend-payers that they are, you’d be hard-pressed to find Union Pacific Corporation (UNP) competing with Apple Inc. (AAPL) or Google Inc. (GOOG) for headlines.
I feel that stocks have broken out of their previous consolidation phase in favor of a new long-term cycle. But while last year’s stunning … Read More
Currently, Apple Inc. (NASDAQ/AAPL) is largely considered a commodity stock that needs to excite investors with new innovations and growth in order to propel its long-term growth.
The stock has been stuck in a relatively tight range between $500.00 and $560.00 since late October 2013, as Apple looks for stronger growth opportunities and convinces the stock market that it can expand its business and not just depend on “iPhone” and “iPad” sales.
To this point, the company took a positive step forward after announcing it was launching its “CarPlay” solution for the auto sector that aims at making the iPhone a powerful add-on in the car. The solution will allow drivers with iPhones access to multiple services while driving. The solution will be initially launched with high-end automakers, such as Ferrari, Mercedes-Benz, and Volvo, but it will eventually be available across a much wider auto segment.
The introduction of CarPlay is critical, as it will expand the use of the iPhone for users and also help to drive sales. The car solution comes at a critical time in the recent aftermath of BlackBerry Limited’s (NASDAQ/BBRY) announcement that it would be replacing Microsoft Corporation (NASDAQ/MSFT) as the information solution in cars made by Ford Motor Company (NYSE/F). This is a key area of growth, and Apple’s innovation is the kind of development investors want to see.
While Apple continues to be the market leader in the premium smartphone and tablet market around the world, the company also needs to deliver alternative avenues of growth. Of course, Apple needs to grow its market share in the key emerging markets; so far, this … Read More
Apple sold a whopping record 51 million “iPhones” and 26 million “iPads” in its fiscal first quarter, which is great stuff at first glance. So why did investors scramble for the exits?
The problem is that the market expectations placed on Apple are enormous. But that’s what happens when you’re the top seller of smartphones in the United States. Wall Street wanted to see the company sell 55 million iPhones, so its four-million-unit miss was a disappointment.
What’s failing the company is its reluctance to sell a really cheap iPhone that caters to the emerging markets, which is, in reality, where much of the growth is for smartphones.
Apple has a deal with China Mobile Limited (NYSE/CHL) to mass market its phones in the massive Chinese market, where there are more than 750 million users. (Read “Apple Finally Takes Step That Will Take the Company to the Next Level.”) But while the deal was only recently formalized, the early indications are that sales of the iPhone in China aren’t all that great.
The problem is (as I have discussed on numerous occasions) Apple’s reluctance to sell a cheap iPhone. Price points are critical when selling products in the emerging markets, so the lack of a cheaper offering from the company will hurt its sales in China. China is not like America, Japan, or Europe as far as available discretionary income. When the per-capita income in China hovers around US$6,500 or so annually and Apple wants to charge $600.00-plus for an “iPhone 5S,” there’s clearly a disconnect.
CEO Tim Cook doesn’t seem to get it or it’s simply an … Read More
While there continues to be a widening of the income gap between the rich and the poor in the world, companies like MasterCard Incorporated (NYSE/MA) continue to make a lot of money from every transaction made using their credit cards. Recently, MasterCard announced it would be splitting its shares on a 10-for-one basis while also increasing its quarterly dividend by 83%. MasterCard is also looking to buy back up to $3.5 billion of its Class A common stock.
The move by MasterCard makes sense and helps to boost the market value of the company for its current shareholders and future investors. The stock split will allow for trading liquidity and for smaller-scale investors and traders to participate in the stock, given that the company’s shares reached a record high at over $800.00 on Wednesday.
Chart courtesy of www.StockCharts.com
In addition, the increase in dividends will attract income investors and the buyback will help to add some support and give the stock market some confidence in the stock as an investment opportunity.
What MasterCard has done is what other high-priced companies with high cash levels should also be doing.
Stock splits make sense for high-priced stocks as a way to increase liquidity to more investors and inevitably help to drive up the share price and create an investment opportunity.
The following are three higher-priced stocks that I feel could eventually see a stock split and offer an investment opportunity:
Apple Inc. (NASDAQ/AAPL) is under pressure from investor Carl Icahn to increase its share buyback program in a strategy to distribute some of its massive $147 billion of cash to shareholders. The … Read More
Just last Thursday, Apple Inc. (NASDAQ/AAPL) revealed its long-awaited and worst-kept secret when the maker of the “iPhone” and “iPad” reported it would align with China Mobile Limited (NYSE/CHL) to push its products into China, a very lucrative market for the smartphone giant.
The deal, while somewhat newsworthy, was not a bug surprise to the markets, as evidenced by the stock slightly edging upward by a little more than three percent on the news.
