Apple’s not out of the woodshed yet

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But there may be a simple explanation for the supply chain’s pain.


From friend-of-the-blog Tommo_UK:

As I feared, not out of the woodshed yet. My dipping a toe in the water last week has turned into an ankle dip at today’s low.

I think the company’s longer term evolution into a media and services behemoth supported by its hardware ecosystem is sound but execution issues such as the HomePod, iPad Pro and iOS languishing behind the power of the hardware are ongoing concerns for me—as is the seemingly random laptop “strategy” (to be polite).

The price per earnings may be cheap, but unless there’s a really good transition plan in effect to excuse the short-term appearance of not having a clue then the Street has every right to be worried even if we’ve seen this all before.

This while Amazon and Netflix—the most overvalued pigs on the planet—continue to thrive, in spite of a bit of a pounding.

There’s no rhyme or reason to it, which is what makes it so unpredictable and maddening. It truly requires a love-hate relationship with this stock to want to stay in it, which is why I am so hesitant to keep big positions on it any more. Unlike Buffett I don’t have billions to lose for the short term. Personally I think the hysteria is overblown—it has been for the last 15 years solid—but the difference is these days as goes AAPL so goes the market.

Frankly there’s a confusion in Apple’s product matrix and lineup I’ve not seen since before Jobs returned and simplified everything. With the emphasis on iPhone sales, and the lack of visibility on them, and the rumours rife of production cutbacks running up to Christmas, it’s easy to see why people are spooked.

There’s one simple explanation I’m not seeing discussed though: Apple started production of this year’s models months earlier than ever before to stockpile for the launch, which is why there were no shortages. Having done so, they’re probably already in-stock for Christmas and are doing the production cutback they’d normally do for the following quarter this quarter instead.

Obviously suppliers wouldn’t know this—they’d just be “shocked, shocked I tell you” about earlier-than-expected component order cutbacks. But that’s their problem. We’ve seen the impact of “component cutback stories” hit the stock year after year like clockwork. It’s just never happened so early before but perhaps that’s because after 11 years of trying, Apple finally managed to get ahead of demand.

Here’s hoping (and investing)!

My take: Interesting theory about the early stockpile, one I’ve not seen elsewhere.