Opinions
David Newman
Apple Inc
AAPL-Q
COMMENT
May 13, 2016
Stock price when the opinion was issued
You might be interested:
12-month price target of $258. One of his Top Picks last time around. Many horses in the race, and you know they're going to do something on the AI side. May do something with TSLA and Grok. Hold on. If it gets above $250, start writing some calls.
Not in his fund, but in a lot of separately managed accounts.
Is adding to his position, being underweight. He wants to buy more at $190-195, but today's tariff report produced enough negativity (down over 2%) to add shares. Apple can hold its ground in a sideways/down market. There are many questions about tariffs going forward. Today was the first of three tranches of buying.
The CEO is open to M&A activity with $113 billion worth of cash while their $100 billion share buyback has been in autopilot the last few years. Investors like the idea of Apple potentially buying a company to lead in the AI race. The earnings and revenue growth, sales in China and services sales were all good. The big story is the M&A potential.
Usually, they allow others to invest in new technologies, let's them make the mistakes, then Apple enters to capture the entire space, as in music and the phone. He expects the same game plan with AI. This strategy is already baked into the shares. The PE is richly valued. Part of this comes to shifting services to 28% of their overall business, a high-margin business, including their app store. And the app store will be their entry into AI. Over 20 years, the shares have seen good and bad times, including three 50% drops. Recent revenue and earnings growth has been poor, so you need faith for the long run.
She added around $210-215. Their earnings call was excellent. Growth is only 2%, but topline was much better. The iPhone 17 will be a better roll-out than the 16, given the AI presence, and Apple continues to do well in China, especially the Mac. The negativity over Apple is over. Buy dips.
A trade, not a long-term investment. He trimmed it, because he's been buying higher from $206, and will sell when he sees exhaustion in shares. $235 was a temporary ceiling, so he took some profits (sold half his position). He doesn't look at prices, but how the stock reacts to the overall environment. Is purely a trade.
Sat out capex on data centres and infrastructure that's depleting other companies' cash balances. Time will tell whether this was a good move or not. The big capex spend may not have been the most efficient use of capital.
Core company beliefs are free cashflow and earnings. Consistently buys back shares, which enhances return to shareholders. Apple owns the end consumer. Don't count it out yet.
The sales of cell phones obviously starting to decline. You have to look at this company in 2 year increments. Definitely the replacement demand is there for the next generation. The next iteration, iPhone 7, is not expected to be all that spectacular. It’s when we get to the next generation, when they have these OLED devices, flexible plastic. Likes the name and feels it is trading very, very cheaply, and still has high single digit growth.