I want to hit a few things on my radar this morning…
First things first, Apple iPhone 7 pre-order sales. I think it is safe to say that the stock’s nearly 10% gains since Monday’s lows tell you that pre-orders are a smash hit. But be aware when you hear pundits refer to iPhone sales in terms like “these numbers” or “these reports” that there are no actual numbers or official reports. But into last week, expectations for iPhone 7 sales were very low and the stock was ripe to reverse that pessimism on the smallest positive headilens. But be careful. Because in the span of a week, expectations became very high. The stock just gained 50 billion in market cap in a week and headlines assume that the iPhone 7 is the hottest thing since Cabbage Patch Kids. But all we’ve heard is that some U.S. carriers promotions of giving away the iPhone 7 is, well, working. And then the other headlines we’ve heard is that initial shipments are selling out. But remember that just last week, when the company issued a statement detailing why they would not release pre-order numbers and initial weekend iPhone sales data (as they have in the past), they said “these initial sales will be governed by supply, not demand”.
JUST IN: Apple says it will not be releasing iPhone pre-order numbers as it traditionally has in the past. pic.twitter.com/kGXfPcUkKB
— CNBC Now (@CNBCnow) September 8, 2016
That’s a very important point for those who want to extrapolate unit and sales data without any real data from the carriers or the company. So I think it makes sense for investors to chill a bit here, those who were not willing to buy the stock Monday morning, but are now willing to do so at $113 based on the commentary from a promotional second tier wireless carrier has to say about iPhone 7 sales are playing with very incomplete information.
How about Deere (DE)? They were loved in August, with the single biggest one day gain probably ever (on Aug 19th following their fiscal Q3 results that beat on cost cuts). The stock’s subsequent re-tracement of much of the gap is disastrous from a technical standpoint. If it doesn’t fill in the whole gap, it’s because it finds support at the stock’s 200 day moving average at $80. But I think mid $70s are extremely possible:
Exxon (XOM) is a stock that had been stabilizing as investors identified last year’s 49% eps decline, followed by this year’s expected 39% drop as a trough and the end of the bad news. But that play may have been too far too fast as the stock just broke down below its 200 day moving average for the first time since February, with next meaningful support near $80:
Lastly Twitter (TWTR). Tonight the company will broadcast their first NFL game, over their new tricked out App for AppleTV, Amazon Fire or Microsoft Xbox:
— adam bain (@adambain) September 15, 2016
Last night I messed around with the App on AppleTV and it is very slick and an amazing first iteration. I am really looking forward to watching the game this way. I also think we’ll see more and more Live video content on Twitter and think this could be the inflection point for the company. If they’re smart, the NFL launch could leave to a Live strategy integrated with Moments, with better curation and a wide range of exclusive content. I don’t mean to suggest that this is an inflection point for the stock or cause a sudden increase in MAUs, but it could be the thing we look back to in a couple quarters and highlight as the reboot moment. I am rooting for these guys, because I think they have a great product and platform, but have yet to figure the broad product market fit.
I’ve been long, maybe not so strong, but consider the mid teens a bit of a floor considering the company’s $11 billion enterprise value, $2 billion in net cash on the balance sheet. The stock is NOT cheap by traditional valuation metrics. P/E is a bit of a mess as the company is very unprofitable on a GAAP basis, despite and expected $2.5 billion in sales this year, trading about 5x those sales. The big problem, the company’s current offering is not growing sales in a way to support their valuation. I’d contest that the replacement value of the platform is worth billions more than the company is currently valued. I won’t hold my breath, but Recode had a great piece on potential buyers. My money is on Google.
— Recode (@Recode) September 15, 2016