- 03 апреля 2018, 01:08
- Zacks Investment Research
President Trump’s stand on China has had technology companies on their toes, with all the CEOs going out of their ways to talk about the benefits of open markets, diversity and so forth. That’s had an unremarkable effect on tech stocks so far. In Apple’s case, which assembles its devices in China, investors have been leery of the government’s actions and their effect on Apple AAPL, creating some selling pressure-
Apple Gets Back in the Education Game
Education was a focus area for former CEO Steve Jobs, but it has taken a back seat in recent years as the need to drive profits took over in the absence of new “wow” products coming out of the company. But education (K-12) is an extremely important vertical because that’s when habits are formed. It does however yield lower margins because schools just can’t afford premium devices of the kind that Apple makes.
As a result, the last few years have seen Alphabet’s GOOGL Chromebooks and other devices corner nearly two-thirds of the market with Microsoft MSFT PCs also taking a 22% share. Apple on the other hand has dropped to the third position with a 17% share, according to Bloomberg. Apple’s renewed focus on affordability with its latest set of devices and software should help the company regain some share. Read more: Apple Refocuses on EdTech, Brings Feature-Rich iPad, Apps
Analysts Slash iPhone Estimates
Rosenblatt Securities' Jun Zhang lowered his iPhone X estimates saying that the product was ending its life cycle with no signs of demand picking up. Accordingly, his production forecast for the current quarter is now 1-1.5 million units a month, sown from the prior estimate of 2.5 million units.
Rod Hall of Goldman Sachs lowered his total iPhone sales estimates from 54.7 million units to 53 million units for the March quarter and from 43.5 million to 40.3 million units for the June quarter. His full-year revenue estimate is also down 2.4% to $256.6 billion with the 2019 estimate down 2.7% to $272.5 billion.
The analyst sees Apple having to burn down channel inventory before the next iteration of its phone launches this year. Zhang has a Buy rating and $180 price target on AAPL shares while Hall has a Neutral rating on the shares and $159 price target that was lowered from $161.
Qualcomm Opposes Case Shift To UK
Apple has lodged 15 cases against Qualcomm QCOM across the world for what it calls illegal charges for its standard essential patents. In the UK, the proceedings are between the UK subsidiaries of the two companies over five patents. Apple claims that FRAND terms aren’t justified because it requires payment of a percentage of the end product so more expensive device makers end up paying more.
Moreover, Qualcomm’s practice of bundling essential and non-essential patents makes it hard to determine what it’s charging for the essential patents. Now, Qualcomm says that Apple shouldn’t be filing cases all over the world since it is a California-based company and proceedings are already ongoing in that jurisdiction.
Apple says such a claim falls flat since Qualcomm has also been filing cases against it all over the world. Moreover, it’s only natural that breaching competition and other laws in different jurisdictions would bring separate cases in those jurisdictions.
Apple Wants Privacy Regulations: Apple’s Tim Cook has been criticizing Facebook at every possible occasion for the way it allowed the improper collection of personal data by Cambridge Analytica. Last week, he went a step further to say that “We’ve never believed that these detailed profiles of people that have incredibly deep personal information that is patched together from several sources should exist,” and that while he wasn’t generally in favor of too much regulation, he thinks that “we’re beyond that. It’s time for a set of people to think about what can be done.
“Everyone should know what they’re giving up, not only the specific data point but the whole line people can draw: When I know this-plus-this-plus-this-plus-this, I can infer a whole bunch of different things,” Mr. Cook said. “That can be abused.”
Technology Enabled Music Grows: According to the Recording Industry Association of America (RIAA), streaming music platforms like Pandora P, Spotify and Apple Music accounted for almost two-thirds of total U.S. music industry revenues in 2017, growing 50%. For the most part, they cannibalized digital downloads, which dropped 25% although physical (CDs and vinyl) also dropped 4%.
The net effect was a 16.5% increase in revenue for the music industry to $8.7 billion, the first time since 1999 that it grew for two straight years. The next thing is likely to be more originals, so streaming services can differentiate themselves. At least that’s what Apple’s Jimmy Iovine hinted at last week.
Chinese Rivals Launch New Phones: Huawei and Xiaomi announced new phones to take on Apple’s iPhone X and Samsung’s S9. Huawei’s P20 Premium and P20 Pro sport advanced camera features and at $804 for the basic version, is also a good bit cheaper than Apple’s $999 base iPhone X but more expensive than Samsung’s $700 device. Huawei has been making strides in Europe even as strained relations between the U.S. and China affected sales to the country.
In Europe, however, it has been taking share from Apple. Xiaomi on the other hand is shipping the Mi MIX 2S, with comparable camera capabilities, a more powerful battery (that also makes the phone slightly heavier, comparable power and storage, but sacrificing on the display. For slightly lower contrast than the market leaders, which use OLED screens, the company could push out a $527 device.
TRAI Frowns on Apple Approach to Anti-Span App: Apple has been at loggerheads with the Telecom Regulatory Authority of India (TRAI), which wants Apple to open up its iOS to allow its “Do Not Disturb” app broad access to a user’s contacts, call and text logs. Apple objects because that could compromise a user’s privacy, a point that is hard to get across with Google already obliging the authority because it agrees that the user should be in control of his/her own data and should have the authority to allow or block access as seen fit.
Of course, Apple is right, especially in light of recent findings by the EU that clearly show how data gets connected in the back end, as a user continues to grant access to more and more apps. Apple has said that users should be able to report spam messages, and its technical team would be sitting with the TRAI to see how that could be worked out. But TRAI’s R.S. Sharma seems determined to force its hand and has said that the regulator would take legal measures.
India Woos Tech Firms: India has changed its laws to allow the import of used goods, but there’s a caveat. These goods can still not be sold inside India. As long as the refurbished goods are then exported to other places and local laws related to waste treatment, health, safety and the environment are adhered to, companies like Apple can bring their stuff. The goal for the government is obviously to make the most of the fallout between the U.S. and China to make India a major exporter of refurbished goods.
The benefit for U.S. firms is the same availability of abundant cheap labor that they were getting out of China. Whether the skills are available, or can be developed is the next question. At any rate, if anything comes out of this, it will obviously take time and money, as manufacturing operations are not easily moved around.
Apple shares have a Zacks Rank #3 (Hold). But you can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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