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Right On Time, My Prediction Of Apple Margin Compression 8 Quarters From My CNBC Warning Landed Right On The Money!

Reggie Middleton's picture




 

 apple product chart growth copyapple product chart growth copy

Well, it looks as if my Apple ruminations and research have come to Fruition - and rather accurately at that. Since Apple has such a cult following, I will set the facts straight right here in a nifty little timeline as Apple tumbles in real time. This is to correct those who are comprehension challenged in saying that I've been crying to short Apple for 400 points. To begin with, I run a subscription site, I generally don't give away actionable advice for free, I charge for it. I have warned about Apple's macro and business conditions - yes, but whether to go long or short on the stock,I only opined in public once. Read below to see how that turned out. My next post will start revealing some of my actual subscription materials in order to make public the accuracy and prescience therein. Is it time for 1000s and 1000s of rose colored #iPhone sporting #iSheep and #fanbois to issue kudos to the BoomBust???

Spring 2010 - I declare the mobile computing wars are on and Google looks to be the front runner (light years ahead of the sell side)...

The Creatively Destructive Pace of Technology Innovation and the Paradigm Shift known as the Mobile Computing Wars!

  1. There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
  2. The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift
  3. An Introduction to How Apple Apple Will Compete With the Google/Android Onslaught

In October of 2010, I warned that Apple would face margin compression and make a short candidate. I DIDN'T say it should be short at that time, but I did say within 4 to 8 quarters competitive realities would catch up with it...

October 2011

So, what happened exactly 4 quarters later? Oh yeah, Apple misses on margins, the stock drops -  Reggie Middleton Wasn't the ONLY Openly Apple Bear in the .. This was the only time where I publicly stated I would short Apple. Announce contrarian short candidate - company misses and the stock dropped, right on the 4 to 8 quarter schedule! Sounds pretty good to me. Go to 2:20 in the video for a clear description of the margin compression illustrated below...

In the mean time, here are some updated margin charts to support what was said in the video and the extant Apple research for subscribers to review.

iBubbleiBubbleiBubble

Yes, Apple is the vast majority of the desktop computer equity market capitalization!

Apple revenues as a smartphone companyApple revenues as a smartphone companyApple revenues as a smartphone company

Apple has, in just a few short years, morphed from a computer computer to a smartphone and tablet company, which essentially are just new age computers anyway. It's just that no one sees Motorola, RIMM or Nokia that way!

ipad marginsipad marginsipad margins

iphone marginsiphone marginsiphone margins

As the key revenue drivers see there margins compress (and I told you so two years ago), entity level margins will drop as well:

Which Is The More Sustainable Business Model - Selling The World's Information or Selling Shiny New Things???

Apple Margin chartApple Margin chart

Google is a true threat to Apple that simply cannot be ignored. Here I explained that threat im explicit, easy to follow detail...

 Of course, I put my money where my mouth was and publicly declared Google to be a superior investment to Apple on CNBC's stock draft. To date, I'm currently in the lead as Google drastically outdistances Apple...  Reggie Middleton currently leading the CNBC Stock Draft Pick ...
Now, exactly 8 quarters after my 4 to 8 quarter premonition, does everybody want to get short Apple and long Google??????

October 2012: Everyone jumps on the BoomBustBlog bandwagon...

 goog vs aaplgoog vs aapl

Below is my latest on Apple, showing whether I believe this is the time to short and what I think Apple is really worth. I feel I have been on the forefront of the Apple issue AND have been rather accurate as well.

Click here to subscribe. After subscribing, I wish all newcomers to download the very simply and quick Apple margin model below to put your most optimistic assumptions in to see how they may look in terms of product sales.

 

Industry Leading, Subscription Based Google Research

All paying subscribers should download the Google Q1-2012 Valuation Summary, wherein we have updated the valuation numbers for Google using a variety of metrics. Click here to subscribe or upgrade

Google still exhibits the likelihood that they will control mobile computing for the balance of the decade.

Subscription research:

file iconGoogle Final Report 10/08/2010

A couple of bits from our archives...


There are currently 7 Google reports available. Select the "Google Final Report" and click the "Download" button. You will receive a 63 page analysis that looks like this on the cover...

The table of contents outlines how we have broken Google down into distinct businesses and identified both the individual business models and the potential revenue streams, as well as  valuation for each business line.

Page 57 of the analysis shows a sensitivity table which outlines the various scenarios that can come into play and how it will change our outlook and valuation opinion.

