Apple's shares broke below $100 in pre-market trading as analyst downgrades and further component producer outlook reductions weighed heavily on the "no brainer." It appears increasingly likely that Tim Cook's "rescue" email to Cramer on August was perhaps not the entire truth.. and the market is trading back to levels it first crossed in August 2014 (i.e. unchanged in 16 months). Of course, amid this carnage this morning, AAPL attempted to save the day and issued a quick statement proclaiming January 1st as the biggest App Store spending day in history... for now the stock is not excited about that.
Following our reports of FoxConn's hiring freeze in November 9which was ignored by all the talking heads), and confirming Nikkei's recent report of a 30% production cut in iPhones, this morning's headlines are not helping...
- Hit 1: *CATCHER TECHNOLOGY SAYS APPLE SLOWDOWN SEEN HITTING 1H: NIKKEI
- Hit 2: *APPLE CUT TO NEUTRAL VS BUY AT ROSENBLATT
Stock tumbles below $100...
Then saved: *APPLE SAYS JAN. 1 WAS BIGGEST DAY IN APP STORE HISTORY
But it's not lasting.
* * *
However, things just do not add up the way that Tim Cook said they were...
Here is what Tim Cook told Jim Cramer via email at the peak of the panic in August:
"I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks."
As we asked at the peak of the panic in August, So did Tim Cook lie?
If one uses channel check data to objectively determine end demand, the answer is a resounding yes. To be sure, Cook may be telling the truth in a very narrow sense, if Apple is simply be resorting to the oldest trick in the book at this point: channel stuffing.
The problem with channel stuffing is that it only allows you to mask the problem for 2-3 quarters at which unless there has been a dramatic improvement in the end-demand picture, it re-emerges that much more acutely: just ask AOL which was channel stuffing for months on end, only to be ultimately exposed, leading to a epic plunge in the stock price.
So is AAPL the next AOL, and is Tim Cook the next Thorsten Heins?
It all depends on China: if the world's most populous nation can get its stock market, its economy and its currency under control, then this too shall pass. The problem is that if, as many increasingly suggest, China has lost control of all three. At that point anyone who thought they got a great deal when buying AAPL at $92 will have far better opportunities to dollar-cost average far, far lower.
* * * It appears - given the constant flow of evidence - that AAPL's Tim Cook may have some explaining to do as his channel-stuffing lioes come back to haunt him.