We spend a fair amount of time in this space belittling the predictions and pontifications of pundits around here (one in particular -- though we would like to stress that it is the sites that unfairly balloon his above-average-but-imperfect record into gospel-like status that we actually don't care for, not the man himself). We love deconstructing rumors (where needed), rooting out the source, watching it evolve and refine (or be walked back and forgotten), and let's not forget: even if it's clearly nonsense, rumors can be fun and entertaining. We feed on them.
One trend we've seen lately, however, has prompted us to furrow our brow: the use of blatant rumors as rationales for investment advice. It's not like this only just started happening -- the Macalope has made a career out of pointing this out, with a great deal more aplomb than we can muster -- but it is increasing, and it is concerning. As near as we can make out, about half of the rumors in circulation at any given time are either completely false or not accurate -- that is not good enough for analysts to stake people's retirement money on, in our opinion.
The dark side
Ever time a big Apple event comes and goes without a mention of something that was widely rumored, we hear from at least one person who claims the event was thus "disappointing" or, if they were really invested in the rumor, "boring" -- or if they are truly crushed, the incantation of "this never would have happened under Steve Jobs." Let's put aside the fact that rumors were even more likely to be wrong back when Steve Jobs was around than they are now (remember the iWalk, anyone?).
Behold the very boring iPhone 7
We should also be frank and say that, from time to time, we have seen rumors that appear to be specifically designed to force AAPL to move in a certain direction. As we all know, traders can make money if a stock goes up, or if a stock goes down, depending on how they bet, buy, or sell on the change. If you come across a rumor that has a detailed explanation of why it will happen, that's one of the signs of possible market manipulation. Lately we've seen less of that, thankfully, but more of what we call "rumor-based presumption advice," and really that's not much better.
Market-manipulation rumors are designed to make you panic, and act: rumor-based presumptions are designed to make you believe all the rumors you hear and accept them., which will influence your future decisions over, say, facts and historical trends. It is disappointing when we see Wall Street firms and analysts -- those guys generally went to college, studied their incredibly boring economics textbooks, probably listened to way too many mind-numbing business lectures -- and now are just getting lazy.
This brings to our example: JP Morgan has cut its estimate year-out estimate of AAPL's price from $125 to $105 (not far from where it is right now). The reason? Because the "iPhone 7" expected this fall will be a dud that is met with cool reception by the public. Did Rod Hall, the specific analyst in question, get some insider knowledge on this? Did he do a poll of potential buyers? Nope. He's just believes what KGI analyst Ming-Chi Kuo has said, because Ming-Chi is "always" right (picture an asterisk the size of Pluto on that).
To be fair, the echo chamber that sometimes is Apple reporting has been reporting on various mock-ups, alleged leaked schematics, and other reports and claims (sometimes with some "evidence," see below) that the iPhone 7 will basically look like the iPhone 6s -- for the first time in a long time, the new-integer iPhone won't offer a complete redesign, in short, and no amount of gee-whiz software features or improved cameras or even a Smart Connector is going to help matters. Dooooomed.
We can't say that it isn't all true, though we are suspicious that this belief seems to have grown out of Intel's decision to extend its chip cycle to a "tick-tock-tock" cycle, and thus Apple will do the same -- even though iPhones don't use Intel chips. Hey, listen, the iPhone 6s is a pretty sweet refinement of the iPhone 6, and if Apple decided to keep the design and just increment it the way they did from the iPhone 6 to 6s, we wouldn't have a problem with that at all. It just seems unlikely to us that Apple would be unaware that a "6s-s," if you will, wouldn't do as well as a substantially new design.
Behold ... the 2017 iPhone!
For its part, Apple hasn't said a word about this -- which increases our suspicion (basically, Apple can't win when you get to this point). No lawyers trying to sue people who get too close to the truth, no Foxconn workers going public with tales of being fired for leaking, no cease-and-desist orders from Cupertino lawyers -- this isn't Steve Jobs' Apple anymore, that much is for sure. While we do not in any way mean to imply that the "same as 6s basically" rumors are false, it's worth pointing out that if
Apple had a new design planned, making people think otherwise would help them keep it secret. Did we just blow your mind? We think we did.
The less-dark-but-still-murky side
The doom and gloom from Mr. Hall and thus JP Morgan buys into the idea -- if you haven't read Rumor Roundup lately, hold on to your hat for this next bit -- that the iPhone 7 will be "meh," and that Apple is actually planning its next big redesign of the now-mature iPhone for its 2017 model, which would normally be called the "iPhone 7s." Now how much would you pay? But wait, there's more!
Only there won't be
an iPhone 7s, see ... Apple will jump straight to the iPhone 8! Surprise! Plot twist! Dramatic sting of music, and guinea pig turning around suddenly!
Now, maybe this will happen: we don't know one way or another, and it would certainly shake things up. A quick look at the paltry statistics we've put together on rumor accuracy, however, would suggest that the farther away from the alleged date of an event, the less likely it is that said even will happen as described. So pardon us if we think the rumor Cluedo (known as Clue in the US) players have not correctly named the killer, the method, and the room they were in some 15 months out.
or maybe this is the 2017 iPhone!