Now, you may be wondering why the stock market simply shrugged at the news, given that China Mobile is the biggest mobile deliverer in the world, with about 730 million subscribers.
Obviously, that’s a huge number of potential buyers and added revenue channels for Apple. But the deal really doesn’t mean Apple will be going back to its previous high above $700.00, reached in September 2012. The reality is that Apple needs to be able to find Chinese buyers for its somewhat expensive (or overpriced) smartphones and tablets.
The target market is there, and it’s probably closer to about 300 million people or so, based on the number of middle-class consumers in China. The reason I see its potential market base being much smaller than China Mobile’s subscriber base is simply due to the company’s product pricing. I really don’t think some shopkeeper or farmer in rural China is going to dole out a major portion of their annual wages to snap up a snazzy “iPhone 5C” or “5S.” This will be the main dilemma Apple will face in this market.
The problem at the very root of this dilemma is that Apple will need to … Read More
Whether the lofty expectations pan out or not, believe it or not, there is more than one investment opportunity you can take advantage of to make money on the success of The Hunger Games series and other major Hollywood blockbusters.
The company behind the production of The Hunger Games is Lions Gate Entertainment Corp. (NYSE/LGF), which is already up over 100% from its 52-week low and could head higher if the film sets new records, meaning this production company may be an investment opportunity. In addition to films, Lions Gate also produces 28 television shows over 20 networks.
Chart courtesy of www.StockCharts.com
Fundamentally, Lions Gate has delivered decent results, beating the Thomson Financial consensus earnings-per-share (EPS) estimate in each of the past four quarters, making it a possible investment opportunity. Revenues are estimated to grow 6.4% to $2.93 billion in fiscal 2015 ending in March. Fiscal earnings are estimated to rise 50% to $1.54 per diluted share in fiscal 2015. While the best gains are behind the stock for the time, longer-term, I see Lions Gate as a good investment opportunity.
A second investment opportunity on the success of The Hunger Games series and other blockbusters is IMAX Corporation (NYSE/IMAX). IMAX offers venues in which you can see the film on a specialized 12,000-watt power-packed screen that could be as high as 98 feet. In general, every major blockbuster film is shown on IMAX screens around the world…. Read More
As I’ve written in these pages before, Apple Inc. (NASDAQ/AAPL) needs to increase its brand in the Chinese economy in order to really entice investors and jumpstart the stock. (Read “Update: Apple’s Attempts to Enter Emerging Markets a Blunder?”)
The reason is simple: China is the biggest mobile phone market in the world with over one billion users, which is more than three times the size of the United States market.
Apple is rumored to have a major distribution deal in place with China Mobile Limited (NYSE/CHL), the largest cell phone operator in the country with a market cap of $210 billion. The company services about 755 million customers as of the end of September, which is huge. (Source: China Mobile Limited web site, last accessed November 5, 2013.)
In my view, Apple could see its business accelerate if a deal is finally announced and, of course, if Apple can execute in the Chinese economy via much cheaper smartphones than the “iPhone 5C.”
For China Mobile, the addition of Apple could also generate new sales and higher margins, so it’s a win-win situation for both companies. The move towards 4G networks will also help to drive growth.
And with the rise in income levels in the cities and rural areas, we could see a major push to buy higher-end smartphones, such as those made by Apple.
China Mobile is the top mobile play in the Chinese economy. The company is bigger than Verizon Communications Inc. (NYSE/VZ) and AT&T Inc. (NYSE/T). China Mobile also owns Luxembourg-based Millicom International Cellular S.A. (OTC/MICCF), a telecom operator with mobile operations in 13 … Read More
While BlackBerry Limited (NASDAQ/BBRY) sends an open letter to investors and the smartphone market begging for its understanding, Apple, Inc. (NASDAQ/AAPL) continues to charge ahead, looking at various ways to expand its sales, especially in the global market.
Even with signs of the recently launched “iPhone 5C” not faring well, the company continues to strategize concerning its direction. (Source: Ellyatt, H., “Apple cuts 5c orders on weak demand: Report,” CNBC, October 16, 2013.) The higher-end metal-encased “iPhone 5S” is performing exceptionally well. (Read “Update: Apple’s Attempts to Enter Emerging Markets a Blunder?”
In the case of Apple, the soft demand for the 5C is not a big deal at this point, but the company will need to find a way to break into the emerging markets. The strategy of producing what is perceived to be a lower-cost version of the 5S (but with a cheaper, plastic look and slower processor) appears to be failing. The issue is that Apple’s rivals have a deep-rooted presence in the emerging markets, with Samsung Electronics Co. Ltd., Nokia Corporation (NYSE/NOK), LG Electronics Inc., HTC Corporation, and others offering smartphones for essentially zero dollars.