Professional/institutional subscribers can actually access a subset of the model that we used to create the sensitivity analysis above to plug in their own assumptions in case they somehow disagree with our assumptions or view points. Click here for the model: Google Valuation Model (pro and institutional). Click here to subscribe or upgrade.

 

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Wed, 10/10/2012 - 00:46 | 2873645 hannah
hannah's picture

reggie - you do understand that when aaple finally does crash. it will take the whole market with it and probably all the brokers also. so you may be up on the trade but you will never see the money. apple is the market and the fed and the whole ball of wax.....be careful what you wish for.

Tue, 10/09/2012 - 18:20 | 2872793 hotkarlandthecl...
hotkarlandtheclevelandsteamers's picture

Reggie picks the god damn best stock in the market to be negative on since 2010, whether he said to short or not is irrelevant, Reggie is just on here pimping subscriptions.  If Reggie was so smart he would not be pimping subscriptions on ZH and printing money hand over fist trading the market.  As far as I know Reggie has been bearish on everything but GOOG, which has severly underperformed the market, even including this last rip.  He was touting how JPM derivative book would take it down....he used to brag about his returns in 2008...it has been all crickets since then, I am guessing he has been blow out on his trading accts which is why he is pimping 2k subscriptions.

Tue, 10/09/2012 - 15:03 | 2872077 Abednego
Abednego's picture

Reggie Middleton calls for rain sometime in the next 12 to 48 months - pack your umbrellas folks because sometime in the next two years it will fucking pour...

Tue, 10/09/2012 - 15:03 | 2872039 Zero Govt
Zero Govt's picture

Which Is The More Sustainable Business Model - Selling The World's Information or Selling Shiny New Things???

selling intrusion on privacy and monitoring peoples surfing, all without their consent, colating the spy-data and flogging it to corporates don't you mean Reggie?

how's Tesla doing old chum?

seems when GOOfball try to sell shiny new things on 4 wheels they need State subsidy to do it. Oh and to flog Android they can't put a price tag on it so that's swimming in red ink. Oh oh, now they're even subsidising their customers to 'sustain' their sinking Ad revenue.

all very commercial isn't Reg?

GOOfball need more props for their biz models than you can shake a stick at ...it'll have to be a stick coz you've buried your fiery sword of truth since becoming a GOOnbubble shill Apple-hating chump

How's your biz model Reg, got the CIA to prop you up yet?

Tue, 10/09/2012 - 15:07 | 2871998 Zero Govt
Zero Govt's picture

Oh shit, the Apple-hater bore is back

How's margin compression at GOOfballs Android Reggie?

...swimming in red ink truth be told, not that you're dealing in truths, but keep burying the fiery sword of truth while you trumpet their praises

How's Ad revenue going at Goonbubble?

...they're subsidising advertisers to keep the model from terminal decline velocity. Funny you didn't see that (desperate act) coming. In fact when it comes to bad news on GOO it's like your silence has been bought, like the Competition Commisioners across the globe

keep burying your fiery sword of truth, keep digging, need plenty of room for you and your beloved GOOfy to be buried in

Tue, 10/09/2012 - 14:37 | 2871933 Stubert
Stubert's picture

In this case Reggie, I would BTFD on Apple.

You enjoy telling people to read before we comment?  Look below...familiar numbers?

Free Subscription = BS

Retail Subscription = $750 annually

Day Pass = $125

Professional Subscription (Monthly) = $275

Professional Subscription = $1995 annually

Institutional Subscription = $1995 annually

No, your prices are ridiculous.  Also, WTF on the TIERED pricing.  Great, you pay more you get more.  So much for the lowly subscriber.

Google may be good, but their do no evil motto is the biggest joke on earth.  They are likely the root of all evil.  Apple is apple, why can't they protect their patents?  Why can't they be capitalistic in a capitalist society?  You rant and rave about Apple and their downfall.  The real repercussion of Apples demise, will also be the demise of the entire market.  We are talking about a bell weather stock.  Go on... chant for it's death.  It'll mean we're all going to suffer.

Stick to predicting bank failures and world crisis.  I enjoy those more.  The apple vs google thing is like you pimping yourself out for google.  They ownz you b!tch.

Tue, 10/09/2012 - 14:39 | 2871919 LouisDega
LouisDega's picture

This gal looks like a young Diane Keaton. Very pretty and nice gams ( Legs ). Who is that guy on ithe monitor?

