Tag Archives: apple

Apple Price Target Cut On Lengthening iPhone Replacement Times

Apple ( AAPL ) iPhone owners aren’t upgrading to new handsets as quickly as they have in the past, a situation that is limiting upside for Apple stock. BTIG analyst Walter Piecyk on Thursday lowered his price target on Apple stock to 130 from 141 but maintained his buy rating. Apple stock was down nearly 1.5%, near 109.50, in midday trading on the stock market today . Piecyk cut his estimates for Apple iPhone sales in fiscal 2016 and 2017 based on “a more conservative outlook for the upgrade cycle of existing users.” He also reduced his revenue expectations for the Apple Watch, given the recent price cuts to the device. He does not expect higher volumes to offset Apple Watch price cuts. “We have broader concerns that there is a structural change underway in the pace of (iPhone) upgrades,” Piecyk said in a report. “It will take a few quarters and the launch of the next iPhone to confirm if end users are, in fact, holding onto their phones longer.” Apple also is facing a resurgent Samsung, which is seeing brisk sales of its new flagship Galaxy S7 smartphones , he said. Apple’s latest smartphone, the low-cost 4-inch iPhone SE, is seeing stock-outs and shipping delays, signs of strong demand, AppleInsider  reported Wednesday. The iPhone SE, which starts at $399, went on sale March 31. Image provided by Shutterstock .

