Apple reports Q3 results
apple.comApple, Alphabet, Amazon, and Facebook, which combined are worth almost $5 trillion dollars[1] all releasing earnings on the same day seems crazy. From what I could find, that is 14% (5T/35T) of the total stock market posting earnings on the same day [2].
I'm curious if anyone has thoughts on what effect that has on the overall market in terms of volatility? (I really have no good idea as to how any of this works) Could we see other stocks dip/rise as money is reallocated?
[1] https://www.cnbc.com/2020/07/29/big-tech-including-apple-and... [2] https://siblisresearch.com/data/us-stock-market-value/
There's a concept in the options trading world called "correlation skew," which describes how tail risk for baskets like SPY/QQQ/XLK can trade richer than tail risk for the basket components, based on how much correlation there is expected to be in the components. When correlation is expensive, you can buy option contracts on the basket components and sell contracts on the basket itself, to set up a position that profits when the basket components exhibit dispersion rather than correlation.
Sure, we could see sector rotation into tech tomorrow. This may be somewhat muted because tech is already a very crowded trade, and tech names are already trading far higher than where they closed.
The timing is based on quarter end dates. There’s a season of a few days each quarter when everyone on a standard calendar reports. Similar companies move together on the assumption of “if Walmart has good earnings, Target should too”
There is only so many trillions to be invested in stocks (because, where else?), and they have already been invested. Stock markets have for so long had a totally irrational relationship with day-to-day news, that they probably won't move the needle much.
First and foremost, the stock market is not the economy. Second, stocks are primarily traded on their expected future value, not current profits, hence why companies like Tesla have a price to earnings ratio that is absurd.
Tesla's stock price makes zero sense in any plausible scenario. I understand the narrative, but unless Tesla becomes the only car company on the planet, it can't be worth 10x Ford
Robin Hooders + solar energy + funds that buy Tesla after 4 x profit profitable quarters + China + ...
Still doesn't explain the crazy valuation
Market cap is set by marginal prices, so supply of uninvested capital isn't super relevant and might even increase volatility due to lower liquidity.
The bond market is many times bigger. There is much more that could come to the stock market.
Where else? Derivatives and commodities,bonds,etc...
See this paper [0] bu Gabaix for instance:
> This paper proposes that idiosyncratic firm-level shocks can explain an important part of aggregate movements and provide a microfoundation for aggregate shocks.
> Existing research has focused on using aggregate shocks to explain business cycles, arguing that individual firm shocks average out in the aggregate. I show that this argument breaks down if the distribution of firm sizes is fat-tailed, as documented empirically.
> The idiosyncratic movements of the largest 100 firms in the United States appear to explain about one-third of variations in output growth.
You are missing Microsoft, worth now over 1.5T in your analysis. I dont even know what that means... Three times Facebook. Also Google numbers look not as bright compared to the other.
One (or maybe more) of them had to adjust dates because of the congressional hearing.
Somehow only Alphabet had a decline in revenue...
Vix doesn't seem to move much this week
Market cap is an irrelevant measure. It's simply the price of the last sold share * number of shares outstanding.
Why is that irrelevant?
It’s not irrelevant, but it also isn’t a fair indicator of the total value of the company. Let’s say a company had 1000 shares outstanding at $1000 each. Just because one person would buy a share for $1k doesn’t mean that anyone would buy the whole company for $1mm.
If people started selling off their shares, the share price would drop, so maybe in the end this hypothetical company would end up worth $500k. I’m not the original commenter, but I assume that was their point.
> If people started selling off their shares, the share price would drop
This is only true if there is a lot of dispute about the value of the company.
Suppose a company is nothing more than the owner of a bank account with a million dollars in cash. Well, then it's worth a million dollars. If there are a thousand shares then you'll be able to find arbitrarily many buyers at ~$1000/share. Existing investors would have no reason to sell for less than that because they could get that much just by liquidating the company.
Where the values diverge significantly is where there is a lot of uncertainty about the value of the company, and then there could be a lot of variation in how different people value it, so that the existing owners might assign a much higher value than others, and if they tried to sell a significant fraction of the shares it's the others whose price they'd have to meet to find a buyer.
> it also isn’t a fair indicator of the total value of the company
Public company acquisition prices are highly correlated with their market caps. In fact, in acquisitions, the acquirer generally pays a premium to the market cap [1].
[1] https://cpb-us-west-2-juc1ugur1qwqqqo4.stackpathdns.com/u.os...
While market cap may not be the actual realisable value of the company, that doesn't mean it's irrelevant. It's perfectly relevant when comparing the relative value of different companies, especially when they are in similar sectors. That's especially true when companies have very different numbers of issued shares.
Even then, market cap does actually correlate directly to realisable value in acquisitions. They rarely trade for exactly the market cap, but it's definitely a useful benchmark against which to compare the company's relative value to the acquirer and it's current owners.
I guess this is the biggest argument for breaking up the tech giants - not only are there clear examples of each company either abusing public trust or using their size in anti-competitive ways, but their wealth shields them from having to meaningfully engage with the public at large or reign in said behavior.
There are alternative to each of the four. No one forces anyone to use any of their products.
Definitely no one forces people to buy Apple’s products at a large premium over their competitors. I would say that Apple has to work harder to get users to willingly depart with their cash.
>I would say that Apple has to work harder to get users to willingly depart with their cash.
Actually, it's often the opposite. In the Boston area, the Apple Stores are always packed while the Microsoft Store (now closed) was usually mostly empty in the high-end mall across the street from the stand-alone Boylston Street Apple Store.
Price isn't the primary factor for many people, especially younger people.
First, there's no real price difference between high-end Android phones—the newest Samsung, for example—and similar iPhones.
A Galaxy S20 Ultra 5G 128GB list price is $1399; the iPhone 11 Pro Max with 256GB (double the storage) is $1249. That's $52.04/month.
I worked with 24 public high school kids last summer. Most of them were from 1st or 2nd generation immigrant families and would qualify for free or reduced lunch at school. Every one of them had a newer model iPhone than my 6s at the time.
Zero Android devices.
Which confirmed something I learned from market analysis years ago regarding Apple: people with limited funds can't afford to make a mistake when spending their limited money, which is why they tend to gravitate to higher quality, better made products.
Yes, there was the typical desire for teens to have the right sneakers, t-shirt, jeans, etc. The iPhone is definitely in that category, with 85% of them either owning or intending to buy an iPhone: https://www.phonearena.com/news/teens-love-apple_id123682.
> Actually, it's often the opposite. In the Boston area, the Apple Stores are always packed while the Microsoft Store (now closed) was usually mostly empty in the high-end mall across the street from the stand-alone Boylston Street Apple Store.
We know that anecdote says nothing. The only thing that the Microsoft store and Apple store sell in common are computers and Mac marketshare is around 10%. It’s not even close.
> Price isn't the primary factor for many people, especially younger people.
If price weren’t the determining factor, the average iPhone buyer wouldn’t live in a household in the US with A 40% higher income.
https://www.comscore.com/ita/Public-Relations/Infographics/i...
> First, there's no real price difference between high-end Android phones—the newest Samsung, for example—and similar iPhones. A Galaxy S20 Ultra 5G 128GB list price is $1399; the iPhone 11 Pro Max with 256GB (double the storage) is $1249. That's $52.04/month.
Only in the US. My understanding is that most of the rest of the world doesn’t have monthly payment options where the price delta would be more apparent.
But also, there are high end Android phones that cost the same, but out of the Android manufactures, Samsung has the highest average selling price, and it’s like $290 - $100 less than the cheapest iPhone. They haven’t been able to convince many people to pay for high end phones.