It occurs to us that if Apple (and thus those eerily psychic pundits) already know that the 2017 iPhone is the big redesign and thus how its going to be different (Ming-Chi assures us that Apple is going to back to its heavier and more-breakable "all glass" design, like a larger iPhone 4 ... sort of), couldn't they -- you know -- just do that now? Yes, there are some things we "know" (see our previous column on "knowing") the iPhone 7s/8 will have that aren't here yet, like the A10x (or A11) processor. But if Ming-Chi knows, then surely Apple does too? So why not just order that up, call it the iPhone 7, and embarrass the analysts?
Hall said in his report that part of the reason for the downgrade is that he doesn't think the Apple Watch will do as well as it did last year. Did it do well last year? Nobody actually knows. There's some educated guesses that put the figure at between 12-15 million units, but Apple hasn't said a peep about this other than it's doing as well as they expected and possibly better. Hall now believes that Apple will be lucky to sell another 12 million this year, even with the price cut and watchOS 3 coming out, and this is about half as many as he thought it would sell this year -- and his 2017 estimate for the Watch is down from a guess of 41.6 million to just 14.3 million.
Both his previous estimates and current ones are based on so little real information that we think it pointless to even belittle them, except to say that this is clearly the math of a man bitterly disappointed that the Apple Watch 2 wasn't announced at WWDC, which apparently means that it never will be -- or at best, it will finally show up before Christmas of next year. Hall goes on to predict that Apple's revenues will stall out next year as a result, because obviously no other new products will be announced, either.
Sorry, no, this one is the 2017 iPhone
To be fair, he does mention, as does Credit Suisse, that the redesigned 2017 iPhone (whatever it is called) will do well enough to see iPhone sales bounce back. And he does blame most of the projected downturn on general market conditions rather than any decisions by Apple per se
, and there is some indicators that would suggest that the smartphone market generally could shrink. There is, however, also evidence that the iPhone market, if not the broader industry, might do better.
We've reported on a study that indicates people are holding on to their smartphones longer, and we've reported on studies that suggest the smartphone market will follow the PC market into the doldrums. But using that latter study as an example, we have to note that Apple generally does great in outgrowing the PC market, and there's little reason not to believe the same thing will happen with the iPhone -- maybe not stupendous, record-breaking sales, but far less than a disastrous malaise.
For example, we've noted that numbers from potential iPhone upgraders remain high, and that Apple is looking at the largest-ever pool of upgraders, thanks to the over-the-top success of the iPhone 6 line, which came out two years ago -- in other words, all those contracts are coming to an end. Even flat rates of upgrading would give Apple a huge boost compared to the iPhone 6s line's holiday quarter, and again we think Apple is aware of this -- so it is in their strong interest to make the iPhone 7 -- not the 7s/8 -- something special, even if it does
use a similar form factor.
Credit Suisse analyst Kulbinder Garcha, who echoes JP Morgan in buying into the Ming-Chi predictions about 2017, maintained his $150-a-share prediction for AAPL on the strength of that existing-customer base. He did cut his earnings estimate for this year to $7.80, and took his 2017 estimate down five percent as well, but on the strength of the notion that the 7s/8 is the one that will boast a redesign, raised his 2018 estimates to $12.32. Yes, that's right, more than two years out is when it will finally be happy days again.
To hear them tell it, this 2017 iPhone we're all waiting on is going to be pretty darn awesome. Among the other predictions (again, most of which come from Ming-Chi as the sole source) are that it will have a curved-glass screen, that the Plus model will have an even bigger display (5.8-inch AMOLED), that the physical Touch ID button's fingerprint reader will be incorporated into the screen so that the display is truly edge-to-edge, that other functions -- like the front-facing camera and even a speaker -- will be incorporated directly into the screen, wireless charging, and of course the additional usual improvements in the rear camera, software, and processors/graphics chips.
Or maybe this is the 2017 iPhone
That, the analysts think, is what it will take to move a lot of Android users over to iOS and truly grow the smartphone market -- or, to put it another way, analysts like Intel's "tick-tock-tock" cycle idea so much they are applying it to non-Intel chips, other types of computers, and even the entire smartphone market (there is an implied assumption inherent in these projections that suggests that Samsung, Apple's chief smartphone rival, will not be able to take advantage of this iPhone lull due to the overall projected drop in smartphone demand).
Garcha believes that 2017 will be a banner year for the iPhone, with Apple selling 250 million units in fiscal 2018 -- a 16 percent increase of the estimated sales of iPhones this year. One the one hand, these predictions from both firms -- which, we remind you, are charged with protecting and growing people's and institution's financial future -- are built on such a complete house of cards that they are almost certain to be off by notable, and possibly huge, degrees. On the plus side ... nobody's talking about "peak iPhone" anymore. There's always 2018 for that.
-- Charles Martin