Linked List: January 27, 2015

Yes, That Was Quite an ‘I Told You So’ Moment 

One more serving of AAPL stock price claim chowder. From a March 2013 piece for MarketWatch by Quentin Fottrell:

In 2010, when Apple stock was trading at $199, Edward Zabitsky, CEO of ACI Research in Toronto, was the only analyst on Wall Street to rate the stock a “sell.” Over the next two years, shares went on a tear, peaking at just over $705 and making Apple the world’s largest company as measured by stock-market value. Today, shares have fallen by more than a third from that high. Through it all, Zabitsky has stuck to his bearish call; and while he has since been joined by a couple other pros who have sell ratings on the stock, including Adnaan Ahmad at Berenberg Bank and Per Lindberg at ABG Sundal Collier, Zabitsky retains the distinction, and in some circles the notoriety, of having gotten there first.

We spoke to Zabitsky about his wins, mistakes and what he thinks Apple AAPL should do next.

You have a $270 price target. Is that still too pessimistic?

Zabitsky: It’s formally a one-year target, but in 3 to 6 months we’re going to see that play out. The reason I started to make noise was the rise of Samsung. If you say that now, it’s not challenged.

In 2013 pre-stock-split numbers, Apple’s stock is today trading at over $800.

Sometimes the Herd Is Correct 

James Stewart, writing for the NYT in Feb 2013, presuming that Apple’s late 2012 stock drop was inevitable and correct:

By November, with Apple stock in the midst of a precipitous decline, they were still bullish. Fifty of 57 analysts rated it a buy or strong buy; only two rated it a sell. Apple shares continued their plunge, and this week were trading at just over $450, down 36 percent from their peak.

How could professional analysts have gotten it so wrong?

As I type this, AAPL shares are trading at $115 after hours. Adjusted for last year’s 7-for-1 stock split, that’s $805/share. So those 2012 bulls look pretty smart.

It may be no coincidence that the only analyst who even came close to calling the peak in Apple’s stock runs his own firm and is compensated based on the accuracy of his calls. Carlo R. Besenius, founder and chief executive of Creative Global Investments, downgraded Apple to sell last Oct. 3, with shares trading at $685. In December, he lowered his price target to $420, and this week he told me he may drop it even further, to $320. […]

Mr. Besenius based his recommendation on technical factors — as Apple hit $700, its upward momentum and trading volume were slowing — as well as more fundamental concerns about product quality and innovation, as well as growing competition from rivals like Samsung. And there were more subjective factors. Mr. Besenius said he became uncomfortable with what he deemed Apple’s arrogance. “I loved Steve Jobs,” he said. “He built a great company. But he was one of the most arrogant C.E.O.’s I’ve ever met. The way he introduced new products was one big display of arrogance. He ridiculed Microsoft as ‘Micro who?’ That’s a good reason to be cautious. A little humility is a good thing.”

Brilliant analysis there. Steve Jobs was too arrogant in product introductions so the stock deserved to fall.

‘I Give Apple a Year Until They Cave’ 

Christopher Dawson, writing for ZDNet back in 2011, on the lack of Flash Player support in iOS:

Again, as Adobe representatives put it,

Video in particular is driving demand for the plugin, as people browsing the Web on their mobile phones “want to have access to the sort of content they’re used to being able to access,” says Adobe’s Anup Murarka, Director of Product Marketing

So when will Apple finally jump on the train? If Flash isn’t a universal standard, it’s about as close as you can get for web multimedia. […]

I give Apple a year until they cave. Android tablets will just be too cool and too useful for both entertainment and enterprise applications if they don’t.

YouTube announcing today that they’re now defaulting to HTML5 video feels like a good time to cash this one in.

YouTube Now Defaults to HTML5 Video 

Richard Leider, YouTube engineering manager:

Four years ago, we wrote about YouTube’s early support for the HTML5 <video> tag and how it performed compared to Flash. At the time, there were limitations that held it back from becoming our preferred platform for video delivery. Most critically, HTML5 lacked support for Adaptive Bitrate (ABR) that lets us show you more videos with less buffering.

Over the last four years, we’ve worked with browser vendors and the broader community to close those gaps, and now, YouTube uses HTML5 <video> by default in Chrome, IE 11, Safari 8 and in beta versions of Firefox.

Progress.

2013 iPhone Claim Chowder 

Remember back in 2013, when the conventional wisdom held that Apple needed to compete with Samsung on price, and then when the iPhone 5C was announced at $549 (off-contract) experts called it a mistake? Good times:

‘The bottom line for apple is that until they price match to compete with Samsung they are going to continue to fall in popularity,’ said George Charles from Vouchercodespro.

‘Consumers vote with their feet and you can have an all-singing-all-dancing, cook you dinner and say sweet things as you fall asleep phone, but punters will always, always go for the cheapest option.’

Apple today announced record-breaking unit sales and a higher average selling price for iPhones in the just-complete first fiscal quarter of 2015.

Six Colors on Apple’s Quarterly Results 

In a blowout quarter like this one, just about all the numbers look good. The one I’ll call your attention to is average selling price for iPhone, which is up significantly, despite the overall market trend being down, because the price to make a “good enough” smartphone for the low end of the market keeps dropping.

I see two clear reasons for iPhone ASP going up:

  1. The iPhone 6 Plus, which is in heavy demand and has a $100 higher price than the regular iPhone 6 and all previous new iPhones.

  2. The 16/64/128 GB storage tiering, which might be pushing people who would have bought a 32 GB iPhone 6 if it existed to spend the extra $100 for the mid-tier 64 GB model.

I still think selling 16 GB iPhones today is a mistake in the long-term, and from a branding perspective, but Apple might be laughing all the way to the bank on this.

See Also: Six Colors’s transcript of Tim Cook’s prepared remarks and Q&A session on the analyst conference call. He says they’re on pace to begin shipping Apple Watch in April.

Apple Reports Record First Quarter Results 

Apple:

Apple today announced financial results for its fiscal 2015 first quarter ended December 27, 2014. The Company posted record quarterly revenue of $74.6 billion and record quarterly net profit of $18 billion, or $3.06 per diluted share. These results compare to revenue of $57.6 billion and net profit of $13.1 billion, or $2.07 per diluted share, in the year-ago quarter.

Not bad.

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