As part of my research into AAPL vs AMZN Performance Madness, I noticed a lot of negative press on AAPL’s share price. So I decided to wait until after the election, then sample the press again to see whether it was a blip or a trend.
In short, the evidence points to a concerted effort to create a negative impression of Apple and push the stock price down. Lets take a look, shall we.
Instead of being my own cherry picker, I used a third party news aggregator to perform the selection of articles for this research. Trove is a personalized news and information engine run out of the well respected Washington Post news organization, so any bias is theirs, not mine. Go to Trove’s Apple channel to see for yourself the articles I refer to below.
So, armed with a list of articles from Trove, I stripped out the technical ones and chose just the business ones. That was easy.
The Adverse Articles
And here they are, in order from Trove, as of this morning. I find it interesting that most of these articles are not originals, they are all sourced from two opinion pieces that are being re-reported as facts.
- AAPL hits five-month low on innovation, competition worries: MacNN blames this on Apple not having a ‘next big thing’, assumes sales growth will stagnate as it assumes popularity is declining, blames margin concerns, blames the iPad mini’s ability to eat into iPad sales, the management shakeup and the loss of Steve Jobs. They do begrudgingly admit that this may all be bullshit as Apple is still experiencing bumper sales volumes and profits.
- We’ve passed peak Apple: it’s all downhill from here: The Guardian, in one of the two core source articles, blames the maps débâcle as they see it, excessive hype on the iPhone 5, the sacking of Browett in retail, and the loss of Steve Jobs. Then ends the article saying that the company still has all its brilliant people and produces amazing and desirable products. In short, if you read only the top half, AAPL sucks, if you read only the bottom half, AAPL is a brilliant investment. It seems no-one read below the fold.
- Why Apple’s Stock Is Down: Business Insider, the link bait company, blames probable Capital Gains tax changes, the difficulty in making iPhones at Foxconn (and therefore supply constraints), an assumption that the iPad price and margin will decline as the iPad mini sells better, and Tim Cook’s assumed inability to stuff the supply channel at launch. Oh, and that people will not buy the most successful phone ever and wait for the next version next year. Note that all their points are based on their own assumptions, and not any facts or numbers. I’d love to have whatever they are smoking there. Interestingly, Business Insider a week ago had this: Oppenheimer: Apple’s Stock Is Ready To Jump Back To $620 , yup, the exact opposite article.
- Apple: Still Calm Before The Storm: Seeking Alpha starts by saying they are long MSFT, then imply that Apple is crashing because they are not being a traditional business and focussing on existing products. Their argument is that the response to Apple’s new products is tepid (vs The Guardian’s hype), the re-organization and of course Analyst downgrades. Then he proves the whole article is bullshit by quoting Dan Lyons, enough said, I had to stop reading it.
- Have We Reached Peak Apple? Quite Probably, Yes: Forbes, referring heavily to The Guardian article above, argues that The Guardian is correct, then elaborates on its version of the new company structure. A “me too” article that presents the Guardian’s opinions as facts.
- Video: Nightline on Apple: Fortune gets in on the “me too” game using a Nightline video on Foxconn, and implies the Microsoft Surface is killing AAPL. What? Interestingly, this article appears 2 weeks after the Surface launch when they knew initial sales of the product were tepid (Microsoft had not yet run out of its extremely limited launch stock).
- 5 Reasons Why Apple’s Stock is Tanking: Mashable turns it into a list, the same old supply chain, management shake-up, tablet competition, declining profit margins and a minor pocket-change adverse patent verdict argument.
- Apple analysis: Wall Street is crushing Apple: BGR points the drop in value to Analysts, especially DoubleLine Capital’s Jeffrey Gundlach’s appearance on CNBC. Their point is that Analysts are gaming the system with their sky high estimates and then hammering Apple when it does not meet these impossible goals.
- Apple’s shares slide to five-month low: The Ottowa Sun, plagiarizes the core Reuters article, blaming the downfall on supply issues, competition, Obama, and whether Apple can continue to innovate. Then it admits that all the big investors in APPL have been doubling down buying more cheaply. The original Reuters article is probably here.
- AAPL: Gundlach Slams iPad mini, Sees Downside to $425: Barrons, also basing theirs on The Guardian article, yet using a title that does not match, and repeats the same The Guardian arguments, another “me too”.
- Apple shares lose 20pc since September record high: The Telegraph claims the losses are inline with competition from other tablets, the minuscule patent infringement payout, and the firing of Browett.
Calling them Out
So why am I calling bullshit on these:
- Did we know about the iPod when it came out, no, and when it did, we all though it would fail. Same with the iPhone, iPad and Apple TV. Since we never knew what Apple’s “next big thing” was, and Apple has maintained it’s legendary secrecy, we still don’t know. Not a reason to move, yet alone kill the stock.
