Apple Inc (AAPL)

They report Thursday. The street has been so negative, that Apple will miss (weak iPhone orders, problems with China, competition). But shares have held in. Their report has to be perfect, though.

Shares are fairly or over-valued. He likes Apple. But most of their profits come from hardware, which offer thinner margins than software or cloud margins. Trades at a high 30x-plus PE, which means the earnings stream must grow by 25-30%. It will grow, but by that much?

This year, Apple has given market performance, not bad. But this will be a slow iPhone upgrade path, incremental. Also, how much AI sentiment is baked into the stock. She predicts 5% revenue and earnings growth with a lot of stock buybacks. It's a long-term story of a beloved stock. It will continue to be a market performer and holders won't sell it.

Wait next week for their report to hear about their AI initiatives, which will be available only in English. So, overseas markets will be less excited. It will be a slow, underwhelming iPhone upgrade cycle. He notices that customers are buying the high-margin iPhone Pro Max phone--upgraders prefer the bigger, better phone. At 23x 2025 adjusted EBITDA, Apple is not cheap, above the average of 20x. Again, watch for the AI report.

When the company announce Apple Intelligence, shares surged, based on the expectation of a super-cycle upgrade. But this is not happening. Also, shares are vulnerable at a low-30s PE. But automatically, passive flows go into Apple.

It's overvalued, yes, but it will continue to perform along with the market. The real issue is China, their key market, where Huawei is making good strides. As Apple moves operations to India, he expects repercussions from China.

AAPL should also do pretty well when it reports, because it has some momentum behind it, even though it's behind on the AI side. 

Owns a lot, but has been trimming it, because it's had a nice run into the quarter. She loves it long term. Even when their old iPhone had sluggish sales, company gross and operating margins both expanded as services grew double digits.

He doesn't expect their next quarter to be a blow-out or will push shares a lot higher. He's got a $250 call written against it; he expects a sell-the-news reaction, but longer-term he loves Apple. There's a supercycle coming for 2016-17, driven by AI. They print money and buyback shares. But shares have come too far, too fast.

Yes, it faces some near-term headwinds (i.e. high PE), but their products have always been top-notch, their services offer a revenue bonanza and stimulus in China will encourage sales of product there.

It's hard to argue against Microsoft. They've earned the higher valuation. He himself started using Microsoft Office 365 instead of spending a lot more to replace his company's server, and 365 has worked seamlessly. This is why MSFT is winning cloud business. Yes, MSFT is expensive. Hold if you own it. Apple is also a good business. Them and Androids run 80% of phone software globally; Apple continues to add features which will enhance growth. There's too much hype in AI rejuvenating iPhones. People will upgrades phones anyway.

You can't judge Apple on how many iPhone 16s they sell. Rather, look at the evolution of Apple Intelligence as a software product that will be delivered on their phones over time. They will succeed. But you have to wait. Meanwhile, Apple is aggressively buying back shares, something they always do as you wait.

Google is growing 15% quarter-to-quarter vs. Apple not growing, and a 20x PE vs. 30X. Apple is overpriced.

They aggressively buy back shares as they continue to innovate. The buyback offers stability in the stock as the company innovates and who knows what they will come up with? Don't sell this, but hold. It will continue to rise for the next 10 months.

Apple slumped today on reports of sluggish new iPhone orders from analysts from JP Morgan and Bank of America, but this always happens. Nothing new. Sellers are missing on the next move higher. Sellers forget Apple's consistent service revenues.