Gloom party, that many had been predicting for apple, thats what ive been reading today. What they did, everything, the fear was that apple absolutely was just going to have the worst quarter they could ever put up. Still a bad quarter, but better than expected, and all of those fears were put to the side, because they actually executed better than people expected. I think some of the numbers most important to me is, where do they have growth . Focusing on this a while now. 10 of their revenues now have been in the service area. Now thats starting to slide up a little bit more and a little bit more, scott. Now its closer to that 15 , 19 number. Youve got to like the direction theyre going. The stickiness factor. I think a great article out today by piper and talking about, look, people love apple products, and by the way, 90 of them plan on continuing to be with apple. So i think all of the fears that everybodys either leaving apple or the slowdowns and everything else, theyve got new cycles of phones coming out over the next couple quarters. Focus on the 7 or 8, the dollars are there and i think they stepped over what had to be a level they had to get to. Kevin, time to get off apples back . Not for me yet. Im intrigued. The Services Number is getting interesting. If they can get up to 25 in the next couple quarters, that could turn the tide. Theres two inflection points for me. One, one shervice trend continuing . Great. Didnt work in music. Brought out a music product. Most stayed with spotify. Id like to see this continue to grow. The kicker, an interesting new attribute to think in apple. If trump gets in, repatriate at 10 cost. Really interesting. Not getting into politics, this thing for apple is probably the most important of any company in america. If trump gives them a nod, a big deal to repatriate cash. And get into the price action a little bit. I think Something Interesting is happening here. Apple has been trading below its 200 day since april. Gapped up, above that lifl the first time and if it can hold into the close, the signals this name is back under accumulation, and anyone that wanted to get out is now out. Pulling it back to a threeyear chart, been at a nasty obvious down trend. Could be breaking above that down trend and the Bigger Picture for markets, this stock has completely decoupled from the market. It is trading where it was in september of 2012. The triple qs up 71 . Ants important to look at this as a distincter to and not try to paint the rest of the tape with something going on with iphone sales. I think the market has justifiably treated a distinct story because revenues declined. The way they can get services to be a much larger part of the revenues is if products keep declining. For a while, people said, so goes, or as goes apple, so goes the market. Right . Big, macho the stock now that conversations over. I didnt buy into that and still dont. Its a company, a big company. Does have a big part of the dow as part of it. Dows up 50 points at one point today because of apple. Look, call it what it is. What i like about it, a monstrous free cash yield. What kevin likes about it also, im sure, but its a Consumer Product company. They make a phone about abnormally large margins. Thats history, cant fight that, and phone sales down 23 . Revenues and services only look at big a part of the pie as they are, because Product Sales were down so much. They did grow 20 . Great, but still a small piece of the puzzle. So to me, one more thing. Since tim cook has been there, the om thing hes created the watch, which is a dud. You and i have been back and forth on this. Its a dud. Pure and simple. Hasnt been upgraded in two years. Stock up since tim cooks been there . 140 . Not the stock a dud. Saying the market is up substantially. Tim cook, not saying hes a bad ceo, hes not steve jobs, though. Services up 19 year over year, but to have the App Store Revenue at record highs, this isnt just a percentage of the overall number, and with iphones declining and so forth and ipads and so forth declining, thats not what this is. This is an alltime record as far as the app store. As far as, judge, Something Like transacting customers, something apple tracks. The number of those, also at a record high. So if you had a company like apple, and it was a onetrick pony, it only had a product. It only had the watch, the ipads, the max and all the rest. Thats not what this company is. This is the other side of that coin, where theyve got both the services and app store. Look, 48 hours ago on this very program bgc analyst colin gillis explained why he cut apple shares to a sell. One of are only three such calls on the street. Doubling down today. Publishing a new note just a short time ago. Mr. Gillis, also has an 85 price target now back with us with his reaction. Colin, how are you . I have the note right here in front of me. Do you regret making your call . You know, scott, if i hadnt done it when i did it id do it today. Absolutely i do not regret making that call, and we were pretty clear this was not about the june quarter. We knew the june quarter was going to have a nice little iphone se and in fact, i dont think todays move is related to the june quarter results. I think its more driven by the September Quarter guidance. Right . Lets step back and put it in perspective. Apple stock has moved around 6. 