Tue, 10/09/2012 - 14:15 | 2871843 earnyermoney
earnyermoney's picture

The only reason Apple went parabolic was the momo chasing "smart money". What was the last count on the number of institutional holders of Apple? Dumb money if you ask me, because I paid .99c for my smart phone. It's all they're worth

 

Google and Apple fan boys fighting over their gadgets. Kind of reminds me of Sunni and Shia muslims in the Middle East.

F Goople.

Tue, 10/09/2012 - 15:48 | 2872156 Zero Govt
Zero Govt's picture

the (actual) reason Apple went parabolic is they hit a series of parabolic winners making the established global leaders in each field look buried in concrete

A Class Act, peerless in the tek arena. Investors recognised those brilliant achievements.

GOOfbubble has had one winner, search, to which they attached one biz model, ad revenue

their only other biz models all stink. Android is given away free dripping in desperation in red ink. Tesla requires State subsidy, The green crap stinks as much as Solyndra. Now even their Ad model requires GOO to subsidise it to prop it up

it can't be long for this disease-riddled CIA dinosaurs demise... Reggie goes with it

Tue, 10/09/2012 - 14:00 | 2871780 trada101
trada101's picture

Is this a joke or something? Reggie makes it sound like Apple is collapsing.

Lets see, Google finally broke out of it's long base range of $650 and went to $775, a very respectable 20% move, but barely over it's highs of 2008.

Apple on the other hand went literally straight from $200 to $700, a whopping 350% move!

Reggie here has had the foresight to come on air and "warn" every one of the impending disaster a few hundred percent early, so nice of him, eh?

Forget margin compressions, Apple has been parabolic for so long it needs to pullback to the $500 area just to behave like a normal stock.

You don't need the iHate crowd coming out of the weed works to know that Apple needs a pullback.

Oh, btw, Google will experience a 10% pullback in the next 4-8 quarters, yup you heard it here first!!!

Thu, 10/18/2012 - 14:04 | 2901878 trada101
trada101's picture

Oh look, it's now Oct 18th and Google just experienced a 10%+ intra-day drop....

 

DAMN I'M GOOD!!!

Tue, 10/09/2012 - 13:24 | 2871645 silverserfer
silverserfer's picture

I despised apple as soon as they put out iTunes with their BS incopatable file format, unreplaceable batteries, average  2 1/2 year lifespan on products, and outrageous user agreemtnets. Never got on board with their icrap. Fuck em.

Tue, 10/09/2012 - 15:22 | 2872176 Zero Govt
Zero Govt's picture

so what are you on, Microshite?

..ok, Mega Shite to be absolutely factual and accurate

Tue, 10/09/2012 - 13:17 | 2871622 Jack Sheet
Jack Sheet's picture

Pumping subscriptions and Lauren's thighs.

Tue, 10/09/2012 - 13:12 | 2871601 machineh
machineh's picture

Last year, Reggie first made me aware of how fast the capability of Android devices was advancing vs. competitors.

Apple's billion-dollar patent verdict over Samsung in August pushed me over the edge -- I ain't Apple's fanboy no more!

Today I bought a Samsung Note 2 running Android 4.1 Jelly Bean. It kicks the iPhone's ass. Thanks for the heads-up, Reggie!

Tue, 10/09/2012 - 13:53 | 2871756 earnyermoney
earnyermoney's picture

If you paid more than .99 for this device, look around the table ... you're the sucker.

Tue, 10/09/2012 - 13:09 | 2871589 Grand Supercycle
Grand Supercycle's picture

As mentioned, APPLE parabolic weekly & monthly charts are at EXTREME levels.

Unfortunately longs will be badly burnt.

H+S pattern (ie bearish) on APPLE daily chart in progress and downtrend on daily chart commences.

http://trader618.com

Tue, 10/09/2012 - 13:08 | 2871566 Almost Solvent
Almost Solvent's picture

Reggie - they keep linen em up - you keep hittin em outta the park!

 

Apple is sooooooo much more than a shiny gadget "offshorer" to Foxconn. They also hoard patents and overcharge you to gate you into their ecosystem.

Tue, 10/09/2012 - 15:27 | 2872208 Zero Govt
Zero Govt's picture

I'm a freedom luvvin junkie, i don't feel "gated"

i have Apple for its uber-reliability and cool function, I have iTunes, like nearly every DJ, it has no paid music, all 2,500 tracks are free off the internet

where am i gated mate?