> The iPhone is definitely in that category, with 85% of them either owning or intending to buy an iPhone:
A survey also showed that 58% of iPod owners “intended” to buy a Zune in 2006....
If price weren’t the determining factor, the average iPhone buyer wouldn’t live in a household in the US with A 40% higher income.
I can tell you based on where I live and who I work with, there are many people who are low and moderate income who own iPhones now.
They don’t buy their phones outright like some people do; they usually can’t drop $1000 in one go on something that’s not their rent.
However, low and moderate income people can pay $10 or $20 a month for the phone while using prepaid services.
To be blunt, that’s why poor inner city kids can rock very nice iPhones.
An iPhone SE is $200 on a carrier deal; it’s a better phone than anything else in that price range that low and moderate income people can afford.
>> Apple’s products at a large premium over their competitors
What premium? Right now I'm trying to decide between Dell XPS 9500 and MacBook Pro 16" and with similar spec MacBook is actually the cheaper option.
In the smartphone space top Samsung models are also priced similarily to iPhones
But they aren’t actually selling.
Samsung’s average selling price is $290....
Wow, iPad revenue up 31% YoY after being down ~10% in the last few quarters. Similar numbers to a Q1 (holiday season). I guess it makes sense that the tablet form factor is popular when so many people are indoors.
Also, services revenue grew YoY but it’s the first time it didn’t grow QoQ in a long time, so it seems to have stagnated. Services include a lot of recurring revenue so they should be consistently growing QoQ.
Wearables growth also slowed, this may be the other side of the coin when people are indoors and don’t want to buy a watch for fitness tracking.
My partner and I bought our God Daughter an iPad for her sixth birthday because we were worried about her not being in school. We installed a bunch of educational apps for her. She loves it. We also get to FaceTime with her and our relatives which is fun. I’m sure a lot of iPads were bought for kids stuck at home. (Edit typo)
I just shipped my parents my 2016 iPad with cellular with my unlimited T-mobile data plan. I removed all of the unneeded apps, installed all of the streaming apps that either I had a log in to, they had a log in to with their cable subscription, and the free streaming apps. I put both of their email addresses in Mail. I also put Office 365. My mom already has one of my six accounts.
Since I can’t see them because of Covid, I can now Facetime them. It was frustrating talking to my dad since he is losing his hearing. He can understand me a lot better when he can see me and FaceTime audio is much clearer than phone calls.
I bought an iPad Air and a pencil to take notes.
Have you considered earphones for your dad? I only ask because my grandmother was quite hard of hearing before she passed away recently and would often miss a lot of the conversation on FaceTime, but once I bought just some standard EarPods for her iPad, she could hear much better.
Sounds like FaceTime alone is a big improvement over the regular phone, but I thought maybe earphones might be even better.
They won’t go near earphones. They think it will make his hearing worse. Whether that is true or not, that’s a hill I don’t want to die on. iOS has a live listen mode too that will pipe sounds from the iPhone (and maybe iPad?) to AirPods.
Ah, that’s a shame. I wouldn’t be surprised if FaceTime gets closed captions in a future iOS release (with all recognition done on device, of course), which I can see being very useful.
Got my nephew the $329 iPad, and its been great. No major complaints. We initially got him a similarly priced Chromebook, as they’re education targeted, but quickly returned. The Chromebook was unexpectedly sluggish and cumbersome.
Any educational apps you can recommend?
>Wow, iPad revenue up 31% YoY after being down ~10% in the last few quarters. Similar numbers to a Q1 (holiday season). I guess it makes sense that the tablet form factor is popular when so many people are indoors.
I wonder how much this has to do with the release of iPadOS 13, which has made the iPad a significantly more capable "computer" than previous versions of the operating system. For the majority of users (you don't fall into this category, fellow Hacker News reader), the capabilities of iPadOS are quickly approaching that of macOS.
Personally I regret the new OS features; I find them clumsy and bothersome. I love the iPad overall though. (I’ve been all in on Apple since ‘08 for context.)
iPadOS 13, the new keyboard with trackpad and a cloud VPS mean even for typical HNers the capabilities of iPadOS are quickly approaching that of macOS. For me, it’s totally replaced my laptop. I still need a desktop because a fair number of very specific things are a PITA on the iPad but in general it offers a much nicer UX than my previous ThinkPad.
I dunno man. I spend my life in the command line. I don’t think anything could replace a Linux laptop right now for sheer flexibility and power.
With Blink you've got an amazing terminal that supports Mosh. Rarely use my MacBook anymore.
You get considerably more power per dollar out of a VPS (at the cost of needing an internet connection to use it)
Me too, that's what the VPS is for.
> For the majority of users (you don't fall into this category, fellow Hacker News reader), the capabilities of iPadOS are quickly approaching that of macOS.
Huh wow, I haven't thought about iPads for a while, but apparently they even added multiple windows (predictably, 5 years late). That's probably the biggest blocker I considered that made tablets a toy even for laymen users (you hardly need to be a leet haxorz to use multiple windows)
On iPadOS you pretty much do need to be a leet haxor to use multiple windows, it’s a complicated mess involving swipes that’s totally undiscoverable
Ah, thanks for the info. An unintuitive UI is also entirely predictable for Apple, but I was actually saying that you don't need to be a leet haxor to use multiple windows on a desktop; ie even laymen wouldn't find a window-less mobile/tablet OS to be a replacement without that feature.
Not so much any more, especially if you get a keyboard and mouse.
The pandemic definitely pushed me to get an iPad. Since my primary source of income is in tutoring in math/CS, being able to draw diagrams with accuracy and share those drawings live with my students has been extremely valuable. Before all this, most of my income was from in-person clients where I could simply grab a piece of paper and pen and draw, now I'm 100% online.
What iPad app are you using for this? And do you also have an Apple Pencil? I also do some math online tutoring, and what I’ve been doing is connecting my iPhone to my Mac, mirroring the iPhone screen on the Mac, and sharing that screen during a Skype call. Then I can use the camera app on the iPhone (mounted on a little tripod) to look down on a piece of paper that I write/draw on. I considered getting an iPad, but even with an Apple Pencil I imagine I wouldn’t feel as free as when drawing on a real piece of paper with a real pen, I’m curious as to what your thoughts on this are
I use Flow on the iPad by Moleskine Studios, it's priced on a subscription (reasonably priced, albeit a little annoying) but a wonderful drawing app. I use an Apple Pencil with it.
I like the ability to easily export documents and send them to my students, as well as the freedom you get with a digital whiteboard––you can drag and manipulate individual pieces of your sketch as if they were magnets on the board in a traditional setting.
The Pencil definitely does not feel like using a regular pen, but it's rather similar to writing on a whiteboard and is rather comfortable to use (you get palm-blocking and everything). If you use the first-party Notes app, you also get automatic handwriting recognition and indexing in iPadOS 14.
Assuming they're currently accepting returns given the pandemic, Apple has a relatively reasonable return policy – 14 days for a full refund provided you repackage everything, so if you find you don't like it you can just return it.
Is that Computer Science at tertiary/undergraduate level? Or something else? If it is, is that common?
Most of my students are in high school (9-12 grade, age 14-18) during the school year. In the summer, I see more 1st and 2nd year college students since a lot of summer classes are at 2x speed and right now they're predominantly online.
Many high school students have access to CollegeBoard's AP Computer Science Principles and AP Computer Science A programs, which expose students to fundamentals of computing and Java respectively (Principles is more focused on the _concepts_ of programming–sequential instructions, working in teams, etc., while CS A is focused on writing working Java). I've worked with students who do not have access to these classes at their school as well, working with them through a self-study curriculum.
