“Investors are buying in anticipation of Apple’s 10-year anniversary iPhone. The average portfolio manager’s investment timeframe is roughly 8-12 months, which makes AAPL perfectly suitable for an anticipation trade for a major product release cadence (even for the institutional types as well). I recall a Bloomberg report that mentioned retail investors were the primary participants in the mid-year to September rally,” Cho writes. “So, by extension, it’s likely the whales are just waking from their slumber and piling back into the AAPL trade (haven’t we seen this before?)”
“So, now that we have lived through an ‘Apple first quarter,’ where Apple ‘built a wall’ underneath the stock price, and reassured the Republic of Apple investors a better future, we can finally get on with our lives as some good folks ‘fat fingered’ the buy switch this time around,” Cho writes. “I believe Apple’s management was conservative on its outlook. I make this point because of this key comment on the earnings conference call… When Apple mentions that it subtracted 2 million iPhones in the channel (compared to prior year), and yet shipments were up 5% y/y in Q1’17 – it means the next quarter will be significantly better. Q2’17 is not supply constrained, as AAPL’s production capacity still sits at 75 million units from Q1’17 build-up. I’m anticipating demand will likely replicate the iPhone 6 cycle where q/q units were -18% versus -32% q/q for iPhone 6S. Inventory risk is significantly lower, so even if end-consumer demand were to fall short, we’re not as exposed to ‘channel burn.’ Perhaps results will be much better than what analysts are willing to forecast or what Apple will indicate…”
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MacDailyNews Take: As poorly as 2016 was set up for Apple, expectations wise, 2017 is set up at least as well in the opposite direction. Nice low bars are easy to clear. Apple’s next really big test will be the world’s reaction to “iPhone X.” Knock our socks off, Apple!!!