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I had the sense of already seen as I watched Apple's shares fall sharply in Monday's trading. The decline in Apple's stock price was caused by massive cuts in earnings forecasts from the iPhone provider, Lumentum. Lumentum CEO Alan Lowe said:
"We recently received a request from one of our largest industrial and consumer customers for laser diodes for 3D sensing to significantly reduce the shipments that were delivered to them during our second fiscal quarter for orders previously previously planned delivery for the quarter.. "
Lumentum said in its recent release 10-K that Apple was its first customer and accounted for 30% of the previous year's revenue. Thus, although Lowe did not name Apple in its publication, the market quickly concluded that IPhone component orders had had to slow down, which had led Lumentum to reduce its revenue forecast by 25%.
This has occurred several times over the past three years; an Apple iPhone provider is issuing poor forecasts and Apple's shares are falling, with analysts charging lower unit sales for the next quarter. A quick look at the AAPL stock chart shows that each of these declines was an opportune time to buy Apple shares.
Apple CEO Tim Cook speaks at an event to announce the new products on Tuesday, October 30, 2018, in the Brooklyn district of New York. (Photo AP / Bebeto Matthews)ASSOCIATED PRESS
I do not buy Apple in hindsight today, because I think the fair value of Apple stocks is more than 10% below the current level. Here's why:
The amazing period elapsed between Apple on May 13, 2016, setting at $ 90.52 and setting at $ 225.74 at the close of September 28, created a market value of 630 billions of dollars almost inconceivable. Much has worked well for Apple since 2016, as evidenced by the adoption of Republican tax reform in December 2016. The new tax reform has not only lowered the company's base rate from 35% to 21%, but it has also prompted Apple to – The offshore cash pile has been brought back to the sea, where new tax rules simplify its use for the payment of dividends and share repurchases.
Most of the share price appreciation occurred in a context of record interest rates in the United States. With 2-year US Treasuries yielding 2.92% today, while 10-year Treasuries yielding 3.18%, it's clear to me that the free-cash punch has been removed from this still thirsty market.
So, the huge market started to turn in October and, as I already mentioned, Forbes columns, I believe this correction will continue. In this context, the shares of companies that reduce forecasts – like Lumentum – will be destroyed and companies that release slightly disappointing recommendations – like Apple did for its most important quarter of December, with the publication of its quarterly results. November 1 – – will be punished.
Apple has lost $ 120 billion in market capitalization since the last trading day of September. This is an extraordinary amount in dollars, but considering the $ 630 billion appreciation since May 2016, there are still huge unrealized gains for investors in a hurry to have then bought shares of Apple.
So the most relevant question is: now that the stock price trend is clearly down and Street analysts have become a little more bearish, what is the attractive entry point for Apple stocks? ?
As a veteran of the stock-side share research for over ten years, I think Apple's decision to stop declaring the iPhone quarterly sales – announced during its November 1 call and effective as of the next report – is regressive and really unwise of such a otherwise well-run business. The financial situation of Apple will become a little darker, because the revenue generated by Apple iPhone (the ARPU in technical terms) will have to be charged and not calculated. I think that Apple's ability to get the iPhone over its iPhone has been the most important factor to control (obviously, the company's management does not control its rate of return). basic taxation), contributing to the valuation of the security over the past two years.
Without the data to justify a continually improving range of products, with higher interest rates and, of course, no interruption of the political and geopolitical noise that affects all large multinationals, I think that the correction of the price of Apple action will continue.
As a person who manages money for clients according to a strategy that integrates both income and value, Apple is a title at the height of its profile. Apple pays a good dividend – set at $ 0.73 for a November 15 payment, implying an annual return of 1.5% – something companies like Amazon, Facebook and Google could certainly afford to do, but choose not to do it.
According to FactSet's consensus estimate of earnings for the S & P 500, the forward P / E ratio for the US market is 16.0. Street's current consensus for Apple's earnings per share for the 2019 fiscal year rises to 13.35 USD, representing a growth of 12% over the reported figure of 11.91 USD for the 2018 fiscal year. This 12% growth rate exceeds the 9% growth expected by consensus for the entire S & P 500 in 2019., according to FactSet.
Applying this multiple of 16 times to the consensus estimate of earnings per share of Apple, we get a valuation of $ 213.60 per share. This represents a significant premium over the current price of $ 195 per Apple stock, but I do not buy them today. Why?