Occasionally, I'll also see middle school students (6-8 grade, age 11-14) who have (or whose parents have) expressed interest in learning to code. I usually work with these students in Scratch then Python, depending on their skill levels, as some schools are even teaching programming classes.
I also get some requests from elementary students, but generally decline those.
Thanks!
My guess for this is the fact that they have a fantastic entry level iPad at a very low price. It's basically the cheapest entry point into the Apple ecosystem at ~$300 (often discounted to $250). And they've shown they're happy to hold this price with the new iPad they released last year as well. Considering iPadOS and support for Pencil, it's a pretty good deal, and I can imagine its bringing a lot of people in.
Picked up this exact one, maxed out the storage but WiFi-only, with an Apple Pencil. It hasn’t obviated my laptop which I do entirely different work on, but it has almost completely obviated my phone since I can route calls through it. I was planning to buy a new phone this year, but seeing as how it gets about 5 minutes of weekly active usage on average since I bought this iPad, which is like 99% camera and 1% Apple Pay, don’t think there would be much point in that.
This has also replaced paper notebooks for me which is what I bought it to do, and I had a pretty sizable book collection on my phone which has been shunted over.
>Services include a lot of recurring revenue so they should be consistently growing QoQ.
You will need to examine Apple's Services Revenue more closely. Apple puts $10/ unit to Services as OS / Map / Siri usage. Considering Apple had record iPhone / iPad / Mac Shipment per quarter.
Google paid Apple roughly $10 per year per Active User as default search placement. Or Roughly $10B per year.
App Store is by far the largest source of Services Revenue.
Considering Apple said in the conference call all of their Apple Services users are growing ( Referring to TV+, Music and News, but we dont know if those are paying members because the TV+ membership could easily be skewed. ). The only variable in QoQ decline is likely App Store Revenue.
80% of App Store Revenue are Gaming. So this suggest people are buying less in game items.
This also might be by design. Apple has to know that Apple Arcade is going to cause less people to spend money on pay to win games. If Apple Arcade encourages more hardware sells, they would be okay with that.
If every single pay to win an advertiser supported game disappeared, nothing of value would be loss.
AppleCare+ is also in Services
My guess for increased iPad sales: Zoom conferencing during COVID
If that's the case, I wonder if webcam sales would affect revenue for Logitech or another big manufacturer.
This is probably the largest driver.
iPad had a spring product launch last quarter which makes a big difference. The previous generation of iPad Pro was more than 18 months prior. iPad sales are pretty weird in terms of cyclicality since launch dates are so random between models.
Tim specifically addressed the wearables decline as a result of store closures during the pandemic. He pointed to the fact that potential new watch customers prefer to try on the watch and view the band options in person before purchasing, and closed stores means this is not possible.
I doubt this is sufficiently explanatory, but Apple has been giving away 1 year of Apple TV with their iPad purchases. That's arguably the most valued among all their services.
For people who like charts.
https://sixcolors.com/post/2020/07/apple-q3-2020-results-eve...
>The Board of Directors has also approved a four-for-one stock split to make the stock more accessible to a broader base of investors. Each Apple shareholder of record at the close of business on August 24, 2020 will receive three additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on August 31, 2020.
So interesting that Apple does this around $400... meanwhile Amazon's over $3,000 and couldn't care less.
It's very curious to me how and why different companies decide whether this is important or not.
AAPL's previous 7:1 split happened at $700, bringing the price back down to $100. This split fits in that same vein. It would seem that the board feels "accessible" is in the $100 range, if that's what you're trying to read into the situation.
Berkshire Hathaway is at almost $300k per stock.
Buffett refuses to split BRKA so yes it's that much, but BRKB has split before and so is ~$200/share.
Also consider the difference in voting rights. Voting rights at berkshire require one to literally be rich. Funny that SNAP got shunned by S&P and literally was the genesis for a new rule [1] for excluding new stocks with split share classes yet BRK, GOOG, FB, CMCS, NWS, etc. can still exist in the index. Heck, companies like F & BF have separate voting shares to give families voting rights.
[1] https://www.cnbc.com/2017/08/01/snapchat-excluded-from-sp-50...
My understanding from that article is that SNAP's public shares are entirely non-voting whereas all the other companies' shares have (diluted) voting rights so I don't think it's quite the same even though in practice it pretty much is.
Thank you for pointing this out, I thought BRK.B had no voting rights. I looked it up and learned that BRK.A shares have 6.66 the voting power of the equivalent dollar amount of BRK.B shares. Specifically, each BRK.A share is 1,500x the economic value of BRK.B but 10,000x the voting power. [1]
It turns out that there are indeed share classes of these companies with no voting rights (GOOG, class C) but I haven't found an example of a company that doesn't have some voting shares in non-insider hands.
It's still shitty that the S&P indices barred SNAP while turning a blind eye to the existing inequities. I'm perfectly okay with them barring new split share listings but at least begin to apply it to others that benefit from the lack of corporate governance.
[1] https://berkshirehathaway.com/compab.pdf#:~:text=Berkshire%2....
Seems a lot less relevant now with the rise of fractional shares.
But not if you want to trade certain contracts positions.
For example I'd like to sell some covered calls for my AMZN as a hedge against a correction later, but since I don't own $300k+ of AMZN share, I literally cannot sell a single call contract.
I'm really surprised Robin Hood and others haven't started offering fractional options contracts yet. It seems like an obvious next step for retail trading.
I'm not saying it would be a great idea or anything, just that it's going to happen eventually and being first will probably garner a fair amount of business and attention (both positive and negative).
I imagine fraction option contracts are much less practical.
As an example, I’m currently holding contracts I purchased in March on SPXL and the daily volume is less than 5. With such low volume, the practicality of fractional ownership is not there.
I'm curious. Do trading platforms automatically adjust existing limit orders the night of August 24, e.g. dividing all prices by 4? (Or just cancel all limit orders?)
I mean I would assume they do, but just wonder if there are ever any severe "gotchas" with a stock split with certain existing buy/sell arrangements, or derivatives etc.
I haven't worked on trading systems in the US, but handling this type of gotcha is the bread and butter of the sort of trading software I have been working on.
There's a million tiny details like this that can cause consequences that are both different from what a customer intended and what our terms with said customer states, so making sure it's all handled in a safe way is just part of daily business.
I can’t imagine working on software that could have such potentially disastrous financial consequences, so kudos to you and all of the developers who do this kind of work.
Exchanges automatically cancel out GTC and GTD orders when splits occur.
Options are also split to take the stock split into account.
Trading platforms shouldn't have to do anything unless they are faking GTC orders by resending them out each day as Day orders.
But if your vendor is doing that then, get a new vendor as that's completely bush league.
A confusing and incorrect comment all around.
Exchanges do not receive or handle GTC or GTD orders, see for example the NYSE pillar spec.[1]
Broker-dealers handle stock splits and the behavior varies according to your broker. Some brokers will request the broker-dealer cancel all orders back, but most brokers allow limit prices to be adjusted for orders "below the market" (buy limit orders and sell stop orders). The Fidelity FAQ is an illustrative one.[2]
I'm not sure what a "vendor" is here, but brokers send GTC orders to broker-dealers, who forward them to the exchange every day as a day order. This behavior is industry standard and certainly not bush league.
[1] https://www.nyse.com/publicdocs/NYSE_Pillar_Gateway_FIX_Prot...
or you know, your wrong:)
https://www.nasdaqtrader.com/content/ProductsServices/Tradin...
it is true the the NYSE eliminated GTC orders. That just means you can't use them on NYSE, which doesn't affect my point:)
You'll have to flesh out your point more if you still feel like you have one:)
Given that I've written more than one trading systems for a living, I'm going to take my 20 years of experience over a random internet troll.
