“China’s heavily reported economic gyrations related to its stock sell-off and devaluing of its currency do not matter to Apple’s continued growth,” David Thall writes for Fortune.
“Simply put, it’s based on a false premise,” Thall writes. “The negative narration that has taken hold of Wall Street’s sentiment toward Apple essentially says that Apple’s future growth depends on increasing iPhone sales in China. And so when China’s economy has problems so will iPhone sales, and Apple’s revenue growth will decrease.”
“Let’s look at the facts, shall we?” Thall writes. “Year-over-year first-quarter iPhone sales growth has always gone in one direction, and one direction only: up… At the July 21st Q3 earning results, Apple reported year-over-year iPhone sales in China had increased 112%… Every Apple store they open immediately increases revenue and profits… Even if iPhone sales in China got whacked by half, Apple would still be growing sales in China by over 50% YoY… Apple is still a growth company. That’s a fact, not an opinion.”
Much more in the full article here.
MacDailyNews Take: The Apple rollercoaster is quite the ride! Even better, for the rational, it can be very profitable, too.
SEE ALSO:
CEO Tim Cook to Jim Cramer: Apple is seeing strong growth in China through July, August – August 24, 2015
Apple crashes under $100 in pre-market trading as tech stocks set up for dismal day – August 24, 2015
There is also an upside for Apple with the Chinese devaluing the Renminbi. The dollar cost for assembling iPhones and other devices will decrease and the same will apply to many components too.
On one hand, sales within China may decrease by an unknown amount, but on the other hand, manufacturing costs for all devices will definitely reduce by a known amount.
It’s interesting to observe that the analysts choose to dwell on the significance of the unknown disadvantageous factor more than the known, positive factor.
The profit margin is so large for Apple’s products that I’d be more concerned about reducing the number of people who can buy them. Slightly lowering the cost of production probably helps very little.
It’s the dilemma many U.S. businesses are facing: pay your workers little so you make more profits, but then the middle class evaporates and there’s few people left who can buy even your slightly-cheaper products. It’s a type of the “tragedy of the commons” problem: it would be better for almost all businesses if wages were higher, but companies are afraid that if they raise wages first they will be at a disadvantage for a while.
We don’t know if sales in China will reduce, or by how much, but nobody is seriously expecting Apple’s sales to China to be significantly reduced and Tim’s recent message to Cramer states that Chinese sales are still excellent.
On the other hand, the cheaper cost of assembly applies to all iPhones, iPads and most other Apple products, irrespective of where they are sold. A small price reduction right across the board is a very big saving.
Reduced sales to China would only be an issue if those iPhones that would have been sold in China are not sold elsewhere. I’m not aware of any reports that unsold iPhones are piling up in warehouses, so it looks as though they’re selling as many as they are making.
Deja Vu
Here we go again!! As in 2008, stay don’t Sell yet Buy more now !!!
2016 will be Profitable 🙂
Go AAPL !!!!
I used to think you were crazy but your predictions about AAPL have always been right on the mark. I hope you are rich and sipping a drink out of a coconut on Bora Bora.
I’ll bet most here have never had the pleasure of drinking fresh coconut milk from a coconut. It is truly golden nectar – nothing like you might pick up at a high end supermarket.
May Apple shares recommence their climb into the stratosphere so that we may all experience the golden nectar.
See my Cramer comment about Apple in the previous “Apple crashes” post.
Analyst Brian White was only off by $100 a share. WTF! As Jimmy Cliff sang, “The harder they come, the harder they fall, one and all.”
Unless someone bought Apple on margin, they sure would be stupid to sell Apple at this point. I can’t say if Apple is going up any time soon, but it’s bound to go up at some point, if not this year, then next year. There’s no way it can stay this low for all eternity. I’m fortunate to be getting my Apple dividends and the share price drop isn’t hurting that.
I wouldn’t be urging anyone to sell the farm to buy Apple because I don’t have any trust in Wall Street. Even if Apple is making money (which I know it is), the analysts will still urge investors to buy any other stock except Apple because they’re so spooked over China. Every quarter for Apple shareholders will be the same thing. Worries over the next quarter.
http://www.cnbc.com/2015/08/24/apples-cook-on-china-to-cramer-seeing-strong-growth-in-china-through-july-august.html
Tim Cook’s statement this morning…….AAPL going HIGHER!!
Thall either can’t do math… Can’t read.. is an in-denial deaf person, OR is one of the best employees Rupert Murdoch has got. Given any one of these four scenarios, the whole article IS A LIE! The man is fundamentally an idiot.