Written by Ophir Gottlieb
PREFACE
New forecasts are out surrounding the impact of the Galaxy Note 7 debacle and how much of that business will go to Apple. Generally, analysts are looking at 5-10 million additional units to Apple Inc. (NASDAQ:AAPL), with the focus on the higher priced iPhone 7 Plus.
This is very good news, and while the incident is temporary, the impact could be permanent. Android switchers tend to stick with Apple's iOS. Of all the mega consumer brands, the brand loyalty for the iPhone is breathtaking.
But, now we remind everyone of the risk we have been long focused on: China. Apple Inc. (NASDAQ:AAPL) is on risk alert from CML Pro because the growing combative relationship between Apple and the communist regime. We outline that narrative in detail here: Risk Alert: Apple Faces China's Wrath.
We bring this up now, before earnings, because while it appears that the iPhone 7 is a mega success, and that has pushed the largest company in the world up nearly 30% from its lows, we still don't really know what's going on with China. No matter how lovely the channel checks are for the iPhone 7 and iPhone 7 Plus, if the Chinese consumer has taken their ball and gone to play somewhere else, Apple Inc. (NASDAQ:AAPL) could be in a world of hurt.
We must pay attention to this next earnings call (likely 10-27-2016) to hear what the numbers are like in China. My best guess is things are OK, sales will be good, China will follow the path of the rest of the world and Apple stock will trade higher. But, that's still a really big unknown.
New Data for Apple Inc. (NASDAQ:AAPL) Looks Very Good Creative Strategies released a smartphone update on October 16th, and it reads really good for Apple Inc. (NASDAQ:AAPL). Here are few takeaways (emphasis added):
When we look at the US and the UK, most observers note there is a duopoly. In both these markets only Samsung and Apple have the dominant smartphone share of the active installed base.
However, when we drill down into brand ownership, the iPhone has a 13.2 percentage point lead over Samsung in the US with the iPhone having 45% smartphone brand share to Samsung's 32%.
We maintain our belief that Apple will continue to take share from Android as time seems to benefit Apple.
When we look at the length of ownership of a smartphone, we find the longer a consumer has owned a smartphone, the more likely they are to own an iPhone.
More Risk
A side story has built into a full blown narrative which is that apparently Apple Inc. (NASDAQ:AAPL) cannot get its act together for the Apple Car. I have stood boldly and unequivocally in the camp that believes Apple Inc. is creating an actual automobile, not just an ecosystem.
If we believe the rumors, that was true, but may not be true anymore. Reports are out of people leaving, a re-shuffle and an internal deadline Apple Inc. has set for December of 2017 to decide what and how this thing will get done. While an Apple Inc. CarPlay sounds great, an Apple Car sounds better.
Apple Inc. (NASDAQ:AAPL) has the cash, the brand, and we would have thought the expertise. If Apple Inc. cannot put together an actual car, then we are left with the question, "how is it possible that with virtually unlimited resources, Apple could not assemble a car in six years?"
Let's keep an eye on this. It's a legitimate risk for the company, as an actual automobile did put Apple in front of Google's play for an ecosystem. That is, it would have a legitimate differentiator for consumers: An actual car versus software.
CONCLUSION
In all we see some very good news for Apple although we do note the China risk and the risk of a failed innovation.
The author is long shares of Apple Inc (NASDAQ:AAPL).
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