Art of Speculation
Chinese-Language AI Fundamentals & Macro, Concentrated Investing
Apple is caught on the wrong side of the memory shortage. Memory makers now favor AI customers on long-term contracts, and DRAM and NAND prices have risen about fourfold in a year. Apple raised prices on several Macs and iPads by 15-25%, and CEO Tim Cook called price hikes unavoidable. Unlike memory makers, Apple absorbs higher costs, and consumers may delay upgrades, hurting demand. The shares fell 6.13%, and a rebound may need to wait for mid- to late-July earnings. x.com
Apple's roughly 35x forward earnings premium looks unsustainable. If fear around the AI trade fades, its gains could stall or reverse. x.com x.com
Apple's valuation pays too hefty a premium for its expected long-term earnings growth. Its forward P/E-to-growth ratio is 2.58; even if the market sees its hardware moat and ability to exploit others' AI investments despite underinvesting itself as a winning strategy, that premium is too high. x.com
Apple is a safe haven amid AI-stock volatility and will gain momentum if it persists over the next two weeks through the midterms. New products and another defensive day bring a momentum push toward $358, then $367 in November closer. x.com
Apple's growth valuation gives too much credit to a $2,000 folding iPhone and a touchscreen MacBook. Its 36.16 forward P/E and 3.54 PEG are higher than recent readings over the past two years, making this a point to take serious profits. x.com
Apple's price is held up by index dispersion and gamma positioning rather than its business value. Its supposed bull case is that, as a non-AI name, it moves inversely to AI stocks; only flows strong enough to break the gamma grip permit price discovery. Fair value is 75% below the current price. x.com
Apple has the most predictable cash flows, including future cash flows, and that dependability appears to be what investors reward. Its P/E is about 40 versus 27 for Nvidia, 22 for Meta and 16 for Alphabet; Meta's free cash flow has turned negative. Leveraged build-out companies have been hit hardest while Apple has outperformed, but Apple investors could be wrong and the point at which its premium becomes too high remains open. x.com x.com x.com
Apple's valuation no longer fits its growth, making the risk-reward unattractive despite an unmatched brand and business quality. Its forward P/E of about 35x is well above its long-term average and near its highest in years, while growth is forecast at mid-single digits, around 7% a year. After a 54% gain over the past year, Apple would be hit hard in a correction. A more reasonable valuation or a growth surprise would make it attractive again. x.com x.com
Apple looks like a short because paying 36x next-twelve-months EPS seems crazy, and the stock is up against resistance from its 2020-2021 highs on a linear chart. x.com x.com x.com
Apple's balance sheet and lack of spend keep a bid under its stock whether the market rises or falls. That bid gets stronger with foldable phones that break. x.com
Apple should not be trading at 40 times earnings, especially after a 10% drop on weak guidance and margin pressure cost it the title of world's largest company to Nvidia. x.com