I work for a large wholesaler and wrote the code that handles client GTC orders for on behalf of pretty much every brokerage in the US. Whatever your experience is, it's no longer correct. NASDAQ stopped accepting GTC orders in 2015, before NYSE.
Here is the specific rule relating to adjusting the price of open orders: https://www.finra.org/rules-guidance/rulebooks/finra-rules/5...
Are stock splits necessary now that many brokerages have fractional shares? It seems the true metric is percentage gained or lost rather than the price.
One thing to note is stock price dramatically impacts the price of options.
For example 1 option contract for Amazon (over $3k share price) can easily be $4,000. In comparison, you can buy 1 option for Apple ($400) contract for $200. After the stock split, option contracts will be 1/4 the current price.
Lower stock prices make the options market much more accessible to people investing less money (for better or worse).
Even more relevant for absolute dollar terms: standard options contracts are for 100 shares. So a single contract of AMZN can require $300k in cash to cover, depending on the brokerage.
I don’t think splits are necessary. Fractional shares are an abstraction of share ownership though. Many people prefer not to rely on their broker for that.
What's the split price? $Close / 4?
There is no such thing as "split price". You get 4 shares for each share you previously owned, and it's up to the market to resume trading at a new level. It's a non-event, really, except it makes some operations easier.
Yeah, it was getting a bit pricy to buy lots of 100 apple shares at a time and sell covered calls. This is much better. Honestly I think selling covered call on Apple is one of the few good plays left out there. Long term the company's value is going to keep going up, but with so much volatility in the market lately option premiums are bananas and though I expect a pretty dramatic stock market pullback Apple is one of the few companies that has very strong fundamentals and should weather it pretty well.
Ah yes, selling volatility via covered calls. The institutional investors' second favourite way of collecting "extra income" in the zero rates world, second only to explicit leverage.
Some of them sold much more volatility, via variance swaps, with quite disastrous results.
https://www.institutionalinvestor.com/article/b1lffwvwdh7xtq...
I mean, my family's investment company is far, far from being an institutional investor, but the math is pretty solid. If our plan is to buy Apple and sell it in the next six months if it rises by 15% then it is pretty easy to justify selling the calls with a strike at 15%, which I know isn't perfect because if something substantial changes at Apple (a new product, say) then in the case where the calls weren't sold you could re-evaluate your target, but that type of event doesn't happen too frequently and if we would have put a sell order at 15% above anyway it's a near-free increase in returns. Because inflation eats the first couple percentage points and taxes don't take that into account the delta in gains does stack up over time.
Selling puts, though, is a fools game unless the market has already really tanked. Black Scholes isn't perfect, yadda, yadda.
Out of curiosity, what's your total return with this approach if, at expiry, the stock price matches the strike price? In other words, how much are you making with the premiums you collect?
I guess one issue with this approach is that it somewhat assumes a period of low-inflation between now and option expiry (unless you're factoring that into the 15% expected return).
Because options are at a premium right now, for the reasons stated above, running the above strategy on Apple looks like this:
Buy at $400 (price at time of writing) sell an option at $460 for January which comes with a $42 premium[0] at time of writing, so if the stock goes up 15% over the six month period the total return is $102 per share, or about 25% return. If inflation is, say, 4% per annum due to Covid pushing it a bit higher than normal, then the total return is ~23% vs what would have been ~13% for doing the same play without selling the option, so the real return is around 75% higher than the alternative where the option was not sold.
Usually it's around 30% more, so right now is an especially good time for this play if you think that Apple will at least hold its value.
[0] https://finance.yahoo.com/quote/AAPL220121C00460000?p=AAPL22...
It will never cease to amaze me. LTMC is my favorite story
LTCM
Possibly, but its really however the market prices it.
For example, if the theory goes that more people will want to buy apple now that the price is a "steal" (people think it's harder to 2x a big number than a small number) then it could go above that on open.
Bitcoin and Bitcoin Cash ?
I prefer to believe that stocks are not in a bubble of such epic proportions that a stupid split can be an "event".
> Bitcoin and Bitcoin Cash ?
That is the split of Google A and C some years back, where Google added a new class of shares with different voting power.
In the Apple split each share after the split will be worth 1/4th, have 1/4th voting power, will receive 1/4th of dividend, etc. just reading happens in smaller fractions.
Given the high rates of unemployment in the US and around the world (with possibly worse to come) this kind of consumer spending on luxury goods is pretty remarkable. Wonder how sustainable it is.
There's a good argument to be made that Apple devices are not luxury goods but save you money in the long run.
They often last for many more years than competitors' products, receive upgrades for longer, become obsolete less quickly, and Apple will repair them both under warranty and out of warranty. (Many competitors simply do not service their products.) And when you're finally done with your device, you can often still resell it on eBay and get even further value from it, again often for much more than with competitors' products of the same age.
Apple products on the lower end tend to be fantastic investments actually. And given how much we're working from home now, your primary devices for remote communication are hardly "luxury" and more "essential".
You reminded me of the last time I spent money on a laptop before mac. Well, it wasn't me, it was my parents. For half the price of new mac air, I got a Toshiba budget notebook. It barely lasted 2 years, which was the amount it's "anything happens" warranty expired - which wasn't really anything happens. The CD ROM just didnt slide back in totally one day and stuck. The shift key got so fucked up I had to disable it preboot or I'd be stuck with caps. Fun times. Never again. Made me appreciate macs way more when I got one.
And I used a Dell XPS for 8 years. Not only Macs have good quality.
Similar story although I haven't purchased a macbook yet. Used to purchase laptops within the 500AUD range which would break or die within a year, decided to spend 1000AUD on a Asus zenbook and it's held up quite nicely over 3 years - only issue being the battery but that's expected.
Haven't spent anything close to a MBP but I know people still using the 2015 model and holding up nicely. I guess price sort of correlates to build quality? Although same can't be said for resale value.
I still quite happily daily drive (in reality, every other day or so) a 2011 MBA upgraded to 4 gigs of ram (came with 2). I have had to replace the battery with an aftermarket one once, and other than that it's been the best machine I've ever owned. I did not update to catlina however, I fear that may be a death knell
I am writing this from a 2013 Macbook Air. It works fine.
Same. Amazing how well it’s held up.
I did need to do a repair on the motherboard as it stopped charging but one repair after 7 years is crazy.
Meh, I used a $300 netbook for 6 years.
OK I need to hear more about that one. I’m guessing it’s all command line development?
It was I think dual core 1.5 G with a gig an a half of ram. It was an upgrade from 800Mhz Pentium III (this was a long time ago.) So it was doing normal personal computing things: Web browsing, photo manager, mp3 player, email, document editing (mostly latex, inkscape, gimp). I had a keyboard and an external monitor since the thing was too tiny.
Oldest phone that gets iOS updates is what, the 6s or the 7? The former having come out in 2015, that is an amazing support lifetime.
I’m planning on keeping my iPhone X past the end of the year, which takes it to a 3 year lifetime, which works out as ~$600/year which is amazing value.
Both the 6s(+) and the iPhone SE (the 5s-shaped one that people love for the small size) will be able to get iOS 14 when it comes out later this year.
Those are the oldest phones which still get new versions of iOS.
My mother has a 6, and it still gets security updates for (IIRC) iOS 11.
It's her second 6, by the way. The battery on the first one started inflating, and they replaced it with a refurbished unit for the price of a new battery.
No other company plays in the same league as Apple when it comes to product support.
