Our primary focus today centers around Apple (AAPL), a company drawing considerable attention from both shareholders and consumers. A strong preference marks consumer sentiment for the Apple ecosystem, although concerns about pricing and monthly expenses persist. Interestingly, these concerns have not significantly impacted Apple’s customer base, which remains steadfast despite these occasional grumblings.
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However, a unique dynamic has emerged in China with the introduction of Huawei’s 5G technology. This development, coupled with Beijing’s assertive stance, seems aimed at keeping Apple’s production firmly rooted within China, employing a style of strategic coercion. The pivotal question lies in the realm of artificial intelligence, surpassing the capabilities of Siri.
This allows Apple to develop a parallel system or explore potential partnerships (notably SoundHound). Presently, Apple continues to operate independently, collaborating with established brands. Furthermore, Apple enthusiasts can anticipate improved Wi-Fi performance and signal strength with the imminent release of the iPhone 15 ProMax and the prospect of a 32-inch iMac in 2024.
Notably, recent revelations suggest that Huawei’s proclaimed competition with 5G technology in China falls somewhat short of the promised standards despite offering speeds akin to 5G. Apple’s loyal customer base in China, motivated by the ecosystem or semi-professional photography requirements, is expected to remain faithful and continue integrating their devices with MAC. The ease of connectivity integration strongly favors Apple, followed by Android systems like Samsung, with generic alternatives such as Huawei lagging.
Additionally, the ProMax boasts a remarkable ‘spatial vision’ 3D camera, capturing the imagination of those with aspirations related to ‘VisionPro.’ However, for everyday usage, this feature may hold limited relevance.
Taking a brief diversion, let’s briefly discuss SoundHound (SOUN). I recently tuned into an interview featuring SoundHound’s CEO, conducted by ‘Wainwright.’ Regrettably, the discussion was prematurely interrupted at the 18-minute mark during the streaming video. While the interview appeared satisfactory, perhaps even routine, it lacked the depth of inquiry I might have pursued. The CEO reiterated guidance, projecting increased revenue in the third and fourth quarters. However, the correlation between these projections and the company’s delivery ability remains uncertain, particularly concerning debt service obligations. As a result, we can anticipate potential price fluctuations in 2024.
One pertinent question I would have asked pertains to utilizing Shelf Registration. Specifically, whether it would be employed to enrich the Board or Founders further or directed solely toward facilitating growth and operational necessities. Given the information I have received indicating a departure from past financial complexities, I believe the CEO could have provided a favorable response. On a lighthearted note, I would argue that analysts who neglect to ask this question might be ‘wain-wrong’ rather than Wainwright, as both they and Dan Ives, who extended warm wishes for my upcoming trip, anticipate price targets of 5 and 7, respectively.
‘Market X-Ray’
Shifting our focus to the broader market perspective, we navigate a challenging macroeconomic environment. Technical indicators for the S&P remain neutral, while the prevailing sentiment suggests that the Federal Reserve is unlikely to enact significant measures given the excessive debt levels. The government’s capacity to curtail spending, reform entitlement programs, or alleviate indebtedness is constrained.
Efforts will likely remain confined to rhetoric, with potential repercussions for the banking sector. However, my longstanding observation remains unchanged: The authorities may tacitly welcome controlled inflation to alleviate debt burdens, albeit at a measured pace that facilitates repayment with devalued currency. The Federal Reserve should be aware of the persistent risk associated with office space oversupply, which might impede its objectives, irrespective of consumer price indices.
Consequently, unless we face catastrophic financial upheaval, we are poised for a period marked by extensive discourse and unease, during which currency debasement will exacerbate the challenges confronting individuals with fixed incomes, particularly older people.
Conclusion
The market sentiment toward Apple remains relatively neutral, awaiting the forthcoming Consumer Price Index (CPI) release. While the headline may reflect an increase, particularly in light of rising oil prices, the core CPI is anticipated to exhibit a more favorable trend, providing the Federal Open Market Committee (FOMC) with room for a potential pause at its next meeting. The market could experience an initial good upswing in such an event, though sustainability remains uncertain.
From a technical perspective, the market appears to conform to a symmetrical pattern. Furthermore, the market’s reaction to Oracle’s recent decline may be somewhat exaggerated, as similar minor disappointments could impact other stocks. Our stance on Oracle is one of observation rather than ownership, driven by its potential to enhance its artificial intelligence offerings.
As a precaution, we advise against prematurely investing in companies such as Oracle (ORCL) or Salesforce (CRM) within the ‘Cloud’ and AI sectors, as valuations have inflated among industry giants, necessitating a correction period. In summary, the prevailing economic landscape in September exhibits few discernible changes, with persistent banking and debt-related concerns. Meaningful adjustments appear unlikely unless the economy experiences a significant downturn. The Federal Reserve must explore policy adjustments beyond mere interest rate manipulation, which could involve balance sheet reductions.
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