Analyst: Apple is a ‘powder keg’ waiting to explode to the upside

“Potentially weak iPhone 7 sales are clouding the market’s judgment on Apple shares, Cowen analysts say,” Fred Imbert reports for CNBC.

“In a late Monday note, Cowen analysts said, ‘while iPhone 7 still looks about flat [with] iPhone 6S and macro risk is clear, our new installed base analysis suggests a ‘powder keg’ is forming,'” Imbert reports. “The note recommended that investors buy the stock.”

Imbert reports, “Cowan points out that more people will be walking around with iPhones that are at least two years old, and they are the group most likely to foot the bill for an iPhone 7.”

Read more in the full article here.

MacDailyNews Take: Hey, let’s keep expectations low, shall we? There’s no need to get all hopped up right now!

[Thanks to MacDailyNews Reader “Dan K.” for the heads up.]

11 Comments

  1. Stock Market 101: Wall Street doesn’t control, decide or “set” the price of a stock. Nor does it “reflect” the state of the economy, let alone the state of any company represented.
    For example, the success of Apple (or lack thereof) has no direct effect on the price of Apple’s stock. Rather, when traders are (in general) more interested in selling it than buying it, the price of a stock declines. The opposite is also true.
    If you “Play” the stock market (trade) you quickly discover the only way to make money on a rising stock is to be among the first to buy it (when it is still low). And the only way to avoid losing money on a declining stock is to be among the first to sell it (when it is still high). The net result, folks, is traders don’t watch the company behind the stock. They are watching each other. If a few start selling a stock, the rest rush to sell it, too. If they hear some news (or some analyst’s comments) that they think will cause other traders to react, they will try to be among the first to so react. Thus they become a self-fulfilling prophecy.
    Investors, on the other hand, are interested in the company. They buy and hold for the long term. For them, it’s a savings account with (hopefully) a better return. But because of this, Investors don’t influence price changes in any way.
    Wall Street is not smart, stupid or clueless. People who cry, “They just don’t understand Apple,” don’t understand the market. It’s a mob-mentality, pure & simple. They don’t care about you, me or Apple. They only care about each other and any “skill” they may have is simply the ability to predict what other traders might do before they do it.

    In other words, “traders” are like sheep… If a few suddenly start to run, they all run and in the same direction. Only afterward will analysts attempt to figure out why.
    What’s the solution for Apple? Minimize their reliance/exposure to traders. So, you begin share buy-backs and bond issues – with an eye toward reducing your risk (from traders) or perhaps one day eliminating it! (Get out of the stock market and go private. All they’d really need is lots of money to fund themselves! Hmmm.)
    I’ll get off my soap-box, now.

    1. Thank you for that excellent description of the stock market. Also important to keep in mind is that because of what you describe, the stock market is very easily manipulated.

    2. Good post Billy. Most reading these blogs and making comments relating to Apple’s stock price just don’t seem to understand the mechanism that determines the equilibrium price point of a stock at any given moment in time. In a vein similar to how I interpreted some of what you said and based on my direct experience trading/market making in equities, they just don’t understand trading and investing are two very different things. The forced intersection of them in their minds leads to some very ignorant comments coming from readers of tech blogs.

    3. Trading has always been about the trade, not really the instrument or the object of the trade. At least on the pro side. It’s not going away. News often is just manufactured or slanted to explain a price move to the retail investor and general market at large. Meanwhile all that ever matters is the price move for the pros to make money.

  2. Nooo! We need the AAPL to stay as low as possible so that we can buy lots more of it when the dividend is payed again. So no we need only bad news lined up here! xD

  3. People let’s keep expectations low til after the next iPhone is announced. I’m tired of watching apple drop double digits after every product announcement. One thing is for certain though:

    If you buy AAPL below $100 you will be making money in the long run.

  4. The term ‘powder keg’ means; “a dangerous or volatile situation.”
    It seems that neither AI’s Neil Hughes or the wazzok that made the original gaffe (Timothy Arcuri of Cowen and Co.) are aware that fact.

    Poor English like this sticks out like a sore throat.

    1. My interpretation of the use of the phrase “Powder Keg” in the context of AAPL was that the explosion would see two things happen:

      1. APPL would “leapfrog” to the upside (famous description used by Steve Jobs to describe how the iPhone was going to diss the “so called” Smartphones in 2007).
      2. The “Powder Keg” is the effect on Day Traders and Hedge Funds that would be caught on the wrong side and implode as a result (I now call this crowd the “Brexit sheep”)

      Gonna be kind of fun to watch, because I agree that this will happen; all long term APPL investors will be relaxed, enjoying their summer breaks.

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