WEBVTT - Dan Ives Talks Apple, Palantir, Tech Earnings

0:00:02.580 --> 0:00:05.400
<v Speaker 1>Bloomberg Audio Studios. Podcasts.

0:00:05.720 --> 0:00:06.279
<v Speaker 2>Radio.

0:00:06.680 --> 0:00:09.200
<v Speaker 3>News. We're going to do this for it, and Paul

0:00:09.240 --> 0:00:13.200
<v Speaker 3>knows how upset I am right now. He's with Yorkville Ives.

0:00:13.480 --> 0:00:16.360
<v Speaker 3>It sounds like it's a medieval church. You know, it

0:00:16.410 --> 0:00:18.889
<v Speaker 3>sounds like a church in Wales or somewhere.

0:00:19.270 --> 0:00:20.330
<v Speaker 4>Yorkville Ives here.

0:00:20.350 --> 0:00:25.230
<v Speaker 3>Dan Ives joins us right now with all of his perspective.

0:00:25.510 --> 0:00:30.030
<v Speaker 3>I'm going mental now about the simplistic view Apple. Folks,

0:00:30.050 --> 0:00:32.050
<v Speaker 3>we're going to pause here. Paul's going to be patient.

0:00:33.659 --> 0:00:39.250
<v Speaker 3>There's a simplistic narrative that is told. What's not mentioned

0:00:39.490 --> 0:00:42.590
<v Speaker 3>is $ 28 billion of free cash flow in 90 days.

0:00:43.390 --> 0:00:48.350
<v Speaker 3>Turner says they return $ 28 billion to shareholders, dividend share buyback,

0:00:48.770 --> 0:00:53.360
<v Speaker 3>and all that. I look at the wonderful Bloomberg intelligence work. Yes,

0:00:53.479 --> 0:00:57.600
<v Speaker 3>gross margin, OMG, China. But the moment you come down

0:00:57.800 --> 0:01:02.640
<v Speaker 3>one line, two lines, three lines, With cost control leveraging

0:01:02.680 --> 0:01:05.540
<v Speaker 3>smoke and mirrors, they make it up at EBITDA. They

0:01:05.580 --> 0:01:10.990
<v Speaker 3>make it up at net income. Is their profitability threatened? No.

0:01:11.010 --> 0:01:15.590
<v Speaker 5>To some extent, their profitability, when you take away some

0:01:15.610 --> 0:01:19.230
<v Speaker 5>of these near-term things on memory and things, it's actually increasing.

0:01:19.590 --> 0:01:23.800
<v Speaker 5>The view is, when you look out over the next four, six,

0:01:23.860 --> 0:01:28.530
<v Speaker 5>eight quarters, their free cash flow... potential and call bar

0:01:28.850 --> 0:01:30.190
<v Speaker 5>is actually increasing.

0:01:30.330 --> 0:01:33.250
<v Speaker 4>I looked this morning, Paul, jump in here because I

0:01:33.270 --> 0:01:35.430
<v Speaker 4>don't want to monopolize. I need a break, Paul. I

0:01:35.430 --> 0:01:37.310
<v Speaker 4>got to get to the Tito's and Tang.

0:01:37.590 --> 0:01:42.510
<v Speaker 3>Their free cash flow modeled for 27 into 28 is

0:01:42.770 --> 0:01:46.630
<v Speaker 3>almost triple what it was before COVID.

0:01:47.330 --> 0:01:48.360
<v Speaker 4>It's simple as that, Paul.

0:01:48.860 --> 0:01:49.220
<v Speaker 3>Exactly.

0:01:49.320 --> 0:01:51.560
<v Speaker 2>And that's kind of what I think the street's excited about.

0:01:52.340 --> 0:01:54.740
<v Speaker 2>Right now, Dan, given what you heard last night on

0:01:54.760 --> 0:01:58.130
<v Speaker 2>the conference call, how would you characterize the AI strategy

0:01:58.270 --> 0:01:59.050
<v Speaker 2>for Apple right now?

0:01:59.610 --> 0:02:02.590
<v Speaker 5>I think it's genius because to some extent, as Tom

0:02:03.010 --> 0:02:06.690
<v Speaker 5>was talking about, they've been able to navigate this, basically

0:02:06.730 --> 0:02:09.970
<v Speaker 5>spend very little when it comes to AI. The install

0:02:10.010 --> 0:02:12.750
<v Speaker 5>base has continued to increase. The upgrade cycle has played out.

