Mystery solved! The chief pillar of the bearish case on Apple (AAPL) was the coming, looming shortfall in cellphone sales.
It was based on commentary from all the usual suppliers, even as they have to mask themselves in order not to lose Apple business. The most recent came just last night when Texas Instruments (TXN) said cellphones were weak. Last week, Skyworks (SWKS) said the same.
The narrative was a simple one: If Apple didn't place a lot of orders with these chip makers, then it must be stuck with a ton of inventory and it would have to slash prices to the bone to get rid of all the excess supply. That, in turn, would lead to more price cutting as it was clear that the current crop of phones had been a total cropper. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
What nobody thought about, what no one even could fathom, is that maybe Apple didn't order enough chips because it underestimated the demand. Maybe it didn't realize exactly how compelling these newer phones were and it didn't understand that they would produce more switching from Samsung than ever before and more upgrading from so-called dumb phones than they thought possible.
That could explain how so many analysts interpreted the data wrong.
Now it might not have mattered if you didn't have so many analysts in the last few days really putting this thesis out there. And, most important, you had "Apple's best days are over" Colin Gillis slashing that old price target just yesterday.
In other words, the facts didn't add up. Hmm, maybe even Apple got too negative on Apple. Who can blame them? Enough people say you don't know what you are doing, maybe, just maybe, you start thinking, hmmm, we're real good but let's be more conservative.
They were.
And they ran into the highest-quality problem: too much demand.
I can name about 400 companies in the S&P 500 that just wish they had that problem!