> save you money in the long run
My two broken Macbooks in 3 years say otherwise.
This might have been true 5 years ago, but the countless complaints of keyboard issues with 2017-19 era Macbooks says otherwise.
that was definitely not my experience when I bought a macbook air a decade ago. after a year it was unusuably slow, and the insulation at some point flaked off the charger wire. i went with a thinkpad in the same form factor after that (a year later), and I'm still using that today
>They often last for many more years than competitors' products
Apple products are often obsolete in a few years, especially iPads and iPhones. Their entire line of laptops and desktops is now practically obsolete with the move to ARM. Apple products are luxury products for people who can afford to simply throw away a device when Apple decides it's stopping support. I have several Apple devices that still boot up just fine, have capable CPUs inside, but are completely useless because Apple just decided they weren't interested in supporting them anymore.
Apple products are often obsolete in a few years, especially iPads and iPhones.
The iPhone 6s was released September 2015 and it will run iOS 14, due later this summer/fall.
My daily driver is a refurb iPhone 7 (released September 2016) and I'm running the public beta of iOS 14—it runs noticeably faster than it did running iOS 13 just a few weeks ago.
I’m pretty sure nothing from Samsung, Motorola or HTC that's 4 or 5 years-old can run this year's Android release. Or even last year's.
iPadOS 14 goes all the way back to the iPad Air 2, which was released October 2014—nearly 6 years ago.
Their entire line of laptops and desktops is now practically obsolete with the move to ARM.
Nope. All current Intel Macs will continue to be supported for years to come. Updated apps will be fat binaries—they'll run natively on Intel and ARM Macs, the same way fat binaries ran natively on PowerPC and 68K Macs back in the day.
macOS 11.0 Big Sur will run natively on both Intel and ARM-based Macs; so will next year's macOS 11.1. All of the important, mainstream apps (Microsoft Office, Creative Suite, Affinity Designer/Photo/Publisher, etc.) will be updated to run on ARM-based Macs in addition to the existing Intel ones.
My last machine was a 10-year old 27-inch iMac that I still use as a server.
I have several Apple devices that still boot up just fine, have capable CPUs inside, but are completely useless because Apple just decided they weren't interested in supporting them anymore.
If they can still run Homebrew, there's lots of software, especially open source stuff, you can install and run. The core apps I use for web development like Vim, command line utilities, etc. work fine on unsupported Macs. If I had to, I could install FreeBSD or Linux and keep things moving.
Most indie developers allow you to download older versions of their apps if you're a registered user.
Macs that don't have 64-bit CPUs couldn't make the jump to 64-bit world, which Apple has been warning about for like 10-years.
>I’m pretty sure nothing from Samsung, Motorola or HTC that's 4 or 5 years-old can run this year's Android release. Or even last year's.
At least android phones can still download apps from the google app store, older iOS devices are just cut off. I have a perfectly good original iPad that's basically useless. The iPad 4 is similarly useless.
>My last machine was a 10-year old 27-inch iMac that I still use as a server.
My current workstation is 10 years old, running Windows 10 like a champ. It's got one of the first 6-core CPUs in it, a recent graphics card, and 32GB of RAM which I may upgrade to 64GB because it's cheap - I have no real reason to get a new workstation, this thing is still running circles around most recent quad-core systems. Your 10 year old mac wishes it were this capable.
I feel really sorry for anyone buying a mac now, since they will be obsolete as soon as the ARM macs are out.
At least android phones can still download apps from the google app store, older iOS devices are just cut off.
My 7 year-old iPhone 5s is still supported by Apple; it runs iOS 12.4.6 and I just installed a bunch of apps on it.
I feel really sorry for anyone buying a mac now, since they will be obsolete as soon as the ARM macs are out.
The first ARM Macs will start shipping in just a few months; the current Intel Macs won't be obsolete, since they too will get the new operating system and Universal apps will run just fine on both. What part of this are you not understanding?
There's a difference between not the latest and greatest (the ARM Macs) and current, supported machine, like any Mac that can run Big Sur.
I have a PowerPC iMac Mini somewhere—that's obsolete as far as Apple is concerned.
An iPhone is the durable personal computer for most people. They don't own a "PC", this is the only way to safely conduct e-commerce. Without it, you're done in the modern world (even government interactions, like scheduling a DMV visit).
A necessity, not a luxury. Best security, best long term support, best re-sale value. If you're poor, an iPhone is the smartest choice. You need to AFFORD an Android device.
I'm surprised to see you say "most people," as Android is what, 85% of the market?
Not in the US which is what OP was referring to. Also, that worldwide market share is massive for junky low-end androids.
iPhone alone is ~50% of US market share: https://www.statista.com/topics/2711/us-smartphone-market/
Android splits the rest.
Sorry, where does it say or imply "US"?
Presumably people are buying the best phone for their budget and needs. Per OP, "They don't own a PC, this is the only way to safely conduct e-commerce." How many people with an iPhone do you want to bet have a PC, versus how many people with a "junky low-end android"? I'll bet you vastly more iPhone owners have another computer.
"DMV" implies the US, although I can see where that might not be clear to a reader from another country.
Like it or not, HN is an English-language forum, run by a company based out of SF, and a lot of commentators presume that context. I try not to, just as I strive to use clear English for the benefit of ESL speakers. But it is the default.
The only issue is that iphone revenue was not up but mac and ipad was up considerable. So people are actually buying more computers and tablets.
iPad is the device Grandma uses during the lockdowns to see the grandchildren.
iPad is the device to follow the stream of the school lesson.
iPad is what the manager got for his Zoom meetings.
Maybe from all the people working and studying from home.
Are these things actually luxury goods?
A smartphone is probably one of the most essential and important devices in many peoples lives these days. Certainly one of the most used. There is the option of Android instead of Apple, but as someone pointed out one time, iPhones are cheaper than flagship Android devices if you account for the support lifetime of an iPhone being a lot longer than any Android device. And that's not counting the cheaper iPhone Apple launched recently.
Likewise, for many people, a computer would probably be considered an essential device. Sure there are cheaper Windows laptops, but the cost of switching ecosystems is potentially quite high, and if you're already in the i-device camp you're probably going to stick with a Mac due to its integration with all the other things you have (and had before the pandemic)
I would count iPads as largely luxury devices.
iPad Pros for non-business use may be luxury devices, but the 'regular' iPad is down to $329 now, solidly low end- especially now that iPad OS has mouse support built in and Safari supports requesting desktop mode pages.
> Are these things actually luxury goods?
I have a lot of trouble characterizing tools as luxury goods. I don't consider my Dewalt tools "Luxury Goods" and they cost roughly twice what basic Harbor Freight tools cost.
You pay for longevity and performance. It's no different with phones/ tablets/ computers. If you want a phone or tablet that lasts 4+ years there is only one brand that offers that kind of device life.
Also, with Apple cranking out the base iPhone at $400, and the massive second hand market for iPhone, it's hard to argue many people associate the brand with luxury the way they do Coach or other luxury brands.
If anyone thought Apple was a "luxury" brand, the flop of the solid gold Apple Watch "Edition" sub-brand should have disabused them of the notion.
>You pay for longevity and performance. It's no different with phones/ tablets/ computers. If you want a phone or tablet that lasts 4+ years there is only one brand that offers that kind of device life.
I still have my samsung after 5 years. I'm not sure why you'd consider it the only brand.
Which Samsung phones are they still providing security and OS updates to on a regular basis?
I'd be fascinated to see a breakout of Apple's quarterly sales by product. I don't know if such a thing is published, and if so I've been unable to find it, but I had also wondered what fraction of it the SE 2 would account for. I remember seeing headlines that it was selling above expectations shortly after launch, but there wasn't any real detail that I recall.
