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Best tech/finance blogger on TipRanks. Alex Cho is ranked 7th among all financial bloggers, with a sector focus of technology stocks. The research he publishes captures the long-term growth potential of tech franchises, and market valuation. His research recommendations over the span of five-years has averaged into an annualized return of 19.3% across 392 ratings of which 66% were successful. Over his years of publishing, Alex Cho has been an indispensable source of information for an investment minded audience, which is why his lifetime viewership has exceeded ten million in total since 2012, across various media platforms. Furthermore, he’s frequently cited in various local business journals across the United States, and is frequently tagged with the “in-depth” designation on Google News for his public articles. The quality of his research is well known, and is well-respected which is why he’s frequently cited by other authors, journalists, bloggers and experts. Alex Cho was a former founding partner of Alexander & Cohen Capital Management, has worked as a consultant for mid-stage tech companies looking to raise capital or form an exit strategy, with the most recent consultation billed to a client that was generating revenue of $10 million+ in the web domain/registrar segment. Alex Cho is frequently invited to interview members of management at various Fortune 500 tech companies’ due to his outstanding media credentials, and credibility. Furthermore, he frequently attends various tech media events at the request of the event organizers. Alex Cho has a great relationship with Wall Street and Silicon Valley, as well. In the Venture Capital Space, he has sources that are inclusive of VC Partners, and independent research from PitchBook, Mercury Data, eMarketer, MergermarketGroup, and so forth. Anyone facing the public with investment related material needs quality sources, which should be inclusive of insights from Private Equity and various sell-side institutions and debt rating agencies as well (Standard & Poor’s, Fitch, & Moody’s). Alex Cho publishes with the support of Bank of America Merrill Lynch, Morgan Stanley Americas, Royal Bank of Canada Capital Markets, United Bank of Switzerland AG, Barclays Americas, Goldman Sachs, J.P. Morgan, Credit Suisse AG, PiperJaffray, Wedbush Securities, Oppenheimer & Co., Nomura Securities, BMO Capital Markets, Raymond James, Pacific Crest, SunTrust, Mizuho Securities, Deutsche Bank and Canaccord Genuity. Alex Cho attended ASU via the MAPP program with a 3.76 GPA in business-finance. The genius behind Cho has less to do with his academic accomplishments, but rather his ability to navigate, adapt, and improve the quality of his work through all the activities he has engaged. In the past year, Alex Cho has launched a new marketplace service referred to as Cho’s Investment Research. To learn more about this service, or to receive article notifications, be sure sure to subscribe. We provide frequent updates via our Blog Posts, which goes out to our subscribers.

Apple (AAPL) Stock Remains a Mixed Bag; Here’s Why

Apple (AAPL) announced Monday a 6% price cut across all Chinese consumer electronics. This price reduction in handsets doesn’t come at the expense of profits though, as it was driven by a reduction in the VAT (value added tax). The reduction in pricing comes at a time when investors have been struggling with a progressively weakening growth thesis tied to lengthened product refresh, and more importantly, weakness in Asian smartphone sales.

The recovery in the stock price reflects growing optimism in the core tech franchise, though some of the selling was sparked by the recent pullback across equities. With markets more optimistic or paying a higher premium for tech companies in general, Apple has been able to recover. Though, the fundamentals of the tech franchise have to reflect some improvement in the next couple quarters to make the recent stock price gains more sustainable.

This shifts the focus back to China, where in its Q1’19 earnings call, Luca Maestri (CFO) blamed the weakness in Greater China for its recent earnings woes:

On a geographic basis, most of the decline from last year came from Greater China and other emerging markets with difficult macro and foreign exchange conditions affected our results. We also believe that the reduction of carrier subsidies and our battery replacement program had an impact in a number of countries around the world. And as Tim mentioned we had a lower number of upgrades than we had anticipated at the beginning of the quarter.

The 6% reduction in pricing in China could drive demand, as it’s the first time we’ve seen pricing come down for its various consumer electronic categories over at Apple. Though, the extent to which it might impact demand is a bit subjective, generally speaking, pricing sensitivity should translate to some unit demand growth in the Chinese segment, which we should hear more about when the company reports sales or earnings as we progress throughout the fiscal year. The consumer electronic category has a price sensitivity ratio of around 2.0 to 3.0, so a 6% drop could translate to 12% to 18% growth in units from just the pricing reduction alone.

Though, this alone might not drive a meaningful change long-term, the near-term headwinds from a more mature installed base of iPhone users, and a delayed transition from older iPhone variants has a lot to do with the controversy of the updated iPhone line-up, which is priced significantly higher than prior-generation models, and with removed features (like the lack of a home button) and the removal of the headphone jack, as well.

Despite these changes, Apple diehards have upgraded in the prior-years, and in turn contributed to Apple’s shipment figures, though there are lingering concerns that the smartphone category has matured to a point where the industry feels and looks a lot like the desktop and notebook computing market where shipment growth has remained stable, or grows by single-digit percentage points.

Since Apple’s high-end iPhone X S variants price at $999 to $1,100, which is very similar to notebooks and desktops, there’s not room to demand more in the way of pricing. Apple’s recent efforts to bring down pricing in China could spark some much-needed shipment growth, though efforts to reduce pricing across all geographies should be explored.

iPhone revenue declined from $61 billion to $51 billion between Q1’19 versus Q1’18 (prior quarter figures). The drop-off was tied to China, so if pricing is a factor, we should see some recovery in Chinese demand in the next couple quarters. If not, Apple needs to explore price optimization yet gain, as the weakness in shipments has everything to do with the flagship line-up pricing relative to generations prior to the iPhone X line-up.

Perhaps the market can’t support higher-prices, so an effort to do the reverse by lowering prices could return shipment growth back to the iPhone business.

Disclosure: The author has no position in AAPL. The information contained herein is for informational purposes only.

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