0:02:13.060 --> 0:02:17.560
<v Speaker 5>Now it's time. Now it's go time. When you think

0:02:17.580 --> 0:02:22.120
<v Speaker 5>about Gemini and what the ultimate strategy is, it's ultimately,

0:02:22.200 --> 0:02:25.960
<v Speaker 5>from a consumer perspective, 20% of the world will access

0:02:26.080 --> 0:02:27.460
<v Speaker 5>AI through an Apple device.

0:02:27.919 --> 0:02:30.480
<v Speaker 1>For Ternus, that's the opportunity and challenge.

0:02:30.800 --> 0:02:34.799
<v Speaker 5>AI-enabled devices, make sure that they ultimately monetize this from

0:02:34.820 --> 0:02:36.100
<v Speaker 5>a developer perspective.

0:02:36.160 --> 0:02:37.500
<v Speaker 2>How do they do that, and what's their strategy, do

0:02:37.540 --> 0:02:37.839
<v Speaker 2>you think?

0:02:38.520 --> 0:02:44.750
<v Speaker 5>As developers, they're going to build AI functionality, apps, additional

0:02:44.870 --> 0:02:47.410
<v Speaker 5>things that are going to happen through the Apple ecosystem

0:02:48.470 --> 0:02:50.570
<v Speaker 5>It's Apple that's going.

0:02:49.900 --> 0:02:51.739
<v Speaker 2>To monetize it. Are we going to see that in

0:02:51.760 --> 0:02:53.020
<v Speaker 2>the services business for Apple?

0:02:53.060 --> 0:02:56.680
<v Speaker 5>I think about 15% of services over the coming years

0:02:56.860 --> 0:03:00.470
<v Speaker 5>will be AI, which is our view like $ 75 per

0:03:00.570 --> 0:03:04.530
<v Speaker 5>share incremental to the story just from an AI perspective.

0:03:04.970 --> 0:03:06.810
<v Speaker 1>So it's a safety stock.

0:03:07.490 --> 0:03:10.859
<v Speaker 5>In this storm from a large cap perspective. But then

0:03:10.900 --> 0:03:14.240
<v Speaker 5>you have AI upside as they monetize. And I think

0:03:14.340 --> 0:03:18.380
<v Speaker 5>that's now, Cook has left this in such a great

0:03:18.419 --> 0:03:22.799
<v Speaker 5>spot for Ternus, who's really hardware innovation and AI will

0:03:22.820 --> 0:03:23.840
<v Speaker 5>define his future.

0:03:24.139 --> 0:03:26.160
<v Speaker 2>So as you go out around the world, which is

0:03:26.400 --> 0:03:28.540
<v Speaker 2>your job, you're always, who knows where you are, you're

0:03:28.560 --> 0:03:32.000
<v Speaker 2>with Waldo out there. What is the AI call from

0:03:32.080 --> 0:03:35.380
<v Speaker 2>investors out there? Do they want the high CapEx, negative

0:03:35.400 --> 0:03:38.320
<v Speaker 2>free cash flow, just build it and it'll show up?

0:03:38.480 --> 0:03:41.390
<v Speaker 2>The business will show up? Or are they asking different

0:03:41.410 --> 0:03:42.190
<v Speaker 2>questions these days?

0:03:42.430 --> 0:03:45.150
<v Speaker 5>You get one shot to get this right. So if

0:03:45.250 --> 0:03:48.410
<v Speaker 5>you take the foot off the pedal, you don't spend

0:03:48.490 --> 0:03:52.090
<v Speaker 5>on CapEx, ultimately you're going to be left behind. And

0:03:52.130 --> 0:03:54.790
<v Speaker 5>I think that's why you've seen all the comments from

0:03:54.840 --> 0:03:57.440
<v Speaker 5>all the hyperscalers. You see all the capital raises from

0:03:57.520 --> 0:04:02.620
<v Speaker 5>Oracle to Microsoft to Meta. Because everyone recognizes the backlog

0:04:02.680 --> 0:04:05.720
<v Speaker 5>is trillions of dollars. Now, I'm not saying could some

0:04:05.740 --> 0:04:08.660
<v Speaker 5>of that fall apart, could there be some neo-scalers that

0:04:08.700 --> 0:04:11.320
<v Speaker 5>fall by the wayside, but from a hyper-scaler perspective, from

0:04:11.360 --> 0:04:15.410
<v Speaker 5>a large-cap perspective, this is viewed as basically a storm

0:04:15.630 --> 0:04:17.650
<v Speaker 5>that they will get through. And on the other side

0:04:17.670 --> 0:04:21.130
<v Speaker 5>of it, to Tom's point, the free cash flow, as

0:04:21.170 --> 0:04:22.989
<v Speaker 5>you go into second half, 27, 28, 29, will be parabolic.

