Got stopped by a faithful viewer while making a hard left turn with a full cart at Costco Sunday. Reasonable guy. Asked a double-edged question: “What can you do to make my Apple stock go up.” Double-edged because the stock has done nothing since June 2023, but it’s up 30 points from a year ago. (And, of course, I can’t do anything personally to make any stock go up or down.) Then again, Meta Platforms put on 80 points in one day, one of the single greatest gains I’ve ever seen. So, why not shoot for the moon? Now, my first answer to the gentleman should have been a simple riposte: “Well, how about Costco ?” The retailer has picked up almost 200 points in a year, plus it finally declared the special dividend shareholders like the Club had been waiting for. (We’re still waiting for a membership fee hike, which is historically overdue.) I was thinking fast, but not that fast having just been deciding whether or not to get the huge plastic bottle of M & M’s. The answer was, of course, yes. So, I settled into a simple, “It’s not been all that bad.” He pressed. I didn’t demure. I said how about the $3,500-plus Vision Pro mixed reality headset that went on sale Friday – Apple’s first new product category since the Watch in 2015. He asked me if I thought it was going to be big. I gave him the answer I have heard from everyone who has worn one, and no one who hasn’t: Yes, it sure will be. It will be meaningful. On Friday, we had so many storylines going it is hard to get your head around Apple’s Vision Pro launch and its import. Consider that the night before we had a spectacular set of numbers from Amazon , including a staggering figure of a decline of 45 cents per the equivalent of a package sent to your door. Given that, all in it can cost more than $2 per package to get it to your door. This savings is monumental, and Amazon is not done. There will be more savings. There will be many more packages. So, the strength of the stock has more to do with a cost trajectory then a revenue trajectory, at least on Prime. The return to growth on Amazon Web Services (AWS) versus a year ago stunned people as did the advertising growth. Meta? What can I say ? No one really knew what to do here because we have never seen or heard anything like it. You had something I can’t recall ever hearing from not just a tech executive but any executive, period. It was a realization that you simply didn’t need as many people as you thought to make a ton of money when you have Nvidia chips that will do it for you by making your ads better and better while enticing you to put up your own content in a more stunning way. CEO Mark Zuckerberg never forgot that Meta is an advertising company with free content – made by you (us), the user. But it also has Reels. This most competitive man will get Reels to be better than TikTok. I have no idea how that will happen. However, you can be sure that TikTok won’t see it coming. During the call Zuckerberg dropped that Meta sold a billion dollars’ worth of other products from the black hole that was the metaverse (officially known as Reality Labs), mainly from good sales of the Quest 3 headset and unbelievable sales from the new connected Ray-Bans that actually look like Ray-Bans, so you don’t feel like a geek wearing them. And, they take great pictures while you can also answer calls and texts. For a really “uncool” guy like Zuckerberg, these are really cool, although I think he’s become a lot cooler lately than we might have thought. Then we got an employment number Friday that was incredibly strong with a little bit of wage growth, something that sent the bonds tumbling (and inversely, bond yields higher) but not the stocks. While the positive distortion from tech is once again, duly noted, I think that we’re getting our arms around the idea that this whole soft landing versus hard landing for the economy thesis is a tiresome dichotomy. We must move on to something I used to talk about but gave up on when the intelligentsia drowned me out: no landing at all. That’s right, why do we have to talk about a landing. That’s the vernacular of those who think crash versus no crash but not of those of us who think there is enough stimulus in the air. There’s enough corporate formation and construction and travel and leisure and shopping – as long as you know where it’s done – and transporting (watch that Dow Jones Transportation Average , as my writing partner Matt Horween points out, it’s looking important to the positive side) that we can argue that the Federal Reserve should leave interest rates as is may be an awfully good to generate some deflation where it can be found. (Deflation is when prices go down. Disinflation is when price are still going up but at a slower rate.) So, you had (1) Meta on fire, (2) Amazon just spectacular, and (3) the bond market not behaving and the stock market not caring. Talk about a three-for-three situation. Then there’s Apple. To journey back to Costco, I told that gentlemen in the candy aisle one more thing: Apple’s stock dropped like a stone at Friday’s opening after the previous evening’s guide down, hitting $179 per share almost immediately and then proceeded to claw its way back in a remarkable move to unchanged at $186. It hung around there all day and finished only 1 point lower. Now these kinds of moves usually require some sort of retest, and I expect that sellers will be grateful to be given a second chance to roll out of the stock. I look at it somewhat differently, though. I am a firm believer that stocks that can withstand guidance cuts and finish only down a dollar may have something going for them that we don’t know. AAPL 5Y mountain Apple 5 years Let’s start with what we do know. Apple had a strong quarter last despite some real weakness in China. Despite the bears’ best efforts to portray this as an Apple problem with a Huawei share-take, encouraged by the Chinese government no less, I don’t find Apple’s travails any different in China than anyone else’s because China, for all intents and purposes, is in some sort of massive slowdown that is hidden by all but its stock benchmarks, which, by the way, I think are about to get a real People’s Republic of China (PRC) makeover. I would not put it past them to start arresting large sellers if that’s what it takes. What don’t we know about Apple? Let me give Club members some of my insight from talking to CEO Tim Cook before the conference call. I think that Cook isn’t as focused on China as so many others are. I don’t think he’s as focused on iPhone sales as many think. He is focused on everything, every line item, and how to improve them all – from