Should We Worry About Apple?

I purposely jumped onto the Apple earnings call a half hour late this afternoon so as to miss Tim Cook and company tell the world how phenomenal last quarter’s numbers were. Not that they weren’t wonderful, in fact they were, it’s just that that’s not where I find value in listening in on earnings conference calls. What I am interested in is the Q&A. That’s where, through their demands for explanation and clarity, the blokes who get paid the big bucks to know what’s what with a company express their concerns.

The shares were already trading off as, true to form (19 of the past 20 quarterly releases), the company offered up conservative forward guidance. Under promise/over deliver on the next quarter has been Apple’s modus operandi. Somehow I must’ve missed in all of the post announcement bluster the statement that going forward the company is no longer going to report iPhone unit sales, thus I became all ears when an analyst broached the subject, then prefaced a question with “of course you know how this looks”. I thought to myself, damn right that’s how it looks!, Cook and company have concluded that the unit growth investors had grown so accustomed to was no longer in the cards (of course they admitted nothing of the sort) so they made the strategic decision to stop talking about it and focus on the “metrics that count”; top line, bottom line, margin, etc., as well as pound the table on their uber-fast growing, recurring revenue generating, services offerings, and so on. While that was probably the right move, they had to know that it would be met with intense skepticism and, at least initially, a tanking share price.

Yep, Apple shares finished the after hours session off $14.41, or 6.5%. If that sticks in tomorrow’s pre-market, well, we’re talking the largest company on the planet, so, at a minimum, it’ll notably mute any follow through in the broader market that today’s strong finish might’ve otherwise engendered, particularly for the Nasdaq.

So, as that wild man on CNBC suggested (per a headline I noticed), if an Apple miss could stall the rally, should we be worried about the state of the market overall? Well, while Apple is indeed a monster, it’s not the market overall, not nearly. Now, having said that, if it had posted sour apples, and an outlook that suggested the world’s consumers had not the $700+ it takes to stuff the latest iPhone rendition into their spoiled teenagers’ Christmas stockings, that would be a whole other macro concern altogether — and we’d be having an entirely different discussion about the current economic state of affairs. But, clearly, that wasn’t the case, not even close; earnings and revenue were wonderful (truly) and the outlook was anything but recessionish.

Of course that doesn’t mean that the market won’t pause after 3 nicely positive days (if you’ll recall, on 10/29 I was calling for a possible two-day rally; the stretch to three was all about Trump and Xi talking nice on trade this morning over the phone [iPhone ya think??]), it simply means that if it does it won’t be all about Apple.

Back to the no-more-unit-sales-reporting: Does that mean Apple’s best days are behind it? Well, you tell me. What kind of cell phone is responsible for your left ear resting a quarter of an inch closer to your skull than your right? What do your friends and family use? What will you/they upgrade to? All I know is that on any given Saturday anywhere from eight to eighteen early-to-late-20’s aged gentleman descend onto my basketball court and pile their cell phones onto the waiters’ table. I recently took a look, every single one was an iPhone. Yes, tiny sampling, but still!

Lastly, and make no mistake, Apple has much more in the works — like its stealth lab where scientists are developing micro-led technology, which is potentially the next mind-blowing screen phase only the techiest of folks know anything about — that it expects will keep it atop the consumer tech world for many years to come. Not to mention the huge 5G upgrades that’ll occur at some point in the not too distant future (I’d say 2-4 years out).

Simple bottom line for me: Until I catch more than a couple of my basketball pals clinging to Samsung’s latest between games, I’ll be clinging to a share or two of Apple’s stock within my long-term portfolio.


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