Interestingly, spending on luxury/positional goods does not decline when the economy is poor. This is a well-known effect. That is not where people tend to cut back.
If you looked solely at Apple's revenue during 2008/2009 you wouldn't even know there was a crash, never mind one that was severe by any measure.
I don't disagree with your point (it is pretty interesting!) but I do think 2008 – one year after the iPhone was introduced – is a bit of a special scenario for Apple that isn't broadly applicable to other stocks/downturns.
It could still be framed within the realm of the underclass. They don’t have enough money to invest, buy a home, pay off debt, but they can certainly buy the best thing within their buying power - a phone, a tv, heavily financed cars, and so on.
I don’t think these buying patterns are incongruous to reality on the ground. In other news, certainly alcohol and drug sales are up too.
Maybe a tangent here, but I don't think it's accurate to think about Apple stuff as luxury goods.
For example, I don't think the volume they do in phones aligns with the typical notion of a luxury brand. The best-selling single smartphone model on the market is the iPhone. In analogy with the car market: BMW, Mercedes, Lexus do not have a best-selling model among them.
The iPhone is more like the Ford F-150, in terms of how it fits into the broader marketplace, than it is like a luxury car. The F-150 is not inexpensive! But it's not a luxury vehicle either.
Why am I bothering with this argument... because I think it leads to confusion about Apple's business, like the comment above. Apple does well because they sell products people want, on the high end of the range, but well within what a lot of people can afford.
A Ford F-150 is absolutely a luxury vehicle. And I don't see any way you can look at an Apple iPhone as anything other than a luxury purchase, regardless of the market share.
"The F-150 carries a base price of $28,495, which is below average for a full-size pickup truck." This is just a quick search from Google. I think ppl might have different opinion of the word "luxury". But generally I would personally not categorize things that's widely sold like F-150 or iPhone as luxury.
I’d gauge luxury on necessity, not commonness.
It's a bit of both, and subjective, imo.
As an example, pretty much every item of food is "luxury" if based on necessity alone. From bread to the cheapest vegetable in your location - except for items that might be the only locally available/affordable way of getting certain essential nutrients, you don't need that specific food for a healthy life.
But... if that food can only be grown on the other side of the world, and therefore is in short supply and/or very expensive relative to local wealth: suddenly maybe that vegetable, type of meat, or whatever is considered a luxury without becoming more of a dietary necessity.
Would the cheapest, most common Casio watch available be a luxury because I don't need to have the time on my wrist?
As to the subjective/contextual side: I don't know anything about pickups, but I consider my car a luxury to me, and yes that's more to do with necessity than cost - it's not a fancy car, I could afford a much more expensive one, but I very much don't need it. I've never used it in relation to work, I get my groceries delivered, etc. (But while I'd call it a luxury for my life, if asked what kind of car I have I'd never call it a "luxury car".)
When you say iPhone, just consider you are speaking about a product which starts at $399.
Xfinity Mobile as an example:
$200 off the list price of the $399 iPhone SE. $8.33/month, with 0% APR for 24 months.
It has similar specs of a $1000 iPhone from a few years ago and is faster than any Android device you could buy for the same price.
Most carriers have the same deal.
Unemployed Americans have (temporarily) discovered the world of fare living-wage unemployment that expires tomorrow.
If you don't live in NY or CA, those extra $600 a week can go very far, and have probably helped stimulate the economy greatly
If you live in an expensive NY/CA metro, that money can be the difference between unemployment benefits covering your rent or mortgage payment or not, which is a very big deal.
California's unemployment benefit caps out at $450/week.
> If you don't live in NY or CA, those extra $600 a week can go very far
True. My girlfriend lost her job March. She is unemployed since then. We are not based in NY or CA. She has mentioned this to me several times that how much more she has in savings now. With all this time and some extra cash, I have asked her learn coding. She is working on her app idea.
What planet are we living on?
600 a week is 2400 a month, which way over any entry level salary in Europe.
How inflated are the salaries in US? Or are people used to some really abnormal level of living?
Do entry-level salaries in Europe have to cover health care? They do here. Even if you're working somewhere with a group plan, you're still taking more out of each check for medical coverage than for anything else except maybe taxes.
And if you're on your own for it, it's the same, except you pay more and the quality of care is a lot lower because the "marketplace" plans are the absolute minimum the insurers can get away with and still comply with the law.
“ Do entry-level salaries in Europe have to cover health care?”
Yes, it’s called tax.
Rent for a low-end 1BR in Silicon Valley is about $2000/month. Low-end 2BR = ~$2600/month, high-end 1BR = ~$4500/month. Houses are ~$10K/month and up.
Entry-level tech compensation is ~$180K/year, mid-career = ~$600K/year. If you're not in tech you're screwed here - formerly middle-class professions like teachers/police/firemen live 4 to a 2BR apartment, or they buy houses an hour or more away. Even mid-career finance professionals get screwed - salary for CEO of a local (not nationwide) bank is in the ~$150-200K range, and barely competes with a new grad at Google or Facebook.
> Houses are ~$10K/month and up.
That's way high. A million-dollar house on a 30-year fixed-rate mortgage, assuming a 20% down payment, is ~4800/month including property tax. With a 10% down payment it would be about $5800/month.
To get to a $10k/month housing bill you need to buy a place that costs close to $2 million. The median sales price in Santa Clara county is closer to $1.3 or $1.4 million. Most people are paying a lot less than $10k/month for their house.
The median buyer in Santa Clara County buys a condo - that's what's going for $1.3-1.4M.
Low-end SFHs - we're talking a 3/2 built in the 1950s - go for about $1.8-$1.9M in Mountain View, $1.6-1.7M in Sunnyvale. A SFH like what you'd get in most of the rest of the U.S. - 4/2.5 or 5/3 on 1/4 acre lot, built somewhere between the 70s and 00s - will run about $2.4-2.8M.
No, the median SFH sales price in Santa Clara county is ~1.4 million. I just looked it up. https://scc.rereport.com/market_reports
Mountain View is one of the most expensive cities in the county, second to Palo Alto and maybe Los Altos. Most of the area is cheaper.
That is the most expensive area in US. This compensation is given to EVERYONE.
$2400 a month is pretty far below entry level for any white color job. Its about what you would earn full time in an Amazon warehouse. Or minimum wage in NYC.
It's $2,400/mo in addition to the regular unemployment amount. The total amount is more than many US workers, like teachers and construction workers, make while employed[0].
[0] https://fivethirtyeight.com/wp-content/uploads/2020/05/atd-U...
Yes. The reality is that COVID unemployment checks have made it so that a lot of people can finally afford this type of upgrade. Many people are receiving a larger "paycheck" now than they've ever earned in their life.
> which way over any entry level salary in Europe
The minimum wage for adults worked full time in the UK (and similar in France) currently equates to 1,524EUR, which comes out as 1,807USD. Most salaried positions would yield more than that.
600 a week is 2400 a month, which way over any entry level salary in Europe.
$2,400/month is the legal minimum wage in some cities. ($15/hour)
I believe EU salaries are usually discussed after-tax, so 2400 / month take-home pay. That is probably the main confusion here.
Seems like an odd way of going about it. If you and I work for the same company in the same exact job role but you're married to an unworking spouse with 2 children and I am single, I will be taxed higher than you so my take home salary would be less despite being paid identical amounts. You're destroying information by relaying it like this and it's misleading. Your personal tax situation is irrelevant to comparing salaries across jobs.
No, thats not what im talking about here.