I think the perception that Apple is entering a slow growth mode exceeds the EPS figures reported and actually justifies a reduction in market value. The Street values much more growth in net earnings than earnings per share. Apple's share repurchase program is therefore not necessarily a creator of short-term value. In addition, the chances of a new tax reform being virtually zero, I do not expect more significant tax rate reductions released by Apple.
"They made profits, but only because of buy-backs and lower tax rates" is a criticism frequently used by many large companies. Apple's earnings per share growth of 29.0% for fiscal 2018 is more than double its growth of 13.7% of pre-tax income. The quality of growth in BPA can therefore be questioned.
So I think we are entering a phase where Apple's shares are discounting the market. How much of a discount?
A quick look at YCharts' data shows that Apple's P / E futures ratio has fallen below the 14x threshold three times in the last 12 months. The decline of course shows that these have excellent buying opportunities.
As a value investor, you still want to buy cheaply, however, and the fact that Apple shares have fallen to a P / E ratio as low as 13 times in the last year. indicates that the actions could do it again. We are in the middle of a "bad band", especially for the Nasdaq, and we can never ignore the impact of more general market concerns on a key title like Apple.
A multiple of 13.0 times the profits of the consensual 2019 fiscal year would imply a price of $ 173.55 for Apple's shares. At this level, the equity return of 1.68% would be close enough to the overall market return – currently 1.91% – to place Apple in growth and income brackets.
So I will wait $ 170 to buy Apple stock. Obviously, this creates the risk that I miss owning Apple, but I stayed away from the so-called FAANG stock boom (Facebook, Apple, Amazon, Netflix and Alphabet / Google) and I do not want to do it. 39; mistake to buy too early in what may be the first steps of a FAANG collapse.
The question of whether Apple's shares continue to fall to $ 170 can only be solved by owners of large-market ETFs or programming their computers to create wallets that mimic them. It's not my investment style, and 26 years of experience has proven that it often produces excessive buying and selling. If this overreaction brings Apple stocks to a level where the company's deliberate growth rate is set at a level that is not reflected in its ultimate valuation, then I will surely buy it. Not before, though.
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I had the sense of already seen as I watched Apple's shares fall sharply in Monday's trading. The decline in Apple's stock price was caused by massive cuts in earnings forecasts from the iPhone provider, Lumentum. Lumentum CEO Alan Lowe said:
"We recently received a request from one of our largest industrial and consumer customers for laser diodes for 3D sensing to significantly reduce the shipments that were delivered to them during our second fiscal quarter for orders previously previously planned delivery for the quarter.. "
Lumentum said in its recent release 10-K that Apple was its first customer and accounted for 30% of the previous year's revenue. Thus, although Lowe did not name Apple in its publication, the market quickly concluded that IPhone component orders had had to slow down, which had led Lumentum to reduce its revenue forecast by 25%.
This has occurred several times over the past three years; an Apple iPhone provider is issuing poor forecasts and Apple's shares are falling, with analysts charging lower unit sales for the next quarter. A quick look at the AAPL stock chart shows that each of these declines was an opportune time to buy Apple shares.
Apple CEO Tim Cook speaks at an event to announce the new products on Tuesday, October 30, 2018, in the Brooklyn district of New York. (Photo AP / Bebeto Matthews)ASSOCIATED PRESS
I do not buy Apple in hindsight today, because I think the fair value of Apple stocks is more than 10% below the current level. Here's why:
The amazing period elapsed between Apple on May 13, 2016, setting at $ 90.52 and setting at $ 225.74 at the close of September 28, created a market value of 630 billions of dollars almost inconceivable. Much has worked well for Apple since 2016, as evidenced by the adoption of Republican tax reform in December 2016. The new tax reform has not only lowered the company's base rate from 35% to 21%, but it has also prompted Apple to – The offshore cash pile has been brought back to the sea, where new tax rules simplify its use for the payment of dividends and share repurchases.
Most of the share price appreciation occurred in a context of record interest rates in the United States. With 2-year US Treasuries yielding 2.92% today, while 10-year Treasuries yielding 3.18%, it's clear to me that the free-cash punch has been removed from this still thirsty market.
