The Downside Of Being Fashionable ....
... is that eventually the products will go out of fashion.
Apple released its financial results for the first quarter of its 2013 fiscal year after the markets closed on Wednesday, and disappointing results immediately drove its stock price down by over 5 per cent. Although Apple posted record quarterly revenue of $54.5bn, a quarterly profit of $13.1bn, and earnings-per-share (EPS) of …
... is that eventually the products will go out of fashion.
What BS sales are up? 47m iPhones compared to 37m a year ago.
So why the 33% drop in the share price ... the analysts don't see a rosy future for the products.
The 33% drop in share price is because the product has stopped being fashionable, the product being 'shares in Apple'.
The P/E ratio is still low, sales are up and revenues are growing. Apart from the lack of profit growth as highlighted by El Reg, I think there's also the psychological problem that Apple shares are no longer a sure fire thing for an investor.
The markets were expecting this so I will bet that many traders are getting their hands dirty and making mega money by short selling the stock.
B.S., it's called a correction, happens all the time, and is Healthy for apple. If their prices get too much more inflated it will become a bubble and bring down the company.
Stock markets rarely make sense.
They often trade based upon hype, so if the new Apple TV set is rumoured it can make the share price jump, when it doesn't appear it can plummet.
There's been an expectation that Apple will launch a big product every year, except that really making an improvement takes time.
I think Warren buffet called the stock market a giant opinion poll
Yeah these are people that say Nintendo should be making mobile games despite the cold hard truth of mobile gaming being a dead end.
Yeah selling more phones and making more profit must really suck.
The share price is based on the assets of the company + the present value of expected future profits. The fact that profits are the same as last year means that future profits are expected to be lower than what they thought they would be last year.
Apple's share price dropping after posting good profits is no less idiotic than it's share price jumping because some chinese factory made a new screen protector.
Ultimately the quarterly statement tells us what has happened, not what is going to happen - that's for the analysts and stock brokers to decide - and the stock market appears to have decided that the sheen is coming off Apple.
"Yeah selling more phones and making more profit must really suck"
They didn't make more profit, more phones, but proportionally more costs - it was just the central point of the article toadwarrior *slaps forehead*
Remember that Apple was the market leader in terms of smartphone for a long time - now competitors like Samsung are outselling Apple in smartphones, and long term that means less people locked into the App Store/itunes etc which lowers Apple's earnings long term - its not just about selling handsets...
Agreed. The signs have been there for some time. Not knocking Apple or their products, but you can improve on an existing product only so many times before everyone has one and competition catches up or passes.
I'm always surprised out how well Apple has done in the American market with the state of the economy. I remember thinking they would never pull it off, but I was wrong.
But the house that is Apple is going through some changes, power struggles, product problems, nothing really new to show off that's above and beyond.
But their patents will keep them in money for a while though......
I can see what looks like exponential growth in the iPhone sales chart which is good for Apple, but iPad sales seem linear which is not good.
Windows Phone is predicted to knock Apple into 3rd place, and this is the understandable impact....
Surface is going to eat into the iPad market too.
Or when you look at the figures a bit more closely:
iPhone sales up from 37m to 47.8m (up over 29%) despite problems manufacturing the new design and negative issues / publicity related to Apple Maps launch.
iPad sales up from 15.4m to 22.9m (up 49%) and they could not make the iPad Minis fast enough to keep up with demand.
Mac sales were down but the whole market is down and they could not build the new iMacs quickly enough for demand so only ended up selling them in 1 month in the quarter.
Total revenues up 17.7% - gross margins were lower at 38.6% - both higher than their OWN estimates - lower margins probably due to the lower average cost of iPads with the iPad Mini and many people buying older iPhones (at lower cost / free on contract).
All of this was despite it being a 13 week reporting period whereas the same quarter 12 months ago was a 14 week quarter (7.7% longer) - so if you looked at average sales per week they would have been higher still).
Sitting on an even larger cash mountain up almost $16bn to over $137bn.
"I can see what looks like exponential growth in the iPhone sales chart which is good for Apple, but iPad sales seem linear which is not good."
We looking at the same charts / figures? iPad sales were up 49% in this 13 week quarter compared with 12 months ago which was a longer 14 week quarter. They sold all the iPad Minis they could make - if they could have made more they would have sold more.
Isn't the point that the iPhone sales are more heavily biased towards older models, because the 5 is too expensive for what it is?