I believe it is $600 per week in addition to the normal state unemployment amount. The actual amount received is more than $600.
Plus, a lot of employed people got checks from the first round of stimulus -- $1200 per individual, $2400 for a married couple, and $500 per child. That's just free money for people who didn't lose their jobs. Some households have earned more during the pandemic than ever before.
That’s on top of state unemployment around $400/week. That’s annualized at $52K a year. The median household income is only $65K.
Good luck staying on state unemployment for a whole year.
I did say “annualized”....
On top of that student loans have been frozen. That allowed me to save an extra $900/month.
CA has plenty of people living in poverty $600/wk make a world of difference for.
That's likely reduced entertainment expense of eating out and of traveling and vacations shifting at least partially to other areas. An iPhone costs a lot, but so does a week long vacation in another state, and eating out a couple times a week, and those are less likely for a lot of people now.
Anecdotally, our app spending is up a lot since the quarantine began—my kids (6 yo twins) got iPads for their birthday and we've probably spent at least $50 on apps for them alone (a mix of educational apps and games). I imagine there's a lot of educational app purchases happening in general.
As an aside, we use new apps as a reward for various exceptional acts. My son looked at my phone not long after we started this and told me that I must have done a lot for my mom to have put so many icons on my phone.
Correct. No family vacations in France/Italy ($15K easy), just spending on gadgets/home renovations.
There are other examples as well. For me, it is RVs. Generally people only buy them when they're feeling good about the future, so you'd expect uncertainty to be devastating right now. Nope, dealers are moving them as fast as they can get them in stock, and they're not budging on price. Normally you only pay about 2/3 MSRP for an RV. Not right now.
Sucks because I want to upgrade to something a little bigger, and I don't want to pay an extra 10K just to have it right now. So I'll wait until January and see if the dealer is feeling more agreeable.
Well, that's the safe way to vacation now, take your shelter with you. That seems obvious to me once you mention the trend.
RV's are not a good sign of recovery in this case.
Usually RVs are bought in addition to other travel, they are more of a luxury item.
In the current environment where booking a hotel is considered by some risky RVs are bought as a necessity if one wants to travel.
Usually RVs are bought in addition to other travel, they are more of a luxury item.
I've seen plenty of newspaper items in the last few months about people who usually fly places for summer vacation putting that money into a used, or cheap new R.V.
Aside from not being able to fly out of the country, it apparently gives them peace of mind knowing they can take their quarantine bubble with them wherever they go.
I don’t think RVs are a good indicator. My wife and I just bought a 32’ Class A motorhome to travel around the country in the fall, since I’m forced to work remotely and the kids will be doing school remotely. If there were no pandemic, we would have never dreamed of buying one.
Right, I agree that this is probably the fundamental reason. Just not something I'd have expected going into this crisis.
I'm glad for it, though, we're going to put ours on the market in a couple weeks after our last planned camping trip for the year, a strong market will be good for resale. Hoping it weakens a bit over the winter, though, because before next season rolls around I'll want another.
My dad just bought one so he could get out while social distancing.
Either that, or a large number of people are unable to meet expenses and forced to break bad. /jk
Wouldn't surprise me if a lot of people are buying new phones while they're sure they can, to avoid the risk of being stuck with an old and potentially failing one when they can't.
Phones are luxury goods only up to a point. Especially once you're invested in an app store, it can cost a good deal to switch platforms. And it should be news to no one that having access to communications grows more, not less, important, the closer you get to stony broke.
Perhaps also that Apple is known for making quality phones. In times of economic pressure, people buy for the long-term.
In times of economic pressure, buying a $1000 phone is not the smartest idea.
Buying a $399 iPhone SE that will receive OS and security updates for at least six years, on the other hand, works out to less than $70 a year.
And a $399 iPhone SE that's $200 off is even better: https://news.ycombinator.com/item?id=24005628
And Apple, of course, makes no phones that sell for under a grand.
> Wouldn't surprise me if a lot of people are buying new phones while they're sure they can, to avoid the risk of being stuck with an old and potentially failing one when they can't.
I think you're incorrectly assuming people are good at any form of long term financial planning...
I think you may know a bit less than you think you do.
My iphone se2 was 400$. I got it at 50% off, so $200.
That's not luxury by any means, and is price competitive even with the cheapest of android phones.
Apple's lower price-point offerings might have old hardware, but its more than made up for it by just working & offering long-term support. Something no android phone can match.
The iPhone SE has the top of the line processor that is still faster than any Android phone.
Remarkable? Perplexing. Like facebook revenues up while all companies are slashing their marketing budget.
Regarding Facebook ads: We are in the throes of a general election cycle, I'm curious how much of the slack that has been picking up. Anecdotally I am seeing tons of political ads across the internet.
I am also curious if increased internet usage in general is compensating for lower PPC as people are stuck at home.
How has Twitter's ad revenue gone? They made the policy to eschew political advertising, so they could serve as a (somewhat imperfect) control group. On the other hand, they also haven't had a high-profile advertiser pull-out like Facebook did either.
In Q2, as the COVID-19 pandemic had companies cutting ad spending across the board, Twitter's revenue fell short of analysts' expectations, falling 19% YOY, and earnings also failed to meet expectations. The one bright spot was that its number of average monetizable daily active users was 186 million, higher than expected. Twitter's stock is up 5.8% at time of writing.
On the ubiquitous political ads, I had to fax something to my doctor last month. I didn't want to subscribe to something to send a single fax and all the fax services that I might have used were unavailable thanks to the lockdown. I found a service that offered free faxing with an ad on the cover sheet. I didn't think twice about it and sent the ad. The confirmation page also had an ad on it. For Trump/Pence. Now I'm terrified that the same ad was on the fax and I'm going to need to get a new doctor.
You just had an entire planet told that they were going to stay at home, and that school-age children needed some type of device to learn through. That must have driven some percentage of new sales.
Not to mention things like Bowdoin providing iPad Pros with Magic Pencil and Magic keyboard to all their students (plus paying for cellular connectivity for those students who need it). I imagine this is going to have a knock-on effect where this becomes a quasi-standard setup for remote education improving Apple's bottom line going forward.
https://www.bowdoin.edu/news/2020/07/bowdoin-to-provide-ipad...
Many sectors are slashing their marketing budgets, especially their vaguely-targeted mass-marketing or big-incumbent-brand marketing.
But Facebook's ad engine allows micro-targeting, and is especially valuable to upstarts & small-businesses in times of changing behavior/consumer-loyalties.
To the extent big spenders free up inventory, Facebook has bidders-in-the-wings, offering just-a-little-less, and plenty of impressions among the 2.99 billion people who visit one of the Facebook family-of-sites monthly.
We'd have to see the product breakdown, but it's possible this could be explained by more people working from home and home schooling; people are likely spending more time on devices like tablets and laptops. If iPhone sales are up, that would indeed be remarkable.
Remarkable either way because Apple stores were closed for most of the quarter.
You're right. The work-from-home angle could be part of it.
My company recently announced everyone is staying home for at least the next 10 months, and is trying to get hundreds of iPhones for everyone who didn't have a company-issued phone before.
The company my wife works for is half at work, and half at home right now, but everyone is getting new phones, just in case.
I never thought of it as a luxury. Actually quite the opposite. A luxury is something that I pay a lot of money for but don’t use it a lot. For me at least. The price per minute used is quite low...
Here in the UK between working from home and "remote schools" (i.e. schools moving online because of the lockdown) spending on things like home offices, laptops, etc. went up.
If you're stuck at home you probably and in any case spend more time online and/or on your phone, which has to be good for whoever owns online app and music stores. (This also explains Facebook's good results).