- If Apple’s popularity is dropping, then so should sales, right? Each new product and version launch by Apple has led to record opening weekend sales, and record quarterly sales, and record annual sales. The graph is pointing up. One cannot use this data to assume that popularity is dropping. Heck, walk into any Starbucks. Used to be that you never saw an Apple product there, now you rarely see anything but Apple products.
- Apple is not a traditional business. When a traditional business comes up with a successful product, it stops innovating and milks that cash cow. Instead, Apple has always been it’s best competitor. Look at the iPod, Apple has not steadily improved its iPods as much as built better and cheaper ones, killing off successful lines for even more successful lines. The iPod mini undercut the iPod in price and was the best selling iPod ever, making Apple even more money. The same will happen with the iPad mini and the iPad. No other company tries to beat it’s own winning products first.
- Apple is making 40% margins on most of its products, and issued guidance that the margin on the iPad mini may be lower. For the record, iSuppli did a teardown and estimated a 43% margin on the iPad mini. Oh, and Apple’s margins have remained steady for tens of quarters. None, and I mean none, of the competition makes any margin on their competitive products, some even selling at a loss. Surely companies that make profits are better investments than ones that do not. One more thing to note, as time goes by, the cost of manufacturing gets cheaper and cheaper, and product margins rise, not fall. Apple (and all others) may make less per unit margin when a product is newly launched, but a lot more margin as the supply chain matures. What’s really bad, erhem Amazon, is when you have a mature supply chain and still sell at a loss.
- The management shakeup is an easy one to use to push a stock down, but in this case I think they went too far. The new management team is the old proven one, just consolidated, with the noisy, disruptive one (Forstall) and the useless, we-should-never-have-hired-him one (Browett) out. Sir Jony Ive wears the Steve Jobs shoes now, and he’s the best person for that job. Browett was destroying Apple retail, and Cook’s only mistake was not firing him earlier. The management team has added no new faces, brought in no new outsiders, did run the company when Steve Jobs was ill and they have not restructured the company.
- The maps issue is a molehill being blown up into a mountain. Remember the antenna issue, another molehill. The new maps app is a 1.0 and it is very good for a 1.0. Comparing that to a 7.0 release of Google maps is silly (and yes, I agree comparing a 1.0 Surface to a 4.0 iPad is just as silly). But from a business perspective, Google had Apple over a barrel with maps (no vector maps, no turn by turn and an expiring license unless Apple gave them private user information). Apple would have had to pay a lot more for Google Maps and give up user privacy to keep going. That’s bad business for Apple, great for Google.
- The supply constraints are a funny one. When launching a new product, a company has to spend money to make that product and have stock available. How much to have available is a function of how much money a company has to spend, how much time they have to manufacture before launch and how many they expect to sell. These writers assume that Tim Cook picked a bad number and ordered incorrectly. In reality, Apple made as many as they physically could for launch day and not one less. If they could have made a million more, they would have, and would have sold a million more. Compare this to every other competitive product launch this season, where they picked a significantly smaller launch stock amount and only a few sold out because the initial stock was way too small. If Microsoft really believed that the Surface would be a success, they had the time and money to create a larger initial stock, and chose not too, yet their share price is not being killed. It’s a specious argument at best.
- The $368 million patent case loss to VirneX can be offset by the billion dollar Samsung patent case victory. But none of the articles mentioned that, did they. Oh, and none realize that these cases will go to appeal and take years to settle, having absolutely no short term impact on the company.
- The Capital Gains tax argument is also a made up one, since it only applies when you sell AAPL, and we don’t know nor can speculate what the tax will be. I suppose you could argue that since they are all doubling-down on AAPL now, they simply want to minimize tax later. Talk about self interest.
I think only two points in these articles are valid:
- Analysts are crushing AAPL as their companies double down their long positions by buying at an artificially lowered APPL stock price. My take is that they hope to make a killing on the spring-back.
- There is more potential competition from Microsoft (Surface), Google (Nexus and new Android) and Samsung (massive carrier push). Such competition is good for the market and the consumer, and could potentially hurt Apple. The word “potential” is key here, it could potentially hurt. I vote we wait out the holiday quarter and see where the money flows. We’ll see if this potential competition is real or not. I hope it is, but it’s not worth a 20% share price drop.
I don’t mind there being adverse press about any company, even Apple, as long as the adverse press presents valid, cogent arguments. It’s when the arguments have no factual or evidentiary basis that they bother me. And when one article presents the opinions expressed in another as sourced and verified facts, well, to me that’s just plain wrong. Too bad this is all investors get to see and make their decisions upon.