This, and the success of the iPad mini, implies that future growth is going to be driven by cheaper, lower margin products, while the competition is technically ahead at the same prices. So the future earnings projections need to be adjusted down.
If they had sold 47.8 million iPhone 5, Apple should be back at $700. But they did not.
"The fact that profits are the same as last year means that future profits are expected to be lower than what they thought they would be last year."
Except that's untrue - they are higher than 12 months ago, EPS is higher and they beat their own expectations.
Predicted by who? I know a lot of people with smartphones yet know no-one who owns a Windows Phone or has plans to buy one - most have or plan to buy an iOS or Android based device.
Long term it does not really matter which iPhone they bought - sure they make more profit today on a '5' but those 3GS, 4, 4S users are very likely (think I read it about 80%) to buy an iPhone 'next' time and they become an iTunes customer today. Also selling all those iPods is underestimated since if you have an iPod (especially a Touch) the logical / easy step is to an iPhone / iPad.
You need some remedial math.
That must be because you have no friends. Windows Phone is selling:
Nokia has returned to profit, ending an 18-month spell during which it piled up losses of more than €4bn (£3.36bn).
The Finnish mobile phone maker reported an operating profit of €439m, compared with a loss of nearly €1bn a year ago, as consumer demand for its smartphones revived and the decision to slash its workforce by 20,000 helped to cut costs. The company has returned to growth, with net sales up 11% on the previous quarter to €8bn.
In a sign that the Windows operating system used in Nokia's heavily marketed flagship Lumia handsets is beginning to gain traction, the key devices and services division also returned to profit.
Markets don't exactly operate on current data, they operate on expectations which are informed by current data. The expectation was that Apple would make more money than it actually did. Therefore future expectations have to decrease, which means the stock price has to decrease. This is all independent of whether ANY of those expectations were grounded in reality.
This is one of the reasons there is a segment of economists who strongly favor not taxing dividends, which would allow stocks to start paying them as a means of benefiting shareholders instead of driving them to stock value appreciation. Not sure how badly this distorts the British and EU economies, but it is a major factor for the US.
Sure, sure follow the illusionist's misdirect.
The relevant numbers aren't total sales, they are profit per sale, which is falling. And given that Apple is a high margin/non-commodity player that means they are either moving into a market segment where they've never competed well, or they have to switch horses to a new high margin product. When Jobs was still alive that was a 7:3 prospect. With him out of the picture it's maybe a 3:7 prospect.
Nokia sales continued going up for years, though the problem was others growing faster. Same case here, with Android's massive continued domination.
Funny, when every other company sells products or makes profit, that doesn't stop the Apple fanatics moaning about them, or saying we should all praise Apple for inventing everything.
I agree with your post, but:
"Remember that Apple was the market leader in terms of smartphone for a long time"
Actually no, it was Nokia number one until 2011, then Samsung 2012. Apple might have held the title for one quarter.
Plus "smartphone" is ill-defined, and just a marketing term, which unfairly compares 100% of Apple phones to a minority of everyone else (with Apple using the term even for phones which couldn't run apps). The mobile market is Samsung number one, Nokia number two; until a year or two ago, it was those positions reversed.
I think another way of looking at it is that people had bought into the absurd media hype from 2007, fuelling some idea that Apple would take over and become number one, but with the amazing success of Samsung (and Android in general), it's become clear that's not true, and the existing companies will carry on leading the market just fine.
The downward movement simply reflects numbers below expectation and more competitive markets in which they trade. Samsung, Google and others are taking more of the wind out of Apple's sails. This may spur them on or it may indeed spur on the competitors...either way, their results are still pretty impressive and their cash pile is not exactly small.
The shares are cheap on a PE basis.
My problem now is are they cheap enough. On one hand it is pretty clear that the ttm P/E says it's cheap but I have no way of knowing if that will be true going forward. As it is, the aftermarket is now down to $463.50 which seems a bit excessive to me so I'll have to set some overnight orders in the event it doesn't rebound in the morning. While I don't see a rapid bounce back, it shouldn't take long to come back 5-7% and I'd be happy with that for a month or so of sitting.
I expect that a lot of work will go into making the [5S,6] a lot cheaper to build to boost the margin back up and they may even quietly spin a 5 rev2 if they have the time, they certainly have the cash. One option that I've heard a lot about in the news, that I can't but question, is whether they will do an iPhone 'frugal' to compete on the low end but I wouldn't be surprised if they built the equivalent of an iPhone Air at eye popping margins with near shaving quality edges and a 3-3.25" screen.