the iPhone to the Mac to AirPods to the Watch and to Services revenue. And, most importantly, something he has been working on for almost a decade: The Vision Pro. All of these initiatives are the product of one mindset: keeping the customer loyal to Apple, which is measured by customer satisfaction, and it probably has the highest satisfaction of any company in history. What does that customer satisfaction allow Cook to do? Plenty. It allows him, for example, to ponder whether to have an ad tier on Apple TV+ now that there is so much content. It allows him to consider being the world’s bank with a credit card that is not talked about enough given its amazing terms – terms so great that Goldman Sachs must be losing fortunes administering it. Customer satisfaction gives him the leeway to go full bore on health, which is something he has told me many times will be his legacy. Most of all, however, the customer satisfaction level allows him to experiment with something really radical: the Vision Pro. Now, if you have tried it, you know we are speaking of something very radical. I think that the company has struggled with how to describe it, using the term spatial, which doubles as spatial computing and spatial vision. I know I struggle with it. In my conversations with Cook about it l have said that I think there simply aren’t enough showrooms for him to sell enough Vision Pros, especially overseas where Apple has so few stores. Cook didn’t deny it, but he has adopted a sort of “let’s cross that bridge when we come to it” attitude, which only a confident innovator can offer. As for the starting $3,500 price tag, he reminds me that you can always buy it on credit, and there are plenty of people who will want to do that. No one has come along to partner with Apple to the point that it will give you a discount on the device. But this is where customer satisfaction comes in. When you have so many people who love Apple, installed base of more than two billion, then you are going to have a lot of buyers of this product no matter what. That’s especially important at a moment when it looks like Apple is staring into an abyss of Chinese paint that can’t be overcome by anything. But what if it is overcome by the Vision Pro? What if the thing is a moldy wet pile of tinder that no one thinks can catch fire – and then and it does. I think the comeback in the stock on Friday had to the Vision Pro. I think it has to do with the possibility that Apple has a homerun in its hands, and it didn’t want to give the product away, especially as Cook urged me to think about a bunch of business-to-business (B2B) use cases — everything from Walmart managers assessing shelf space to contractors looking for roof cracks to health care practitioners analyzing patients. Now I know that there have been some biting and sarcastic critiques that will accompany any headset device. The category isn’t even treated as a category. It is treated as an alien being wrapped around your head, a heavy one at that. But I think Cook is thinking otherwise. I know it is an overused term, but Cook is thinking of this as a platform, one with a ton of apps and thousands more coming, something that can be transformed into so many different things that you will simply want to get one to figure out which one you will want the most. Watching Major League Soccer (MLS)? Catching basketball courtside? Checking out a vacation site. Devouring “Masters of the Air?” Watching some of the astounding things that are going to come from those who are using Nvidia’s chips to design and create things. Reading better. Cooking better. Airplane travel, better. I need you to think hard about the word “better” because it is the one that Cook mentioned to me several times for what the Vision Pro really does: It makes your life better. You know I made a joke with him Friday morning that after I had listened to the conference call Thursday evening, I didn’t really care about the conference call. What I cared about was how many iPhones would be sold in Mainland China in the first hour of the first day of April. I said that, of course, because that’s the focus, the actual focus of most of the analysts who follow Apple. They just can’t help themselves. They can’t afford to let their imaginations run wild with the Vision Pro lest they get bushwhacked by even worse China numbers. They can’t let it fool them. It wouldn’t be rigorous. But what happens if it is a monster seller? Lots of people were buzzing about how Meta couldn’t meet demand for the Ray-Bans. No one is buzzing about how Apple can’t meet demand for the Vision Pro. That’s why you have to ask yourself what if Apple can’t? What if what drives Apple higher is the satisfied customer? That’s what the Street is missing. The negativists, who outnumber the believers because Apple’s iPhone sales overwhelm everything else even when they are weak, have no answer for the stock’s comeback Friday. They can’t bring themselves to believe anything other than the Vision Pro is dead on arrival. Bottom line I think they are wrong. If the price to pay is six months of no gains to find out or even another six months of no gains, I will take it. Because I believe in something that’s not captured by a spreadsheet. Why should you believe me over those who think Apple’s best days are behind them? How about because I have liked the stock since it was $5 per share? The prosecution rests. (Jim Cramer’s Charitable Trust is long AAPL, COST, NVDA, META, AMZN. See here for a full list of the stocks.) 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Got stopped by a faithful viewer while making a hard left turn with a full cart at Costco Sunday. Reasonable guy. Asked a double-edged question: “What can you do to make my Apple
Double-edged because the stock has done nothing since June 2023, but it’s up 30 points from a year ago. (And, of course, I can’t do anything personally to make any stock go up or down.) Then again, Meta Platforms
Now, my first answer to the gentleman should have been a simple riposte: “Well, how about Costco
I was thinking fast, but not that fast having just been deciding whether or not to get the huge plastic bottle of M&M’s. The answer was, of course, yes. So, I settled into a simple, “It’s not been all that bad.” He pressed. I didn’t demure. I said how about the $3,500-plus Vision Pro mixed reality headset that went on sale Friday – Apple’s first new product category since the Watch in 2015. He asked me if I thought it was going to be big. I gave him the answer I have heard from everyone who has worn one, and no one who hasn’t: Yes, it sure will be. It will be meaningful.