In order to excel, Apple needs the emerging markets, especially a deal with China Mobile Limited (NYSE/CHL), which appears to be in the works, as the iPhone can now be used on China Mobile’s 4G network. If a deal is done, Apple will have access to more than 650 million customers who would likely be extremely happy to move over to the iPhone. Of course, the price has to be right. There is speculation the date of an … Read More
When the next-generation Apple Inc. (NASDAQ/AAPL) “iPhone 5S” and “iPhone 5C” were launched in mid-September, the company reported record sales over its first weekend of selling.
But there was a problem: the majority of the sales were for the iPhone 5S, while sales of the iPhone 5C lagged. The problem was the cost of the plastic-cased 5C; at around $100.00 with a two-year contract, the “cheaper” version simply cost too much, especially for the emerging markets like China, where Apple had high hopes for the iPhone 5C.
Obviously, the initial demand for the iPhone 5C over the first few weeks appears to be disappointing. Best Buy Co., Inc. (NYSE/BBY) announced it was cutting the price of the 5C to $50.00 on a two-year contract between October 3 and October 7.
But while the discount was only for four days, you kind of wonder if there will be a more permanent price cut ordered by Apple should sales lag.
The iPhone 5S is selling very well, but for Apple to really break out of its shell, the company will need to cut the cost of the iPhone 5C in order to get a foothold in the emerging markets.
Without a major price cut, it will not be easy for Apple to break into a mobile market that focuses on attractively priced smartphones—a market that includes established rivals, such as Nokia Corporation (NYSE/NOK), whose mobile assets are to be acquired by Microsoft Corporation (NASDAQ/MSFT), Samsung Electronics Company Ltd., LG Corporation, and major upstarts, such as Huawei Technologies Co. Ltd. and ZTE Corporation, based out of China.
For Apple, the massive mobile market … Read More
The news broke out right after I wrote the first draft of this commentary on BlackBerry Limited (NASDAQ/BBRY): a surprise takeover bid emerged from Fairfax Financial Holdings Ltd. (TSX/FFH) offering $9.00 per share, or $4.7 billion, for the struggling smartphone maker.
It appears to be the correct timing for BlackBerry. (See “Research In Motion Had Better Be Right.”) And for BlackBerry CEO Thorsten Gerhard Heins, he could get a $20.0-million send-off for selling the company.
This was the situation prior to the takeover announcement to take BlackBerry private:
BlackBerry reported a massive fiscal second-quarter loss of $1.0 billion, highlighted by the write-off of about $930–$960 million of its inventory. The company also announced plans to axe 4,500 jobs, or 40% of its workforce, as my stock analysis indicates.
The inventory adjustment is frightening, based on my stock analysis. It implies the company cannot sell its “Z10” and “Q5/Q10” devices. Again, this isn’t a surprise, as my stock analysis notes that BlackBerry has consistently screwed up in its execution over the past few years to the point that it allowed rivals, such as Apple Inc. (NASDAQ/AAPL) and Samsung Electronics Co. Ltd., to bulldoze over BlackBerry, leaving just a pile of scraps.
BlackBerry said it sold about 3.7 million smartphones in the quarter. Honestly, that number really stinks, based on my stock analysis, especially considering Apple announced it had sold nine million units of its new ”iPhone 5S” and “iPhone 5C” in the first weekend.
The numbers are telling, but this has been the issue for BlackBerry for years, according to my stock analysis. In a never-ending battle to regain … Read More
There was so much anticipation and hype for new, cheaper “iPhones” to be introduced by Apple Inc. (NASDAQ/AAPL) on September 10—but something went astray. It was akin to waiting with bated breath for a big moment to happen and then nothing materializes.
Prior to the announcement, cheap iPhones were going to take over in the emerging markets and China, where consumers just don’t have the means to pay that much for a smartphone.
But since the announcement launching the next generation iPhone, the share price of Apple has retrenched over 10%.
Here’s the problem: Everything seems great for the new “iPhone 5S,” which is much more powerful and twice as fast with the 64-bit “A7” chip. The 5S may be a better iPhone, yes, but the lack of selling has to do with the “iPhone 5C.”
With the so-called “budget-friendly” 5C priced at $99.00 with a contract, the price tag is still way too steep for lower-income users in the emerging markets, which is where Apple needs to excel. Who cares about America?—Apple is already the boss of smartphones here.
However, the $100.00 lower cost of the plastic-bodied iPhone 5C could still cannibalize the iPhone 5S sales in the United States and other industrialized countries.
For the company, the failure to offer a cheaper iPhone 5C, say for under $50.00, was not smart. Apple is clearly going after margins, as has always been the case. In this instance, though, this is clearly not the right strategy.
Apple should have come out with a super-cheap smartphone to compete with Samsung Electronics Co. Ltd., Nokia Corporation (NYSE/NOK), HTC Corporation, and others in … Read More
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