Cody Kiss & Tell: Thoughts on Apple, Gold, Netflix, Alibaba and more
Q. Wondering your thoughts on gold over the next few months?
A. Feet to fire gold action guess: Gold to stagnate around $1100 into year-end. Gold to fall closer to $1000 in a panicky sell-off if and when the Fed finally raises rates a bit. Gold to hit$2000 sometime in the next decade after that.
Q. Do you think that $NFLX is an expensive? It seems really hard to know if they will be able to expand out of the country and if the US market is saturated.
A. In less than five years from now, $NFLX could end up with more than 100 million subscribers paying $15-20/month. That’d generate nearly $30 billion a year in revenue and several billion in earnings. The stock is definitely “expensive” on any near-term metric, but looking out five years, it’s not so expensive after all. Here’s a graphic showing Netflix’s US vs International Subscriber Growth.
Q. I guess in an overall sense, I’m still a bull on Apple, but two recent products seem (to me) to have lost their momentum for the moment . First, the Watch — a relatively weak start, right? And also — and there was discussion of this on this TWC Chat a day or so ago — Apple Pay: it seems to have little presence, little promotion by either Apple or the banks or merchants. Are you concerned by either? Was/are either expected to impact on near-term numbers? You think Apple needs to re-tool in either area? (Or in the case of the latter, say, help fund promotion of the service? It’s invisible.)
A. I think the new iPad Pro is going to bomb worse than any other product Apple’s rolled out in a long time. Apple Pay is still in the top of the first inning and it could become quite large as Apple innovates and builds on its potential. The first Apple Watch is selling faster than the first Apple iPhone and I do think the Apple Watch will be a profitable tho smaller part of Apple’s business for many years to come. Apple’s not the same with Tim Cook running it instead of the great Steve Jobs, but it’s still positioned to generate big profit growth in smartphones for the next year or two as iPhone takes share from Android.
Here’s a review of the new iPad Pro and a good graphic comparing it to Microsoft’s Surface Pro.
Q. Will $SIMO be able to sell its memory controllers to $INTC and $MU for their new memories? Who will their main customers be over the next few years? If they can sell to $MU and $INTC then over the long term they are really golden. Good luck on getting the information from the management. Their lawyers probably don’t let them say a lot.
A. Great question and I’ve got a call with SIMO’s management coming up in the next few weeks so I’ll ask them that directly and get back to you.
Q. Any comment on the huge beyond-record sales Alibaba $BABA experienced with their Singles Day extravaganza (kinda like Black Friday on steroids)? Their chairman acknowledged the weakeness in China’s economy but also said there can be highlights like that. Do you think despite the overall weakness, individual companies like Apple, etc. can continue to break the mold and garner enough sales to shine even ‘midst a general slowing of their economy?
A. Just today, I read a good quote from Cramer about what wins in China and the main point is that we should differentiate commodities vs finished products. “What do we want out of China? Do we want the Chinese to buy steel, or do we want them to buy Nikes? Do we want them to buy coal, or do we want them to buy Starbucks? Do we want them to consume iron, or do we want them to buy iPhones. Do we want them to import aluminum, or do we want them to purchase Huggies and Pampers? ” http://realmoney.thestreet.com… You guys know I’ve been preaching to stick with companies like Apple that can and is winning in China and to stay away from commodities and commodity stocks that can’t win in China for years now.
Q. Great Cramer quote. BTW, I’ve always wondered, does he write his own stuff or have a staff (following his instructions)?
A. Both, I think. He writes most of his own stuff but I’m sure some of his premium stuff is done by/with staff following his instructions.
Q. What about $BABA as an investment these days? But not a short candidate?
A. I’ve long said that “I have never and still don’t like$BABA and it’s China-based, US-traded, Cayman Island-headquartered company.” I still don’t. Did you know that at their current quotes, $BABA is worth more than $DIS?! Just sayin’. I’d rather be short than long on $BABA, but I don’t think the risks of shorting it are worth the potential rewards.
Q. What is your opinion for $WBA?
A. I haven’t followed the WalGreens roll up saga very closely, but a few things stick out — #1 the company’s balance sheet went from pristine to way over leveraged in the last couple years (see pic below) as it paid $26BB for Boots Alliance and has been buying back its own stock and paying out billions in dividends too. Secondly, the company is consolidating its biggest competitors which should be good for margins. Third, you have to try to figure out how Obamacare is going to impact the pharmacy and other health-care related businesses that $WBA runs. I wouldn’t want to own $WBA, even as it’s been a well run profitable company for many years. Good luck!
Q. For the record, your latest thinking on Chipotle? (Speaking of tacos.) Think their ShopHouse line will help/grow?
A. Chipotle doesn’t have what I consider to be real tacos or Mexican food. I prefer to eat at local restaurants and that bias along with my always wanting to find Revolutions to invest in keeps me out of $CMG.
Ok folks, that’s another wrap. Thanks! I’m headed here to this local joint gas station/bar/restaurant to pick up my tacos and bring ’em back to my desk for lunch. See y’all on the flip side.