So, the huge market started to turn in October and, as I already mentioned, Forbes columns, I believe this correction will continue. In this context, the shares of companies that reduce forecasts – like Lumentum – will be destroyed and companies that release slightly disappointing recommendations – like Apple did for its most important quarter of December, with the publication of its quarterly results. November 1 – – will be punished.
Apple has lost $ 120 billion in market capitalization since the last trading day of September. This is an extraordinary amount in dollars, but considering the $ 630 billion appreciation since May 2016, there are still huge unrealized gains for investors in a hurry to have then bought shares of Apple.
So the most relevant question is: now that the stock price trend is clearly down and Street analysts have become a little more bearish, what is the attractive entry point for Apple stocks? ?
As a veteran of the stock-side share research for over ten years, I think Apple's decision to stop declaring the iPhone quarterly sales – announced during its November 1 call and effective as of the next report – is regressive and really unwise of such a otherwise well-run business. The financial situation of Apple will become a little darker, because the revenue generated by Apple iPhone (the ARPU in technical terms) will have to be charged and not calculated. I think that Apple's ability to get the iPhone over its iPhone has been the most important factor to control (obviously, the company's management does not control its rate of return). basic taxation), contributing to the valuation of the security over the past two years.
Without the data to justify a continually improving range of products, with higher interest rates and, of course, no interruption of the political and geopolitical noise that affects all large multinationals, I think that the correction of the price of Apple action will continue.
As a person who manages money for clients according to a strategy that integrates both income and value, Apple is a title at the height of its profile. Apple pays a good dividend – set at $ 0.73 for a November 15 payment, implying an annual return of 1.5% – something companies like Amazon, Facebook and Google could certainly afford to do, but choose not to do it.
According to FactSet's consensus estimate of earnings for the S & P 500, the forward P / E ratio for the US market is 16.0. Street's current consensus for Apple's earnings per share for the 2019 fiscal year rises to 13.35 USD, representing a growth of 12% over the reported figure of 11.91 USD for the 2018 fiscal year. This 12% growth rate exceeds the 9% growth expected by consensus for the entire S & P 500 in 2019., according to FactSet.
Applying this multiple of 16 times to the consensus estimate of earnings per share of Apple, we get a valuation of $ 213.60 per share. This represents a significant premium over the current price of $ 195 per Apple stock, but I do not buy them today. Why?
I think the perception that Apple is entering a slow growth mode exceeds the EPS figures reported and actually justifies a reduction in market value. The Street values much more growth in net earnings than earnings per share. Apple's share repurchase program is therefore not necessarily a creator of short-term value. In addition, the chances of a new tax reform being virtually zero, I do not expect more significant tax rate reductions released by Apple.
"They made profits, but only because of buy-backs and lower tax rates" is a criticism frequently used by many large companies. Apple's earnings per share growth of 29.0% for fiscal 2018 is more than double its growth of 13.7% of pre-tax income. The quality of growth in BPA can therefore be questioned.
So I think we are entering a phase where Apple's shares are discounting the market. How much of a discount?
A quick look at YCharts' data shows that Apple's P / E futures ratio has fallen below the 14x threshold three times in the last 12 months. The decline of course shows that these have excellent buying opportunities.
As a value investor, you still want to buy cheaply, however, and the fact that Apple shares have fallen to a P / E ratio as low as 13 times in the last year. indicates that the actions could do it again. We are in the middle of a "bad band", especially for the Nasdaq, and we can never ignore the impact of more general market concerns on a key title like Apple.
A multiple of 13.0 times the profits of the consensual 2019 fiscal year would imply a price of $ 173.55 for Apple's shares. At this level, the equity return of 1.68% would be close enough to the overall market return – currently 1.91% – to place Apple in growth and income brackets.
So I will wait $ 170 to buy Apple stock. Obviously, this creates the risk that I miss owning Apple, but I stayed away from the so-called FAANG stock boom (Facebook, Apple, Amazon, Netflix and Alphabet / Google) and I do not want to do it. 39; mistake to buy too early in what may be the first steps of a FAANG collapse.
The question of whether Apple's shares continue to fall to $ 170 can only be solved by owners of large-market ETFs or programming their computers to create wallets that mimic them. It's not my investment style, and 26 years of experience has proven that it often produces excessive buying and selling. If this overreaction brings Apple stocks to a level where the company's deliberate growth rate is set at a level that is not reflected in its ultimate valuation, then I will surely buy it. Not before, though.