5 on earnings on each of the last three quarters. So this is sort of a, a typical move for the company. And the concern about the next upgrade cycle is still very valid. In fact, they pulled 4 million iphones out of channel inventory and one of the reasons september guidance is good as because theyre going to rebuild that channel inventory and the fact that a lot of the fears is coming out of this name is more reason why we want to maintain our sell rating. The street today, you have pretty much a nearterm gloom and doom scenario for apple. You do. An 85 price target, cut the stock to sell. The street seems to be saying today and investors along with them, seem to be saying, no. That ship is sailed. Thats not correct. Well find that out. Right . The reality, look at operating margin just posted. The lowest in seven years. Their gross margin was the lowest in seven quarters. The app store that tim cook keeps touting about is only 14 revenue. Not going to be meaningful enough to make up for a slowdown, or elongation of the iphone upgreat cycle. Then the tenth anniversary iphone, happening in 2017, theres going to probably be demand for that, and that may negatively impact demand for the current cycle. Pointing to the fact they drew down inventory of the current models by 4 million units. That probably is indicative of the fact those units are not selling as fast as they were. Colin, josh brown. Ill concede, the phone market is saturated. Margins probably dont go higher from here. Especially as they start selling product into places like india, where the consumer is more cost conscious. Put that aside. Every is aware, stock paid the price. Has not moved in about four years, again. Bigger picture, were in environment, rates are low. People overpaying for consumer oriented companies. I dont mean cereal and soup are the same as phones but people are prizing multinationals who have a Stable Revenue source, who have a product that does have some defensible margin, a name brand and a big, big flexible Balance Sheet like apples. If this were to rerate, you would be right on the growth problem, but wrong on the equity price, and i genuinely believe we could be seeing the start of that right now. But also theres a flip side of that. Right . Which is that apple is the largest market cap company, right . On a u. S. Listed exchange and markets at alltime highs. If we get pull barqbacks, the f raises rates. A lot of ifs, colin. But domestic cash, its down to 17 billion. Limited flexibility left domestically. So theres the secular reasons to sell apple and also the Broader Market reasons. Colin, let you run. All right, thank. Thanks for coming back on. Defending your call and in some cases doubling down. How well take it today. Colin gillis. Dom chu, with a market flash. We got whats going on with the beer side of things. Earlier we told you about the idea there were reports here weve now confirmed that the sab miller anheuserbusch deal is at least for right now, temporarily possibly maybe longer. So halting Merger Integration work with aab in bev. Comes on the heels of ab inbev racing to a slight, overcoming hurdles with regard to the currency weakness in the British Pound Sterling on the heels of brexit. We have shares of Anheuserbusch Inbev taking a lower leg off its worst levels of the day and checking out whats happening with molson coors. Watching those shares, part of inbev to buy this particular sal sab miller. Revert back to molson coors, a u. S. Joint venture, sab miller and molson coors for all beer operations in the United States and puerto rico. The reason why tap shares molson coors down as well. A complicated story, were still monitoring. We know for now, david faber confirmed halted for right now integration work with a proposed deal to be acquired by sab and inbev. Well follow that story. Back to apple, colin, in the same building as you. 12 to 24 months from now, investors who dont own this stock, being apple, going to regret it . Hes actually got some very, very good thesis about why you wouldnt want to own this if you want to beat the index. Have you owned if youre an institutional investors, owned apple the last year, youre way underperforming. The big risk youve got, i think is, if its true that apple can turn services around and turn it into a quarter of its business, this stock will outperform, because the margin story of decline is going to end. Its going to stabilize, and the other big piece we havent talked about yet is china. Tim cook pulled his horns in a bit talking about china. He did. It wasnt an optimistic call. China is supposed to be the growth engine. The question, this quarter, sitting around 100, pile into this name and own it 5 waiting in your portfolio thinking somehow this behemoth is going to get a trigger to outperform the index, and i dont think were there yet. I really dont. The china story, if not intact is a problem. The only thing that intrigues me, 17 billion stateside, 200 billion overseas. Trump lets them bring it home, they can increase the dividend for me. Send me more money. Then id want to be a shareholder. A good point about, maybe a little bit of caution in the voice of cook on china and other emerging markets. A point my buddy made on the earlier program, that his look at the he didnt sound as optimistic. Look at the success theyve had with the s. E. Right . Talk and how strong that was. I know thats creating something with the margins. Obviously one of the aspects of that, but that is the entry point that gets people into it mostly internationally. So that combined with what kevin talked about. If they actually can get the services that quickly towards that 25 number in terms of receive nhu, that really does turn this company into a much Different Company everybody is talking about, it will reprice it and because of that well see it push towards the 110, 120 rather than a lower end of 85 colin talked about. And talk to a analyst later in the program who upgraded the stock. Josh made a point. Consumer staple. What apple . Is how it should be viewed . Absolutely not. Lets understand what happened. What are you going to do when your phone is up, two years and heres what im going to do get another phone . Keep all the stuff that you have in your itunes ecosystem . Im not married to apple anymore. They went from a Technology Leader to a brand name. Its a technology follower now, and its a huge laggard in technology. So each time samsung comes out way phone its leaps and bounds ahead of apple. When the phone sup, im going to look around. Able to connect on find friends with my kids and my wife, maybe ill go to samsung. Thats the owninly reason. I dont know about leaps and bounds. Oh, leaps and bounds. . Know. Have you checked out sum seun samsung . If hes right what he talked about, he said 90 say theyre going to stick with apple. That sort of hold on. Hold on. Take a look. Max down 11 . Ipads down 9 . Had phones down 23 . Thats not