Apple have a long term benefit - they may sell an iPad Mini or older iPhone and make less margin but they are then an Apple / iTunes customer. Samsung sell a phone today and that's it - next time it could be a Samsung but equally a HTC, Asus, Motorola, Sony - whoever. Once someone has used Apple they tend to be much more loyal and (unlike Samsung) Apple make ongoing revenue selling the media from iTunes.
Yes the shares appear cheap - market cap ($482bn now) less cash ($137bn now) puts them on a ridiculously low PE of around 6. Compare it to Microsoft for example or Google or Amazon - or pretty much anyone for that matter. Realistically the share price could double and they would still be reasonably priced. And - they even pay a dividend now.
Obvious FAIL from Apple. Failed to meet expectations. The iPad is obviously stagnating and the iPhone5 is a failure. They have lost momentum. The cool factor is gone. I just quickly read 7 different articles all negative on AAPL. Man, I mean look at those graphs and numbers?!? How is Apple even staying in business?
Somewhere there is a reality distortion field, and it is located on Wall Street, and in the offices of Tech journalists.
Reality distortion field? I think it's yours...all my graphs are up.
- Revenue up
- units shipped up
- operating income up
- earnings per share up
Only thing Cook needs to explain is the 18% drop in profit on that revenue- it reeks of poor supplier management and cost creep; something he was formally head honcho of.
And much of this come from over analyst expectations, which apple can't control. eg: Apple management forecast $52.00 billion in total revenues, the analysts expected $54.69 billion, and the result was $54.51 billion.
My question is where the big products are coming from in 2013 - another year of incremental upgrades like 2012 will not get them back in front.
Afterall, 56.24% of sales came from the iphone alone, and given the 5 was not the big upgrade people were expecting, degredation of iphone sales volumes will have a big effect on bottom line.
I'm guessing (obviously - but not like a highly paid anal-yst) but maybe they took in huge stocks they could not build in that quarter which will increase cost but not converted to revenue (yet) so hit margins.
What SHOULD count to shareholders is do Apple meet THEIR expectations - these analysts are listening to rumours and the fact is they DON'T KNOW.
You missed the sarcasm. Where is the sarcasm icon when you need it?
so where is the 'cachet' in owning one?
Ignoring the fact that the reported profit is an obscene 55%, which should be enough to put anyone off buying any product, these things are as common as dirt and little better than a Ford Model T.
Seeing your charts simply highlighted the fact,
I better understand the mentality behind one company who treats the loss of an iThingy more like the loss of a pencil than a valued piece of equipment. Even a 22-year old house guest never got too excited when she lost iThingy but it turned up a couple of days later.
54.5 Revenue, 13.1 profit.
Where's the 55% figure from?
As much as you losers try to make it about the "cool factor", It ain't about cache', it just works, and I can do shit on my ipad 1 I still can't do on any other device. That's a problem, because I will have to shell out for another ipad if I want to keep doing things BESIDES checking my email.
Given there are probably about three times more Android phones in the world I don't see how you can say an iPhone is common?
> profit is an obscene 55%
As always that will be operating profit, before all the deductions like tax, investment, etc. Nothing obscene about it at at all, even if your 55% calculation were accurate.
Funny thing about that. I was reading an article in wired magazine about how only 2% of android users are actually USING android. It's all O.S.'s built on android, but full of bloat ware and HEAVILY rebuilt to be specific to each manufacturers hardware. Only about 2% of users are getting the android experiences.
Please don't assume Wired know what they are talking about. Most of your post makes no sense, so if you got that information from Wired, then their article must make no sense either.
There are no OS's built ON android (Android is built on Linux, the OS). All Android implementation require some customisation to specific hw, but are nowhere near 'HEAVILY' rebuilt. The only obvious example is TouchWiz on Samsung phones, that is built ON TOP of Android, but doesn't rebuild Android to any great extent at all.
Basically few android users know or care its android or a particular manufacturer.
"I can do shit on my ipad 1 I still can't do on any other device."
Name one function (apart from syncing with cursed itunes...) that you can't do with another tablet.
If you can't do it with one of the current Android tabs its because you have never bothered to try - the difference between the two in terms of functionality is practically non-existent these days.
Sure, if you're comparing a $500-800 ipad to a $200 locked down kindle, then yeah the kindle does less by design, but its a fraction of the price too...
That's just ONE thing that I'm playing with. There are hundreds, if not thousands of things going on in all walks of life and all professions.