Tue, 10/09/2012 - 12:47 | 2871518 benbushiii
benbushiii's picture

This would be great research, except that Reggie has been negative on Apple since 300.  So from 300 to 700, and now 630; how did one make money from this research? 

Tue, 10/09/2012 - 13:27 | 2871657 Reggie Middleton
Reggie Middleton's picture

You see, this post is for you. Go back and reread it. Without paying for the research, you don't know how negative I've been on the stock - and I assumed that was common sense. alas, it's not so common. Publicly, I've declared a short on Apple once, it missed shortly thereafter. I've been publicly negative on product margins - which dropped. I've been publicly negative on market share - which dropped. I've been publicly negative on tech progress, which dropped. All of this stuff is contained in the article and links above, but we are still having this discussion for some arcane, Apple marketing induced reason.

Haven't been wrong yet. Now, if I can only get you guys who don't pay to read what I write versus what you feel, them I'll be making progress.

Wed, 10/10/2012 - 13:00 | 2875293 benbushiii
benbushiii's picture

I did have a subscription, and read your research.  You were flat ass wrong, not just on Apple, but most other concepts.

Wed, 10/10/2012 - 15:26 | 2872263 Zero Govt
Zero Govt's picture

the only time you care to comment is when you're trying to convince some (primarily your deluded self) you've been right all along and still weilding a fiery sword of truth

you're actually a biased, Apple-hating, cherry-picking, truth-burying shill for GOO

delusion has set in, why don't you take your Apple-hating series and mis-direct your subscribers into GOO shares, they've already missed the greatest ride (Apples meteoric share price) because of your blinkered, un-informed, mis-informed bias 

PS. i, like your cue-jumping self, tried to beat the cue at the launch of Android. Only problem was Reggie, there was no cue! Just as you scour the world for anything better than an Apple product, i scoured the world for a cue for Android. A big fat zero on that score, contrary to your garbage pumpinbg about Android being desireable amongst consumers. No cue, no desire, another dullard GOOfy product launch

PPS: there's no cue for Tesla cars either, they'll be giving them away free like Android soon, they're already saturated in red ink like Android

Tue, 10/09/2012 - 14:30 | 2871898 SokPOTUS
SokPOTUS's picture

The only number we really want though, Reggie, is Lauren's.  We would pay for that... ;)

Tue, 10/09/2012 - 13:47 | 2871729 ihedgemyhedges
ihedgemyhedges's picture

I'll take an opportunity to be serious.  Reggie, I do think your fundamental analysis whether re: European banks or CRE or Apple is deep and rates extremely high compared to the crap that is available all over the street, especially when coming from sell side.  I'm probably not educating anyone, including you, in noting that charts and momentum and hype and fads and the "beat the estimates" game can make fundamental analysis look worthless for long periods of time though.  However, that doesn't diminish the intrinsic value of your work.  People who consume it just have to understand that those calls may be very early.

Tue, 10/09/2012 - 13:04 | 2871564 I am a Man I am...
I am a Man I am Forty's picture

closer to 200 actually, almost as bad as doug kass at $85 back in 2007.

http://www.thestreet.com/story/10332933/1/dont-buy-apples-one-trick-ipho...

 

Tue, 10/09/2012 - 12:57 | 2871546 ihedgemyhedges
ihedgemyhedges's picture

"how did one make money from this research?"

Unless you paid for his advice, who cares? We loyal ZH followers have gotten several nice views of Lauren Lyster's hot bod during this time......so in my book, Reggie succeeded........

Tue, 10/09/2012 - 13:31 | 2871652 notbot
notbot's picture

On what planet does an analyst do a victory lap for his "Margin Compression" call when the margins looks like this:

http://goo.gl/zI3tD

Someone needs to explain to Reggie the difference between a decline in ASPs and a decline in Margins.  Even the last data point on this chart is higher than it was 4 qtrs ago.

Tue, 10/09/2012 - 13:33 | 2871675 Reggie Middleton
Reggie Middleton's picture

Again, you need to read before you comment. Your question (and chart) have already been answered and addressed. Watch this video again (start at 2:20 if you're in a rush) as I walk you through the way Apple's margins have moved...

Tue, 10/09/2012 - 14:19 | 2871835 notbot
notbot's picture

Reggie, I agree with most of what you said in this interview.  It affects the equity mkts. Check.  The iPhone growth will slow b/c the smartphone mkt is getting saturated. Obvious. If they stumble, there will be a rush to the door.  Yup.  

