Friday, July 31, 2020

This Is Not Just Goldilocks! This Is Goldilocks On Steroids -- AAPL Now Trading At $421 -- July 31, 2020

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I just checked in on AAPL. Oh. My. Goodness. Now trading up $27/share, when it normally moves a dollar or two up or down on a daily basis.

I initially thought this was a Goldilocks story, but this is Goldilocks on steroids.

Think about it.

This was "Covid Quarter."

Analysts across the board were "concerned" about AAPL. The day before Apple reported earnings, Jim Cramer, when asked the leading question, agreed that there was reason to be worried. Cramer had no idea what to expect with regard to Apple's earnings. He was 100% sure it was not going to be a huge surprise on the upside. No one expected a surprise on the upside but some were actually concerned with a surprise on the downside (I was in that group).

Apple is usually very conservative, very cautious with their guidance.

In all the years I've followed Apple I've never seen headlines like this. And then on top of that, out of the blue, an announcement to split the stock, 4 - 1.

By the way, I got a kick out of that. The CNBC Fast Money crowd quickly jumped on that, reminding the uninformed that a split does not increase/decrease/change the value of the stock, all other things being equal. They could not understand the reason for the split. LOL. They don't understand human behavior. And they don't seem to realize this "argument" about the value of a split has been going on for years.

Human nature? If people like something, they generally like more of something.

If one likes their hundred shares of AAPL, one will absolutely love having four hundred shares. I can't explain it but it's true.

But I digress.

This was "Covid Quarter."

Their stores were closed.

No new products were introduced. At least none that I can recall or none that really make a difference.

The analysts are all excited about the new iPhone. But, wow, this worked out well. Coming off a huge quarter, Apple announced that the new iPhone will be delayed. Perfect. So will school openings.

I think there was a huge number of folks who upgraded their computers when they were told to work from home.

If so, it sounds like it didn't move the needle. Of it did, neither the company nor the analysts are telling us.

But this fall, starting in August, high school students and college students are going to be getting new computers or upgrading older computers when they return to school ... online.

From the quarterly earnings report, as Bloomberg reported it, Goldilocks on steroids:
  • fiscal third-quarter revenue set a record for the June period
  • fiscal third-quarter revenue: $59.7 billion; if I recall  -- ah, here it is ... from an earlier post --
Morgan Stanley-- Apple to outperform 2Q20 estimates; forecast revenue and EPS of $55.1 billion and $2.18 EPS;  posted July 26, 2020; Apple to report after market closes on July 31; on July 24, CNN reported earnings and sales forecast for AAPL: EPS, $2.03; sales, $51.9 billion;
So, Morgan Stanley estimated revenue of $55.1 billion vs an actual figure of almost $60 billion.

Goldilocks on steroids. According to Bloomberg, earnings were up 11% from a year ago, and "smashed" analysts' estimates of $52.3 billion. Wow, it sure did.

Ah, here it is, in the linked Bloomberg article:
The pandemic is keeping people at home, which has spurred demand for Apple devices to help millions of consumers use the internet to keep in touch with friends, family and co-workers.
The pandemic likely boosted iPad and Mac sales due to lockdown rules and an increase in remote learning, while Apple store closures are weighing on iPhone sales, the CEO said in an interview with Bloomberg TV.
And I think it's going to snowball this autumn as high school and college students go back to school.

"Hey, dad, since you don't have to pay for room and board this year, how about a new computer? And an iPad. And Beats headphones."

Other earnings numbers. Go through these slowly -- line by line -- every line item improved and improved significantly:
  • revenue from the iPhone: $25.4 billion; forecast: $21.3 billion
  • iPad: $6.6 billion, a strong increase from $5 billion a year ago
  • the Mac: another big jump; $7.1 billion, up from $5.8 billion a year ago
  • subscriptions: $13.2 billion; up from $11.5 billion a year ago
  • 550 million paid subscriptions; on track to reach 600 million by year-end
  • wearables: $6.5 billion vs expectations of $6.1 billion
I just checked: AAPL now up over 8%; up over $31 / share; now trading at $416/share.

Ten Reasons To Buy AAPL Immediately

Link here.

The analyst reiterated his Buy rating on Apple’s stock and moved his price target up to $420 from $410.

Memo to analyst: AAPL is now trading at $421. 

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