0:04:26.450 --> 0:04:27.950
<v Speaker 1>For a lot of these large cap names.

0:04:28.050 --> 0:04:30.190
<v Speaker 3>Okay, we're going to, I can do this now because

0:04:30.210 --> 0:04:34.289
<v Speaker 3>of AI. Ask B on Bloomberg and Google Gemini and

0:04:34.330 --> 0:04:37.190
<v Speaker 3>all the rest of them. Some of the parts, Mr. Ives,

0:04:37.510 --> 0:04:41.050
<v Speaker 3>the service sector. Oh, they were a little bit off today.

0:04:41.110 --> 0:04:46.030
<v Speaker 3>Let's sell our shares. What's the margin? Alexis, what have

0:04:46.050 --> 0:04:49.710
<v Speaker 3>you last bought on services? Your cherubs, what did they buy?

0:04:49.730 --> 0:04:53.670
<v Speaker 3>You saw a little bill in your, you know, Your

0:04:53.730 --> 0:04:55.740
<v Speaker 3>bank statement. Right.

0:04:55.740 --> 0:04:55.900
<v Speaker 5>$ 2.

0:04:55.740 --> 0:04:56.020
<v Speaker 3>99, $ 4.

0:04:55.820 --> 0:04:55.920
<v Speaker 1>99.

0:04:55.920 --> 0:05:01.039
<v Speaker 3>It's like subscriptions on like an Apple device or something.

0:05:01.060 --> 0:05:03.620
<v Speaker 3>They're making a purchase. What's the margin on that? And

0:05:03.660 --> 0:05:05.640
<v Speaker 3>then what's the value of services?

0:05:05.860 --> 0:05:08.529
<v Speaker 5>It's 85%, 90% in terms of a lot of those

0:05:08.589 --> 0:05:11.510
<v Speaker 5>margins because it goes right to the bottom. The services

0:05:11.589 --> 0:05:15.250
<v Speaker 5>margins are double. the margins of the hardware business.

0:05:15.450 --> 0:05:16.630
<v Speaker 4>So give it scope and scale.

0:05:16.680 --> 0:05:19.000
<v Speaker 3>What am I getting for free when you sum of

0:05:19.020 --> 0:05:21.159
<v Speaker 3>the parts, services, and some of the other stuff?

0:05:21.500 --> 0:05:24.060
<v Speaker 5>I mean, I view the sum of the parts, services,

0:05:24.140 --> 0:05:25.039
<v Speaker 5>it's worth $ 150 to $ 175 per share.

0:05:25.060 --> 0:05:26.760
<v Speaker 1>The services worth $ 150. So the services business....

0:05:32.360 --> 0:05:36.130
<v Speaker 5>Now, you can't necessarily separate it, but that's my view.

0:05:36.150 --> 0:05:37.909
<v Speaker 1>And that's always been my view. My view of the

0:05:37.970 --> 0:05:39.930
<v Speaker 1>whole rereading.

0:05:39.190 --> 0:05:43.410
<v Speaker 5>On the Apple story is the services business because the margins,

0:05:43.450 --> 0:05:45.240
<v Speaker 5>and even when Paul, when you asked about the AI,

0:05:45.250 --> 0:05:48.030
<v Speaker 5>the AI piece... is going to show up in services.

0:05:48.070 --> 0:05:50.930
<v Speaker 5>And you could argue over time, that's just going to

0:05:50.950 --> 0:05:54.950
<v Speaker 5>get more and more profitable. That's why the stock trades

0:05:54.970 --> 0:05:58.390
<v Speaker 5>where some will say, oh, it's 35 times earnings and

0:05:58.430 --> 0:06:00.610
<v Speaker 5>things like that. I just, I know it's the wrong

0:06:00.650 --> 0:06:01.930
<v Speaker 5>way of view. You have to view it on a

0:06:02.010 --> 0:06:04.950
<v Speaker 5>sum of the parts basis. That's how most institutional investors

0:06:05.010 --> 0:06:05.390
<v Speaker 5>view it.

0:06:06.300 --> 0:06:08.280
<v Speaker 2>Palantir also reported last night.

