Investors should not jump to offload Apple (AAPL) shares because of a handful of cautious reports ahead of this week’s quarterly results. The narrative shaped by the financial media and Wall Street analysts in recent days questioned Apple’s relationship with Alphabet (GOOGL) on Google search, the initial sales of the iPhone 15 in China, and why the tech giant released new Mac computers and personal computer chips so close to earnings. As the most world’s valuable company, Apple has always had a target on its back, with people speculating if this quarter is the beginning of the end. Jim Cramer points out that this has been happening since the first iPhone was released in 2007 and even before that. But Apple has been crushing naysayers all the way to a $2.66 trillion market cap. That’s why we recommend before taking any action on Apple shares — selling or buying — to wait to hear directly from management when the company issues numbers for its final quarter of fiscal 2023 after the closing bell Thursday. We stand by Jim’s “own it, don’t trade it” mantra on Apple. However, that doesn’t mean we stick our heads in the sand. Jim’s buy-and-homework mantra means we don’t just buy and hold. Even in high-conviction stocks like Apple, we do the homework to constantly test our investment thesis against new developments. So, here’s a summary of the news items mentioned above and our Club take on each. The news: On Tuesday, a Wall Street Journal analysis speculated that Apple’s lucrative relationship with Alphabet may be on the rocks. The report also detailed headwinds coming from its business in China. “It’s a classic negative piece on the company that crystalizes the ‘hate Apple trade’ that’s been going on,” Cramer wrote in his Top 10 Things to Watch Tuesday. To be sure, the ongoing Google antitrust trial has scrutinized the billions of dollars paid to Apple and other companies by Alphabet to ensure that Google’s search engine and browser are the defaults on devices. The proceedings stem from a lawsuit filed by the Justice Department against Alphabet three years ago this month, alleging these exclusive deals hurt competition. Last week during the trial, testimony showed that Google paid $26.3 billion to be the default search engine on mobile phones and web browsers in 2021. A recent Berstein research note estimated that up to $20 billion of that total went to Apple. Google has denied the DOJ’s claims, arguing its products are just better and more in demand, and it should not be punished for that. The Club’s take: We agree as shareholders of both Alphabet and Apple. We don’t think Google Search became a market leader just because of its tie-in to Apple but by being the superior service. Headwinds from the DOJ’s case to Apple shares are not likely to materialize anytime soon as any verdict no matter what it is would most certainly be appealed. It could take years before there’s a final ruling. The news: It looks like the iPhone 15 got off to a slow start in China. According to a recent IDC research report, Apple shipments to China in the third quarter dropped 4%, and its market share there was basically flat from the year-ago period at 16%. Apple moved up a spot to the No. 3 smartphone maker in China behind two local brands, Honor and Oppo. But that was more of a function of a third Chinese maker, vivo, going from No. 1 to No. 4 in smartphones. According to IDC, there was a lot of excitement about China-based Huawei’s high-end smartphone to compete with Apple but sees any Huawei impact as more of a Q4 thing. The shifts for Apple in China came after a Sept 6. report in The Wall Street Journal that the Chinese government banned its staffers from using iPhones and other foreign-branded devices at work. A week later, China denied the report but not before Apple suffered a two-session decline of 6% — a loss at the time of $200 billion in market cap. The stock has only dropped more than 4% since then. The Club’s take: We doubted the Journal report from the outset and always argued that Apple’s position as a premium brand in China hasn’t changed despite growing competition for mobile phones. Instead, we think the iPhone remains a formidable player in the Chinese market because of product quality, along with its closed ecosystem and prices. Apple has also been expanding into emerging economies in an effort to diversify its supply chain and curb the risk from tense relations between the U.S. and China. This gives Apple the chance to grab market share in the world’s most populous country, India, along with providing downside protection in China, which accounts for roughly 19% of Apple’s sales. The news: Apple revealed new product offerings , including MacBook Pro laptops and new PC chips, at its “Scary Fast” event Monday evening. The event came days prior to its earnings release, raising suspicions on Wall Street about the timing. “[This] causes us to worry that laptop and iMac sales were weak in the Sept [quarter],” Needham analysts wrote in a Tuesday research note. “That would suggest that last night’s launch was a way to mitigate any negative share price reaction, because AAPL can focus on the future and reiterate how optimistic it is about unit sales of its new laptops and iMac products.” The Club’s take: We view this is largely speculative — and, instead, prefer to see Apple quarterly results and hear from management Thursday evening before rendering any judgment. (Jim Cramer’s Charitable Trust is long AAPL, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Apple CEO Tim Cook holds a new iPhone 15 Pro during the Wonderlust event at the company’s headquarters in Cupertino, California, on Sept. 12, 2023.
Loren Elliott | Reuters
Investors should not jump to offload Apple (AAPL) shares because of a handful of cautious reports ahead of this week’s quarterly results.
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