Oct 29, at PM. He battle-tested his investment philosophy and strategies as portfolio manager of Tier 1, a market-crushing Motley Fool real-money portfolio that delivered Follow Tier1Investor. Apple's stock price pulled back on Friday.
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Apple is clearly in a much better position to navigate the ongoing headwinds compared to other smartphone players. This means the company should be in a better position to pay more to secure supply, compared to smaller players, without really impacting its profits. This could mean that Apple will see reasonable supply growth despite shortages. Demand should also hold up, as carrier promos for the new devices also appear attractive, as wireless carriers look to sign on customers for their recently built out 5G networks.
Our revenue estimates are in line with consensus estimates, while our EPS estimate is slightly below the consensus. That said, we expect revenues to still see a solid year-over-year increase, driven by strong sales of the iPhone 12, higher demand for iPads and Macs as the remote learning and working trend persists, and continued growth in the services segment.
See our interactive dashboard analysis on Apple Pre-Earnings for more details. The underperformance comes as investors rotated out of pandemic winners such as tech and work from home stocks, to more cyclical and value stocks to play the re-opening. However, if Apple manages to post a reasonably strong earnings beat in Q4, we could see the stock move higher from current levels. We think the semiconductor shortage is only likely to have a transitory impact on Apple, and believe that the company should see further upside from its iPhone franchise, with upgraded models around the corner and also from its fast-growing and highly lucrative services business.
Apple also appears to be getting more Android customers to migrate to its ecosystem, noting that it saw strong double-digit growth in the number of people who switched in Q3. This is significantly positive, as Apple has done a good job locking in users and better monetizing them with pricier upgrades, new products, and services. Apple was an example from this group of concerns about price-to-earnings multiples.
One reason: it sucked so much demand forward investors are rightly concerned posting good earnings comps will get harder. But, Colas said, that might also mean it has the most room left to go up, even in the short-term as a new iPhone launches in the fall and back-to-school boosts spending on consumer tech.
The broader global growth story the entire stock market is tied to isn't a lock. In fact, amid the panic over inflation earlier this year and expectations that the year Treasury yield would go higher, it did the opposite.
The rate story was wrong, but slower economic growth is now higher up on the list of investor concerns for a U. But investors don't have that many great choices globally.
With the situation in China between the government and its leading companies resulting in massive losses in recent weeks, there might be trading opportunities , but emerging markets are no place to be for anything but a trade.
And even if there is potential opportunity in other international plays like European financials, it is going to take time for rates to move in a direction that benefits those stocks. It's U. Still back to the same names.
Looking at sector weightings back to the s and through the s, he says there has never been a time when five companies had more weighting. That was a commodity play. These companies have huge barriers to entry and very high structural returns. Even with those advantages, trying to figure out what their earnings power will be post-pandemic, or at least as the world transitions from the worst of the pandemic to the lingering effects, is the bigger issue for big tech.
For Alphabet — the only among the big tech names to report last week which rose after its earnings — and for Facebook, which reiterated a prior warning of slowing revenue growth , there is the cyclical nature of advertising market to rely on, and that has not changed all that much in recent decades.
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