0:06:08.300 --> 0:06:08.680
<v Speaker 4>What did we get?

0:06:09.080 --> 0:06:13.300
<v Speaker 5>I mean, there is no better barometer than in terms

0:06:13.339 --> 0:06:16.419
<v Speaker 5>of what enterprises are doing in their commercial business. I mean,

0:06:16.460 --> 0:06:21.850
<v Speaker 5>the commercial business that we're seeing in Palantir, it's off

0:06:21.870 --> 0:06:22.290
<v Speaker 5>the charts.

0:06:22.390 --> 0:06:23.990
<v Speaker 1>Now, the stock's selling off today.

0:06:24.589 --> 0:06:27.590
<v Speaker 5>Again, knee-jerk, we're in a jittery market, nothing tech stocks

0:06:27.610 --> 0:06:29.650
<v Speaker 5>will do, we'll have the stocks go up. But it's

0:06:29.730 --> 0:06:33.500
<v Speaker 5>my view that when you look at Palantir combined with

0:06:33.520 --> 0:06:38.920
<v Speaker 5>the hyperscalers, combined with CapEx, it shows enterprises are lining

0:06:39.060 --> 0:06:40.340
<v Speaker 5>up for these use cases.

0:06:40.830 --> 0:06:43.160
<v Speaker 3>Are we at a point, Dan Ives, you know, I'm

0:06:43.200 --> 0:06:48.420
<v Speaker 3>looking at this almost as an IB model, where 27,

0:06:48.420 --> 0:06:53.680
<v Speaker 3>post-election and all, is where we begin to see mergers, transactions,

0:06:54.380 --> 0:06:58.339
<v Speaker 3>convenient roll-ups is less than good or failed models?

0:06:58.380 --> 0:07:02.400
<v Speaker 5>If you're a banker on Wall Street, I think the weekends,

0:07:02.440 --> 0:07:04.900
<v Speaker 5>you're not going to be too much leisure over the

0:07:04.960 --> 0:07:08.150
<v Speaker 5>next year. Because the reality is, from M &amp; A

0:07:08.610 --> 0:07:10.230
<v Speaker 5>to capital raises— We had.

0:07:10.190 --> 0:07:13.930
<v Speaker 2>The biggest— Tech M &amp; A trade yesterday with Marvell Technologies,

0:07:14.190 --> 0:07:15.550
<v Speaker 2>you know, with their $ 100 gajillion.

0:07:15.570 --> 0:07:18.150
<v Speaker 5>Yeah, and that's why you could talk about, like, AI

0:07:18.250 --> 0:07:20.830
<v Speaker 5>and everything we're talking about with job law. Banks are

0:07:20.850 --> 0:07:23.890
<v Speaker 5>going to continue to be hiring significantly because the capital

0:07:23.950 --> 0:07:27.770
<v Speaker 5>raises and the opportunity, it will almost be generational in

0:07:27.790 --> 0:07:30.330
<v Speaker 5>the next two years when it comes to, you know,

0:07:30.430 --> 0:07:32.050
<v Speaker 5>for what's happening in tech.

0:07:32.810 --> 0:07:34.690
<v Speaker 3>Okay, I got to go to this headline. Somebody just

0:07:34.810 --> 0:07:37.430
<v Speaker 3>emailed in. This is the Center Daily Times.

0:07:38.000 --> 0:07:38.130
<v Speaker 1>Where?

0:07:38.150 --> 0:07:39.120
<v Speaker 4>State College, PA.

0:07:39.240 --> 0:07:39.560
<v Speaker 5>Oh, boy.

0:07:40.170 --> 0:07:42.790
<v Speaker 3>The good, the bad, and the ugly reviewing Penn State

0:07:42.810 --> 0:07:46.700
<v Speaker 3>football's crushing of Purdue and the Boilermakers.

0:07:46.960 --> 0:07:49.200
<v Speaker 4>What did we learn from that?

0:07:49.680 --> 0:07:51.800
<v Speaker 5>I mean, look, I think, and obviously it's been a

0:07:51.820 --> 0:07:55.400
<v Speaker 5>disappointing season, but for Campbell and those guys, I think

0:07:55.440 --> 0:07:58.530
<v Speaker 5>it's actually a gut-check moment to show what they do,

0:07:58.630 --> 0:08:00.570
<v Speaker 5>especially going to Washington the next few games.

0:08:00.590 --> 0:08:00.670
<v Speaker 2>Yep.