a staple. You dont see those kind of drops in Product Sales in staples. Never. I think the phone on a quarter of a quarter basis is not going to be same as a year over year basis. Talking about one quarter. They have a refresh, everyone knows about, coming after phones are staples. Apple is not a staple. I dont understand. Kevin, a last before we go to break . Theres coke and pepsi. And that does negate we continue to upgrade i phones and ipads at a you could have sat here ten years ago and made the same argument about blackberry. No, i couldnt have. Yes, you could have. Everybody else was only a staple for you. We were, we had all moved past the black berry early. Ten years ago. Yeah, yeah. Kevin, hold your thought. Catch you on the other side of the break. A lot more ahead on the Halftime Report. Announcer the waksals are back on wall street. This time their stock is kadmon. Ceo Harlan Waksal is here on launch day for the stock. Its down big time. Plus, halftime men of steel. The najarian brothers, show us why steel is so strong right now. And more apple, more mr. Everything. The Halftime Report with scott wapner is coming right back. Is all right. Welcome back to the Halftime Report. Show you shares of twitter. Here they are down 13 after reporting the slowest Revenue Growth since going public. And giving weak guidance. The josh kramer calling this a clown show this morning. Still in the clown car. I guess so. Really mean. I wouldnt go that far, but this is the fourth consecutive quarter where theyve disappointed and i think four out of five times the stocks had a double digit loss the following day. There werent any bright spots. Let me ask you this. Reframe. Yeah. Why do you still own the stock . I have a core position. Make the case. A core position. I trade around it. I took some off after the last earnings dispimt. Not adding here. No reason to think present trends will change at any point. They really were not optimistic going forward, and all of the pressures they cite, pressure, competition and difficulty to add users are very real. The street has been right on this name. Analysts downgrading it pretty much every month over the last six months. So that doesnt change the fact i think theres a ton of potential in the platform. Even if theyre not being successful at monetizing them right now. I may change my view on that at some point but have not yet. Its a very slow growth story, and theyre disappointing. Share count exploding. 28 of revenue going to stockbased compensation, which i think is getting outrageous. But these are very wellknown negatives. Some of the broadcast deals theyre cutting now with content providers specifically in sports, i think could be very interesting. I think could serve as a catalyst, again, we have no evidence that things are getting better. Kevin, this stock traded like an out of control dumpster fire. When can it be extinguished and how . The only reason you would own this stock today is you think that in the next six months someones going to put it out of its misery and acquire it. There is no metric to look at today anywhere on the Balance Sheet or income statement that would make you want to own this for the capital appreciate on the companys own engine itself. It is a dog. It is a loser. It has not been able to execute. What else can you say . You cant keep bringing in new management and get actually no traction on any metric you promised the street without getting severely punished. The only reason the stock is not a single digit entity, guys like josh think it will get acquired next week. I dont think it is. I dont think it is. Well why do you own this . Why do you own this stock . Would have gotten acquired probably would have happened already. The stock had a big rally after lynched inn and youre going to watch that rally get unwound. Why are you punishing yourself this way . Im not punishing myself. The stock will not give you back anything. It returns no capital. All this, kevin, the oneyear anniversary, a day or two ago, of dorsey coming back to run the should show. One of the big issues for these guys and facebook, well talk about later, is snapchat. Snapchat is el tooing people away from instagram, of course, is facebook, and twitter is obviously not getting the love it needs from what its been doing, judge. I tend to agree with kevin, and ive said it here. If this, if it werent for takeover premium that somebody ludicrously may pay for the company, this thing would be single digits. So i do agree with that, because theres nothing to stop it. Gravity is pulling it down to there, and snapchat is apparently these guys and facebook. The biggest fathilure is probably not on the revenue side. If you dont have growing users its hard to attract advertisers. Its not a chicken and egg debate. You need marketers to continue to spend more dollars. They actually grew monthly actives for the first time. By 3 million. Very small. Still something. Since jack returned 9 million new users, facebook added 164. A big difference. Lets talk about facebook. We already are a staple. Use it every day. I mean they dont get paid, though, as a staple. Moving on facebook up 16. 5 year to date. Reports earnings after the bell. And maofhas alwahas always be antithesis of what they were able to do zuckerberg, an outstanding job. Promised everybody theyd get big in mobile. Thats where theyre biggest. You love what hes been able to do through acquisitions. Hes done many of them. Talked about it before. 59 acquisitions since the beginning, a lot based on talent. The way he evaluates it. Looking for talent. The problem with twitter is they have not been able to figure out ho to monetize. Part of the reason facebook is killing it so well, theyve grabbed silent on top of technology. Because of that, thats moving the bar for them now. Look what theyve done recently in biggest acquisitions, scott. They are becoming a bigger and bigger part of the facebook story. Its no longer just reliant on facebook but they have instagram. Look out in the future. Vr, different entities. Kev, do you take the money add run with face book or run it into the number . Theyre killing it. One con