Apple Inc (AAPL)

(Market Call Minute.) It has moved up a little in terms of market multiple, but we have repatriation out there with the iPhone 8 and iPhone 10. It has a 93% loyalty rate and there are a billion installed devices.

Today is the launch of their new Iphone. It is possible there is a two-tiered approach happening. It is a very high price for a new phone, the A8+, and the X, which is new. If you set the price point of X at a higher level, there are a couple of things that can happen by splitting that market and fitting it into 2 pools. There is the classic trade of selling Apple once it reaches the product launch. How do they defend the new product. Maybe they are coming up with a strategy where this is early technology with augmented reality. If they can produce the X version at a very high price point by demonstrating the power of the technologies that they have, but ultimately they are probably going to work out a few kinks, needing more powerful processors to get it humming. They can then get that into a mass model, maybe at a later stage. If they can just show any number of different commercial applications, there is a big addressable market. If they can show that it may maintain the multiple, get the product launched at a more reasonable price point, it is possible they can skate along a pretty thin line.

This stock has really done well. It has been a great performer this year, relative to tech and relative to the market. It’s an easy one to look at and think they’ve got so much going for them. They’ve got the services they are building out and trying to get revenue to $50 billion by 2020, so they are diversifying. Has great momentum. He would be cautious. The multiple is getting pretty full. He would hold it into this product launch and then assess it in a day or 2, and see how they do.

The iPhone 10 is quite expensive. Carriers in the US and the UK will no longer subsidize the phones, and it is going to be a really hard sell to spend that kind of money. It doesn’t really address the issue of what is happening in China. They’ve been losing unit volume share there. In China, it is a substantial amount of money to pay for even the revamped iPhone 8, let alone the iPhone 10.

In many cases, this has become the iconic product “you have to have”. If you do, then you are paying a whole lot more digital connectivity than you are if you buy the Android. A fabulous company. However, don’t confuse a good company with a good investment. It’s the law of large numbers that are getting in the way of the company going substantially from here, at least until the next product. The opportunity for them to grow significantly for the next 4-5 years, is going to be a struggle. If you want, continue to hold.

Virtually every year, they announce new products which usually come out around the beginning of October. Historically, this moves higher prior to the announcement. Seasonality ends after they have made the announcement of new products. In this case, the announcement is going to be coming on September 12th. We are getting very close to the end of the seasonal strength. If you own it, you might want to take some money off the table at around September 12.

An amazing world leading company, and even more amazing since Steve Jobs is no longer there. This company meets all his criteria. Great free cash flow and not an overly expensive valuation. However, about half the profits are the iPhone. There is always a risk to that. Does the next product suddenly become the cool thing to own? That would cause this stock to take a big hit. He thinks there is too much risk. It is more of a consumer products company and less of a technology company. Prefers things that have not done very well, but which he thinks will do well.

Any particular FAANG stock you would buy? He would go with this one. It has a below market valuation, trading at about 15.5X earnings. They are on the cusp of releasing the latest edition of their iPhones, which could generate billions of dollars of new sales. They could be a huge beneficiary of tax reform out of Washington, because they have that hoard of cash overseas, which they could repatriate at perhaps a very low cost.

September 12 will be the big announcement. As a user, he had been a little soured, but everything is fine now. He is finding the TV experience good, and is looking forward to the new phone. Wait until September 12.

A very well-run company. A very strong branded franchise, but not as cheap as it used to be. The question is, are they going to be able to continue to innovate and have people continuing to refresh their iPhones. The risk on a hardware company is that at some point there could be new technology or a new provider with something new and different. Because of this, he always prefers service type businesses. This company is now building up their service business.

hey come out with new products in the September/October timeframe and the stock moves up in anticipation. Traders tend to sell on news. We are on the upside and probably okay until they launch their product, then you should take profits.

It had a positive trend. The gap is $155 and that was previous resistance. There is a level of support below the market. If it breaks below that the next level of support is $140 and then $130 so there is potential downside. The headlines regarding the upcoming launch are supporting it. That event is very seasonal in nature. It should dip, selling on the news, in mid-September. Then we have to see what the sales are on this new product.

The challenge is the law of large numbers. How can you continue to grow at the right component where the market has priced earnings growth moving forward? People talk about the extra cash, but if they could do something about the cash they would have done it. A lot of it is invested in tier 1 bank capital, propping up a lot of the banking system. Until there is a next product, they have to find upgrade cycles.

(A Top Pick Sept 15/16. Up 41.26%.) He still likes this. Not expensive, trading at 15X earnings. It all depends over the next several months on how they execute on their new iPhone. Have lots of cash, so there is a lot of opportunity for them to do capital allocation.

Thinks this is going to spend its time at this price until the new iPhone comes out. He thinks this goes to $212. Dividend yield of 1.6%. (Analysts price target is $175.)