0:08:01.160 --> 0:08:03.980
<v Speaker 5>And I think in this NIL era, you know, I

0:08:04.020 --> 0:08:08.100
<v Speaker 5>think give them a true year starting with the portal

0:08:08.120 --> 0:08:09.780
<v Speaker 5>this year, and I think that's where Campbell's going to

0:08:09.800 --> 0:08:10.660
<v Speaker 5>prove himself out.

0:08:11.340 --> 0:08:11.520
<v Speaker 3>Yeah.

0:08:11.640 --> 0:08:13.200
<v Speaker 4>I mean, you've got to spend money. It sounds like

0:08:13.240 --> 0:08:15.120
<v Speaker 4>he's on ESPN. Yeah.

0:08:15.290 --> 0:08:17.510
<v Speaker 2>Well, he's out in State College, Happy Valley a lot

0:08:17.550 --> 0:08:17.910
<v Speaker 2>of the time.

0:08:18.410 --> 0:08:18.790
<v Speaker 4>We are.

0:08:19.110 --> 0:08:19.450
<v Speaker 3>Yeah.

0:08:19.670 --> 0:08:21.370
<v Speaker 4>Can they get to a bowl with this?

0:08:21.490 --> 0:08:24.110
<v Speaker 5>I mean, look, now I think bowl, obviously, it's a

0:08:24.170 --> 0:08:26.610
<v Speaker 5>low bar. But the whole view is, like, as you

0:08:26.630 --> 0:08:30.460
<v Speaker 5>get into next year, 2014 playoffs, Look, Big Ten and

0:08:30.560 --> 0:08:33.500
<v Speaker 5>SEC teams, you could lose three games and still make

0:08:33.540 --> 0:08:35.760
<v Speaker 5>the playoffs. And I think you're just, you know, leveling

0:08:35.900 --> 0:08:39.050
<v Speaker 5>off of the playing field that's happening between NIL and

0:08:39.070 --> 0:08:39.530
<v Speaker 5>the portal.

0:08:40.150 --> 0:08:43.150
<v Speaker 3>When you're sitting on the sidelines, what's the number one

0:08:43.210 --> 0:08:47.130
<v Speaker 3>thing that I miss? When you're on the sidelines of

0:08:47.150 --> 0:08:50.900
<v Speaker 3>the Division I big-time college football game, what do the

0:08:50.960 --> 0:08:52.059
<v Speaker 3>amateurs like me miss?

0:08:53.010 --> 0:08:54.820
<v Speaker 5>I think the thing that you miss is just the

0:08:55.010 --> 0:08:58.520
<v Speaker 5>size and the speed of these players today versus even

0:08:58.559 --> 0:09:02.860
<v Speaker 5>a few years ago. I think that's when that's underappreciated.

0:09:02.880 --> 0:09:03.260
<v Speaker 4>Right.

0:09:03.740 --> 0:09:07.160
<v Speaker 5>And I think it just shows that you're just, you know,

0:09:07.179 --> 0:09:09.020
<v Speaker 5>as much as people want to talk about NIL and

0:09:09.040 --> 0:09:12.360
<v Speaker 5>the professionalism, it comes down, they're still 18 to 22

0:09:12.360 --> 0:09:16.680
<v Speaker 5>year olds. And it's about them having fun and winning games.

0:09:17.860 --> 0:09:21.989
<v Speaker 4>How come, you know, I look at this. Well, I

0:09:22.010 --> 0:09:25.670
<v Speaker 4>don't think I will leave that. Dan, I got to go.

0:09:25.870 --> 0:09:27.349
<v Speaker 4>I'm frazzled by Election Day.

0:09:28.230 --> 0:09:29.530
<v Speaker 3>You know, this is great. Yeah, I know.

0:09:29.550 --> 0:09:30.290
<v Speaker 4>We're all over.

0:09:30.309 --> 0:09:30.929
<v Speaker 3>We're all over.

0:09:31.590 --> 0:09:32.210
<v Speaker 4>We're two years.

0:09:32.309 --> 0:09:33.350
<v Speaker 1>Get the popcorn out.

0:09:33.510 --> 0:09:35.590
<v Speaker 3>A lot of commercial free moments here so we can

0:09:35.630 --> 0:09:38.989
<v Speaker 3>get people like Dan Ives in with a longer conversation.

0:09:39.030 --> 0:09:42.030
<v Speaker 4>He's with Yorkville Eyes. And again, go to them for

0:09:42.120 --> 0:09:44.120
<v Speaker 4>all of their writing up of Apple.