Let's talk about the guidance for next quarter first, since that's all anyone cares about. Apple says $0.94. Analysts have them pegged at $1.09. Ohh boo hiss, selloff - take the stock down 30%! Well what did they do last 90 days ago with guidance? [Apple Reports] They gave guidance of $1.42. And today's report came in at $1.76. Again, this company is lowball central.
Let's look at the rest of the earnings report, while people stress about how awful next quarter will be due to "low guidance".
- The Company posted revenue of $9.6 billion and net quarterly profit of $1.58 billion, or $1.76 per diluted share. These results compare to revenue of $7.1 billion and net quarterly profit of $1 billion, or $1.14 per diluted share, in the year-ago quarter.
- Gross margin was 34.7 percent, up from 31.2 percent in the year-ago quarter.
- International sales accounted for 45 percent of the quarter's revenue.
We have gross margins up 3.5% year over year. And up from 33.6% last quarter (+1.1%)
We have a company that almost half of sales are now outside the US.
- Apple shipped 2,319,000 Macintosh® computers, representing and 44 percent unit growth & 47 percent revenue growth over the year-ago quarter.
- The Company sold 22,121,000 iPods during the quarter, representing five percent unit growth and 17 percent revenue growth over the year-ago quarter.
- Quarterly iPhone(TM) sales were 2,315,000.
- Looking ahead to the second quarter of fiscal 2008, we expect revenue of about $6.8 billion and earnings per diluted share of about $.94."
I'm not trying to spin it or justify the numbers; if things stink I'll say it. But this is just typical Wall Street gamemanship and in a nervous market you can't win for losing. For "stock performance" it would of been better to beat this quarter's estimates by say only $0.06 and then throw that extra $.08 into next quarter's "estimates" so the wolves on the Street are appeased. And the stock would be up, on a reasonable beat and better guidance.
Looks like Apple should be on target for $5.30-$5.40 for 2008 EPS (analysts currently have them at $5.14 but they beat this quarter by $0.14 which gives us $5.28 and then they'll magically keep beating the next 2 quarters as well).
So at $155 (today's close) it's 29x my 08 estimates. Not cheap, but not many $130B companies grow 40% year over year. At $136 which it is trading now in after hours, it's 25-26x my estimate. Or about 2/3rd of its current growth rate. And roughly in line for what it should be able to (at least) grow the next 3-5 years. For a premium franchise. But not enough to appease this ruthless market.
It appears "buy and hold" investing is going the way of the dodo bird - looking at a 1 year chart of Apple (AAPL) in the span of 3 weeks all gains since July 2007 are now erased. At the pace we are going every stock, even the best franchises, are going to be heading to 2006 levels.
Long Apple in fund; and in personal account
3 comments:
dont tell me you believe AAPL will be immune from a consumer slowdown? they are the quintissential consumer company...even worse, their products are premium-priced. of course AAPL will suffer as much as the next guy if consumers feel the pinch from a slowing economy. i think thats why the stock is down. they also missed estimates on ipod sales.
I don't think anything is immune. But the way things are going we are pricing in no one ever going to eat at restaruants, ever buy clothes again, or in fact leave the house.
Even if true (hah), almost 50% of sales are now overseas. And yes we can make a bear case for that too. I mean those overseas markets are now going to stop growing their middle class too, right? In fact I can make a bear case for anything if I try hard enough including Walmart, Altria, and any drug company. But I think at some point people are just starting to see ghosts around every corner. I'm really not concerned with iPod sales - that is now an old driver and created the Halo effect around Apple - it was a great product that brought a virtuous cycle back to the company. The Macs are the growth engine and driver. Even the iPhones - lots of hype, but the key driver their is not hardware sales but the subscription revenue sharing they receive. A nice diversity play on the revenue stream. To me a bonus, but it keeps going back to Macs. Everything that builds the cache, and drives people to replace PCs with Macs is the key.
Look kids are still paying $140 for jeans at Abercrombie. People still pay premium for products they prefer. A HPQ or Dell or Lenovo are interchangeable. The Apple is interchangeable in terms of "what it does", but not whom buys it and how they view it. All the arguements against why do people pay more for Apple products could be made for 2 decades against Nike sneakers. At the time, why were people paying $110 for Nikes when a perfectly suitable, offering the same functionality Reebok was going for $35 - but people kept buying them when sneakers were the hot thing in the 80s and 90s. Why do people pay $15K more for a premium car brand when they can get the same functionality in a different brand. I really don't know since I am brand agnostic myself, but my observation is people are obsessed with brand and willing to pay for style and cache. Yes if we go to worldwide Depression they will have to change behavior. But until those $140 jeans stop selling I just don't see it getting there (yet).
Last, all these middle school, HS age, and college age kids who live and breathe Apple are going to move into the corporate world and start driving decisions. If Apple ever gets a toehold into the enterprise market in a meaningful way, that will be the truly huge driver. But again those are long term views, which may or may not work out. The market is only concerned about 90 days at a time, and the stock price reacts to those 90 days. Thats "long term investing" nowadays.
well, talk is cheap, as a trader you have to be able to anticipate the move and weight in your risk and reward for each trade. Chart don't lie, and you can not fall in love with certain stock, no matter what. I remember very well how CSCO (it's going from 84 to 9), MSFT, INTC trade down in 2001, that how market bring new star to the front, by turn off on the old one. How many time has aapl give us a chance to get out in the last few weeks? Many....
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