Apple Could Make Changing Wireless Firms As Easy As Changing Socks

Apple ( AAPL ) makes things easy, a big reason the iPhone is so popular. Soon, things might get easier for iPhone users in one major respect: They might be able to switch wireless service providers as easily as they change socks.  Alphabet ’s ( GOOGL ) Google could do the same. It’s not a day that leading wireless-services providers AT&T ( T ) or Verizon Communications ( VZ ), which strive to retain their customers, are looking forward to. Some observers say this could lead to the next step, which is Apple and/or Google actually offering wireless services themselves by leasing a wireless network from a carrier, though there has been no indication that such a move is planned. The easy-switch technology probably will not be included in Apple’s next smartphone, the iPhone 7, due this fall. But it might happen with the following iPhone, and the wireless industry might never be the same. The basic idea is that consumers no longer will need to visit wireless firms’ retail stores, where they sign up for service, and where a salesperson then inserts a tiny “SIM” card into a phone. That tiny SIM (subscriber identity module) card, often found under the battery, provides access to a wireless network. Instead of this scenario, consumers would buy a smartphone directly from Apple or Google. Built into the phone would be reprogrammable software that provides network access. Analysts call it a smart SIM, an electronic SIM, a soft SIM or a virtual SIM. In any case, it does what the conventional SIM does, but it’s embedded in electronic wiring that doesn’t have to be swapped out. Soft-SIMs Are A Nightmare For Carriers Aside from Apple selling its own wireless service directly to consumers — a potential worry at some point — putting a smart SIM into iPhones is the most “destabilizing thing” that Apple could do to wireless firms, says Strategy Analytics. “We expect the first smartphones with embedded-SIM cards to emerge worldwide in 2017,” Neil Mawston, an analyst at Strategy Analytics, told IBD. “We expect the Apple iPhone to contain an embedded-SIM by 2018.” With a soft-SIM, consumers could shop for the best wireless data plan and switch service providers instantly. They would not need new phones or new SIM cards if they switched service providers. And Apple or Google would be there to help with any issues. “Soft SIMs have always been the nightmare scenario for wireless carriers,” Craig Moffett, an analyst at MoffettNathanson, told IBD. “Anything that lowers switching costs and reduces brand loyalty is bad, and soft SIMs would do both in spades.” Most consumers still buy iPhones and other devices from wireless firms, and nowadays they usually buy a phone in monthly installment payments. But Apple rolled out its own iPhone-upgrade financing plan last September. Samsung has also explored the model. In China, selling phones directly to consumers is how fast-growing Xiaomi does business. It probably would not make sense for wireless firms themselves to sell e-SIM-equipped smartphones that make it easy for consumers to switch service providers at the drop of a hat, analysts say. They don’t want their customers switching. On the other hand, offering an e-SIM could give consumers more reason to purchase an iPhone from Apple or an Android phone from Google or Samsung. AT&T declined to comment for this story, and Verizon didn’t respond to requests for comment. “Apple and Google might try to become more aggressive using smart SIMs that play each carrier off one another for the lowest priced service,” speculated Oppenheimer’s Tim Horan in a research report. He says it’s unclear, though, whether Apple or Google would then take the next step — morphing into an “MVNO,” a reseller of wireless services. The idea that Apple or Google might become a wireless-services provider isn’t new. In January, consulting firm McKinsey noted that “in 2011, Apple was granted a U.S. patent to create a MVNO platform that would allow wireless networks to place bids for the right to provide their network services to Apple, which would then pass those offers on to iPhone customers. ” McKinsey points out, however, that because wireless firms are still important distribution partners for Apple, the company has been careful about using smart SIMs. Apple Tests New SIMs In iPads But Apple has been innovating with SIMs in its iPad tablet-computer products. In 2014, Apple built the “Apple SIM” into iPad Air 2 and iPad Mini 3 tablets sold in the U.K. However, U.S. Strategy Analytics says those initial Apple SIMs were still physical SIM cards, installed at the factory. Apple last month launched its 9.7-inch iPad Pro, along with its iPhone SE. What’s different about the new iPad Pro is that SIM circuitry is embedded in the device and is no longer removable. The new iPAD’s e-SIM could be a precursor to a smart SIM in an upcoming iPhone, says Strategy Analytics. In 2015, both Apple and Samsung were reported to be in talks with an industry standards-setting group called GSMA. The industry group has been developing standards for e-SIMs embedded in consumer electronics such as phones, as well as for the “Internet of Things.” IoT refers to wireless technology that connects industrial, medical, automotive and consumer devices to the Web. Many wireless firms, including AT&T and Verizon, see IoT as a big growth opportunity, and e-SIMs would make sense in some applications. In March, U.K.-based Vodafone Group ( VOD ) said it’s working on e-SIMs with Germany’s Giesecke & Devrient for IoT markets. At the Mobile World Congress in February, Samsung rolled out a smartwatch, the Gear S2. The Gear S2 featured a built-in smart SIM. Apple’s smartwatches do not yet have their own cellular links to wireless networks and rely on nearby iPhones for Internet connectivity. The GSMA is still in talks with wireless phone companies and aims to release an e-SIM standard for smartphones this year, analysts say. “The Apple iPhone 7 will almost certainly not have an embedded-SIM,” said Mawston. “Operators are still resisting, while Apple remains publicly undecided on whether to continue supporting its own Apple SIM or the GSMA standard. We think the uncertainty surrounding embedded-SIMs in the short-term means Apple will hold off on the iPhone 7 for now.” Market research firm Ovum, in a February report, said that “given Apple’s support of the e-SIM specification, it is seems likely that Apple’s products will also feature embedded SIMs in the very near future.” Ovum, though, says wireless firms might not fare as badly as some pundits predict, depending on what the GSMA’s smart-SIM standards look like in the end. “An extremely polarized scenario could see OEMs (smartphone makers) selling connectivity via their application stores in the form of apps and charging end users either directly via carrier billing or via their accounts such as Google Play and App Store,” said Ovum. “This is a pretty scary scenario for mobile operators, and surely the GSMA’s standardization activities will try and avoid this from happening. “Commercial tweaking — and in some cases stiff negotiation — are sure to take place before the reprogrammable e-SIM will seriously disrupt existing players in the mobile industry, but it is useful to acknowledge that, from a technology point of view, the building blocks have been laid.”