But the title of your post and your previous calls for "margin compression," have just been plain wrong.  Your spin that what you really meant is "product margins" are declining but "corp margins" are increasing is disingenunous, to put it nicely.  And AAPL doesn't disclose those, so we are taking your numbers?  

At the very least, you've missed the broader story, which is that AAPL has been a great stock for the last 3 years you've been out with your contrarian view.  It was a risky call.  You were early.  You made a "Short" call and apple declined 5%, then promptly doubled from there.

You'll be right, eventually, but you should man up and own your bad call.  You missed a great stock, and it wasn't just all hype like the dot com era...AAPL blew away numbers.  Real products, real sales, real margins, real cash flow.  

 

 

Tue, 10/09/2012 - 14:36 | 2871921 Reggie Middleton
Reggie Middleton's picture

You're polite, but you're also wrong. Ive been very specific about what margins were to fall all along the way. Its on the site, simply look it up. Nothing to debate over. As for whether I missed anything, unless you subscribe you simply dont know that. When things come to pass I will release the subscription research for all to see.

Ive been more accurate than the street consensus.

Tue, 10/09/2012 - 14:47 | 2871942 vast-dom
vast-dom's picture

Reggie I like you, I really do. And I don't particularly care who's right and who's wrong as I don't have skin (directly) in the Apple short game. I can also say that Apple is nowhere near it's real value, but neither is Facebook, Google, SP, DOW, NASDAQ. 

I know someone who used all the charts in the world, all the research and every possible trend, resistance, etc etc etc when shorting Apple -- his narrative was more than compelling as was his timeframe (i.e. end of summer) -- he almost convinced me. Right now he's bleeding out of his orifices and yet in many ways his research was correct and continues to be. 

Yes it's overvalued. Yes it will correct. But it ain't worth shit if there's not specific timeline for action.

 

EDIT: Reggie I suggest you release your research specific to what is being scrutinized here, to not only prove your track record (since it is ultimately to some extent after the fact), but more appropriately, since you are waving around your sword of truth here. It'd be common courtesy to show rather than to brag.

Tue, 10/09/2012 - 16:30 | 2872480 Reggie Middleton
Reggie Middleton's picture

I have a thoroughly documented public track record over 5 years long and I give away plenty of free stuff. I have thick skin and don't really care about snide comments from those that won't even bother to objectively read what was written (they won't be convinced anyway), thus I have no incentive to give away this popular content that my clients pay for... none at all. I will give it away when it is stale.

Wed, 10/10/2012 - 15:40 | 2872994 Zero Govt
Zero Govt's picture

your critics aren't being "snide" Reggie, they're objective (factual)

your Apple-hater series of articles are a fact. Your Goo-luvin articles are a fact. Your ignorance and/or silence of GOO's collapsing biz models kneck deep in red ink are a fact. You cherry pick with bias with blinkers on to avoid truths about GOO's crumbling escapades.

Facts Reggie, a long string of objective facts

We've had the 7 articles blowing your trumpet for Apples margin compression.

But how's GOOfballs margins on Android Reggie? Compressed?? ...sorry we missed the 7 articles you ran on GOOfball Android margin compression and bleeding red ink, what were the dates? 

I'm looking forward to your 2 days in a row articles dissing GOOnbubbls desperate attempt to subsidise their failing ad revenues and prop them up with cheap credit (debt). Read your predicttions crowing on Apples margins but missed your prediction GOOnbubble are suffering Ad revenue decline and would have to pump cheap credit in to keep in afloat. What date was your GOO bad news trumpeted Reggie?

Seem to have lost your fiery sword of truth Reggie, did you mislay it in a skeleton cupboard, brown envelope or privacy-abusing GOOnbubble red ink loss-making debt-subsidised biz model electric 4 wheeled turkey???

That's a mouthful of brilliant news for GOO, did it get stuck in your throat you not sharing it with us?

let's deal with facts Reg, as snide depends on which side of the fence you're sitting... missing the epic Apple share price rise because of your "objectivity" was it?

Tue, 10/09/2012 - 14:34 | 2871902 vast-dom
vast-dom's picture

much as i like Reggie, bravado notwithstanding, i wholeheartedly agree with notbot. timing is everything and Reggie's calls ain't worth shit to date; rather, they have killed anyone who bothered to short from his "research".

 

I'll even say this much: to short (or long) any stock at this point is not about fundamentals, research, charts and such -- it's about front running The Fed = no one can be blamed fully -- we are in some kind of perverse Twilight Zone of faked up markets.

Do NOT follow this link or you will be banned from the site!