All in all, it's not surprising that results are good for Apple. But it is not sustainable growth.
Looking at the numbers, both iPad and Mac sales exceeded estimates, iPhone was inline.
Seems likely a lot of this came from laptop and iPad sales for work-from-home, and home education respectively, as opposed to frivolous luxury consumer spending.
People are saving a lot of money too from not having to commute, entertainment, travel, etc. that spending shifted to consumer goods. Plus, government handed out a lot of free money on too of that.
I don't know if I would classify Apple products as strictly luxury, certainly not in the same sense as a Casio vs a Rolex, a Jansport vs Gucci, or a studio vs a 1 bedroom, Honda vs a BMW, staycation watching Disney+ vs trip to Disney.
When I think of cutting back on luxury, I am looking for things with a very high incremental cost to incremental value ratio. Apple products could be one but it would be farrrr down the list speaking for myself and others I know.
I just read today that disposable personal income in the US rose by 10% in Q2, thanks to stimulus: https://mobile.twitter.com/jasonfurman/status/12888166061650...
If congress really does not extend benefits, there's bound to be a sizable negative effect.
>consumer spending on luxury goods is pretty remarkable
The vast majority of Apple products and services are no where near "luxury" prices.
What makes you think companies aren’t buying these for use due to COVID? Doctors and nurses video conferencing patients, schools switching to e-learning, and any other businesses sending workers home who may or may not have a computer. Certain industries might also be switching to FaceTiming/Video Conferencing customers.
Very few people are paying full price, up front.
It is like leasing a car, except it is a hand computer.
Hasn't consumer spending (at least at some level, not completely) been propped up by the unemployment assistance and CARES act checks? I wonder how much spending on these kinds of goods might drop if that assistance goes away.
Don't forget that they've just released a new MacBook Air and iPhone SE. In hindsight this was the perfect time to be releasing cheap devices like this.
ipads for education, mac's etc. working from home can drive sales, as folks need mobile equipment. and most sane companies are able to let a user choose equipment. in the small to medium shops it's less costly to run mac equipment than windows in the long run due to saner security requirements etc.
Everyone is cooped up at home. Not too surprising that they'd buy laptops & ipads.
I’d guess that people buying luxury goods are also the ones least affected by unemployment.
Do people maybe see phones and related tech / services as sort of essential?
you can buy a new Nokia 2.2 android phone for $100 on Amazon. it works perfectly for 99% of what you might ever need to do. phones are now at the point where PCs were in 2010--commoditized and at a technical peak. so there is no longer a compelling reason for the average person to buy the newest most expensive model every year. Apple should be dying. maybe it's delayed and we'll see Apple's first decline in revenue in 2-3 years.
Anxiety induced shopping is a real thing. Leisure travel is another huge wallet share that’s been nonexistent for several months now.
Anecdotally that is totally the case for me - I’ve been spending money on lots of tech and random fun items. Despite my purchases though my spending is overall down because I’m not eating out, going on trips/vacations.
Really unexpected that YOY revenue is up for Mac 22% and iPad 31%. Also unexpected that service revenue growth seems to have slowed.
iPhone sales moved up 2% from last year to $26.4 billion in the June-quarter. Apple earnings infographic: https://news.alphastreet.com/apple-inc-nasdaq-aapl-earnings-...
When did Apple started distributing dividends? I remember them being known for not doing so.
I believe around 2013 Apple altered its buyback and dividend practices, as large shareholder Carl Icahn seemed at the time to be trying to manipulate the company and shareholders to his own advantage.
Several articles discussed such around the time. Here are a few.
https://www.latimes.com/business/technology/la-fi-tn-carl-ic...
https://www.marketwatch.com/story/carl-icahns-2-billion-appl...
https://www.forbes.com/sites/chuckjones/2017/11/10/carl-icah...
When they ran out of things they could reasonably spend their cash on.
:( and here i am still waiting for Apple product to reduce its price, coz i thought in pandemic, people will keep money for groceries, medical bill and not electronic devices.
Their phones start at $399. Do you consider it too high?
Would you agree that the Tl;dr would simply be "unstoppable"?
It's Q2 right? Or do they not use the calendar year for accounting?
They do not – their fiscal year ends 9/30.
They don’t use the calendar numbering, but I don’t really know why
When you start a company, you choose a "tax year" by filing a tax return. From then on out, you file your tax return the same month every year.
If it's a small business, you probably find it most convenient to have the tax year be the calendar year and match up with your personal filing.
Many businesses have some concept of a "selling season" that makes it really convenient to not use January through December. A retailer, for example, probably prefers not to close their books on December 31 every year because of all the post-Christmas gift returns. Walmart has a January fiscal year (February 1 through Jan 31).
If you sold stuff to schools, you might choose a June fiscal year; most universities use a June fiscal year so an entire school year stays in a single fiscal year.
I have no idea why Apple chose September, but it was probably a rational decision.
Possibly related: new iOS and iPhone versions are released in mid-to-late September.
Apple's calendar year was set in stone about 30 years before the iPhone was invented.
Apparently:
For a variety of reasons, some public companies will use a non-standard or non-calendar quarterly reporting system. For example, Walmart's first quarter is February, March, and April; Apple Inc's Q1 is October, November, and December; Microsoft Corporation's Q1 is July, August, and September.
In addition, certain governments use different quarter systems. The first quarter of the United States federal government’s fiscal year is October, November, and December, Q2 is January, February, and March, Q3 is April, May, and June, and Q4 is July, August, and September. State governments may also have their own fiscal calendars.
Sometimes a company may have a non-standard fiscal year to help with business or tax planning. The Internal Revenue Service (IRS) allows companies to choose a “tax year” that is still 52-53 weeks long but does not end in December. H&R Block (HRB) ends its fiscal year on April 30th, which makes sense because that is the end of the busiest part of the company’s year. Releasing your annual report, which may be accompanied by shareholder meetings and additional disclosures after the busiest part of your year will help managers and shareholders make better decisions about the year ahead.
Companies that rely on U.S. government contracts may use September as the end of their fiscal year, and the fourth quarter because that is when they expect new projects to be closed and budget planning from the government to be available. Historically, large technology firms had stronger quarters early in the year, which is why many of them (including Microsoft (MSFT)) have a fiscal year that closes at the end of June.
Some companies have very unusual quarterly systems. Adobe (ADBE) closes their fiscal year on the Friday closest to November 30th. In 2018, November 30th was a Friday, as well as the last day of the month but in 2017, ADBE closed their fourth quarter and the fiscal year on Friday, December 1st, because it was the Friday closest to November 30th.
> Some companies have very unusual quarterly systems
This can make things quite confusing when comparing revenue or earnings between periods as years may have 52 or 53 weeks (a 2% difference) and quarters may have 12 or 13 weeks (a 8% difference).
It's because Apple has to account for returns, and their biggest quarter is the December quarter. Most retail companies do not end on Dec 31 for this reason.
There's a slight tax disadvantage in using a non-calendar fiscal year since tax brackets typically adjust upwards annually and the non-calendar accounting means that you'll be booking some revenue in year X at the less advantageous year X-1 tax rates. But other accounting matters can outweigh that.
https://www.benzinga.com/news/16/10/8617799/why-do-different...
Along other reasons, with such a massive percentage of their income (and income variability) in Q4, it really helps their accountants to close out a tax year in the (relatively) predictable and stable Sept after three quarters of normalizing cashflows.
Sheltering taxes in a double-Irish requires pretty accurate projections.
Also often they just don't have all the data they need to close out a year until a few weeks after holidays, especially if people are taking a break, so it's just a lot easier on the humans involved.