Policy Divergence And Investor Implications

By Mark Harrison, CFA The world’s central banks and treasuries are no longer simply balancing the levers of growth and inflation through a succession of cycles with varying degrees of poise. Karin Kimbrough, a macro-economist at Bank of America Merrill Lynch, explores a world where all the old symmetries of monetary and fiscal policy have evaporated – that era might as well be 100 years ago. Instead, according to Kimbrough, who spoke at the CFA Institute Fixed-Income Managed Conference in Boston, in this new era, central banks are far from scoring top grades. In the United States, the US Federal Reserve’s quantitative easing (QE) trade is beginning to unwind, but QE policies are still underway in other developed economies. There is monetary and fiscal policy divergence, which, together with demographic distinctions among advanced economies, has important implications for interest rates and fixed-income markets. In this question & answer session following Kimbrough’s presentation, concerns are raised about this policy divergence, difficulties controlling inflation, portfolio risk concentrations from investor yield-chasing, and perceived foreign threats. A full version of this presentation is also available in the CFA Institute Conference Proceedings Quarterly . Audience member: What do you think about the concept of good versus bad inflation? Karin Kimbrough: I personally do not ascribe too much value to the good versus bad inflation concept. I think that the good versus bad inflation argument really just reflects where we see growth and demand more tightly. We are making more advances on the consumer side. Growth is looking okay, and services are definitely stronger than manufacturing, so we are seeing more inflation in services. Any sort of price pressure from abroad is just completely disinflationary given the strengthened dollar and the many downward pressures abroad in commodities and import prices. You mention that fiscal policy is not living up to its end of the bargain. What are some policies that you would espouse to help bridge the gap? I am a Keynesian at heart, in the sense that Keynesian is shorthand for correcting deficient demand. I believe that, in the presence of a deep lack of aggregate demand, the government should step in and support it. So, as a Keynesian economist, I would have supported some kind of new deal deploying people who are still unemployed to work on a major infrastructure project. It might be a redo of some of our major highways or getting high-speed internet into more rural areas – some long-term infrastructure investment that would actually pay off in dividends in the long term for the United States in terms of productivity, either through transportation or communication. So, I would have liked to have seen highway bills and infrastructure bills or, as a New Yorker, another tunnel between New Jersey and New York. All of that got delayed because it was deemed too expensive, but I cannot think of a better time to do it than when rates are low and there is a lot of labor to deploy. Yes, it is expensive, but it also puts people back to work. When people are back at work, they are paying taxes, paying their mortgage, and shopping, and businesses make plans and invest. When you grade inflation a D+, you grade it against the Fed’s target of 2%. How do we know 2% is the right number? If 2% is not the right number, what might the right number be, and how would it affect your grade for inflation? I graded it based on the test, and the test was 2%. Should the test be different – say, 1.5%? Maybe. I think of it this way: 2% provides a nice, comfortable margin such that the Fed is not setting a target that is so low that it is constantly flirting with deflation, which is generally a nightmare for central banks. No central bank wants to be constantly resorting to QE and asset purchases. The Fed wants to be able to toggle the pace of our economy using rates, which is hard to do when everything is sitting so close to the zero lower bound. A 1% inflation target would mean that, over the medium term, actual inflation is oscillating at a very low level, which is problematic. The Fed is trying to set inflation expectations that give the central bank ample room to respond without constantly facing a threat of either destabilizing high inflation or managing problematic deflation. No one is quantitatively arguing the Fed get to 2% more robustly than historical behavior. If 2% is just a random number and is not achievable, does it force the Fed to implement policies that might create other risks, such as the systemic risks that come out of an attempt to create something that is not possible? Central banks look at a variety of measures when deciding on policy, and of course, not all measures point in the same direction. For example, the personal consumption expenditure (PCE) index presents a more negative case right now compared with consumer price index (CPI) inflation, which is sitting at 1.7-1.8% – a lot closer to 2%. It depends on how something is measured, and of course, governments and central banks are guilty of occasionally changing their standards. They will give good reasons for changes – for example, they might say, “We think we need to reweight medical costs or housing costs differently” – and they will come up with a different measure of inflation. If 2% is indeed unachievable and we are constantly trying to drive ourselves there, then perhaps we are doing it at the expense of inflating asset price bubbles by keeping rates unusually low. I think about it from a central bank perspective: There are risks of financial instability resulting from inflated asset prices. These risks are worsened when leverage is added into the mix. Right now, I do not think we are at a particularly over-levered position relative to a decade ago. So, the Fed might be willing to tolerate some degree of overvaluation in certain markets, because the leverage does not look like it is there. That said, if leverage were building up, I would be a lot more worried about trying to achieve an unachievable target of 2%. Disclaimer: Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.