bmichaud Posted April 24, 2013 Share Posted April 24, 2013 Cramer outdoes himself here.... WOW http://www.cnbc.com/id/100668341 Link to comment Share on other sites More sharing options...
txlaw Posted April 24, 2013 Share Posted April 24, 2013 Oh no! iPhone ASP declined by 3%. Competitive pressures are eroding margins !Run for the hills! ;D ;D ;D Yeah, but look at the slowdown in YoY unit and revenue growth for iPhone. That's the more troubling aspect of their quarter, at least with respect to iPhone. (Edit: And, yes, I realize that the headline YoY figures are lower because of channel inventory bump last year. Even adjusting for this, there's quite a slowdown.) Could the slowdown be because they haven't dropped ASPs enough for the older iPhone models? Tim Cook noted that Apple "recently made [iPhone 4] even more affordable to make it even more attractive to those first-time buyers [in China] and so we’re hopeful that will help iPhone sales in the future." We could see greater ASP drop going forward -- whether revenue growth will compensate for that remains to be seen. CC transcript: http://seekingalpha.com/article/1364041-apple-s-ceo-discusses-f2q13-results-earnings-call-transcript I'm troubled by this quarter. It looks to me like competitive pressures are, in fact, taking a toll in a way that makes it far less certain that unit sale growth will compensate adequately for ASP and GM decline. That means that folks are betting on the pipeline to provide earnings maintenance. I may have to rethink whether I want to hold onto my small position in AAPL. It is going to slow down, there is no two ways about it. There isn't only more competition, but the competition is better...and the business is becoming very commoditized. No different than any other business...whether it's operating systems, laptops, search engines, advertising, etc. You will never completely outlast the competition...you can only extend your longevity. And that's where I think people are wrong. Apple has gone from will grow to a trillion to will be demolished by the competition...the pendulum has swung too far the other way now. I think Apple can last many years, with very modest growth, and pay out alot of capital to shareholders over that time. No different than INTC, DELL, MSFT, etc. Cheers! I agree with you on the first part about commoditization and then on how sentiment has switched. The problem I see is that under a commoditization scenario, where there is also substantial unit sales growth slowdown for the flagship products (iPhone and iPad), which are also the most likely to face crazy competition going forward, I don't see much more than earnings maintenance, and there could continue to be earnings decline, depending on how they ramp up R&D and SG&A. Now, it may very well be the case that the product pipeline (e.g., iPhone 6, iTV, iWatch, etc.) will result in revenue growth and earnings maintenance/growth starting in the fall and continuing through 2014. But I'm just less confident of this, mostly because of the slowdown in iPhone. I'm also worried about iPad because I think there are gonna be some very interesting releases by Google, Microsoft, Amazon, and even Blackberry later this year. The range of outcomes has expanded on the downside for me -- that's all. So I've decided to sell and just watch from the sidelines for now. If we get Apple closer to $400$300, I could revisit. Link to comment Share on other sites More sharing options...
txlaw Posted April 24, 2013 Share Posted April 24, 2013 Oh no! iPhone ASP declined by 3%. Competitive pressures are eroding margins !Run for the hills! ;D ;D ;D Yeah, but look at the slowdown in YoY unit and revenue growth for iPhone. That's the more troubling aspect of their quarter, at least with respect to iPhone. (Edit: And, yes, I realize that the headline YoY figures are lower because of channel inventory bump last year. Even adjusting for this, there's quite a slowdown.) Could the slowdown be because they haven't dropped ASPs enough for the older iPhone models? Tim Cook noted that Apple "recently made [iPhone 4] even more affordable to make it even more attractive to those first-time buyers [in China] and so we’re hopeful that will help iPhone sales in the future." We could see greater ASP drop going forward -- whether revenue growth will compensate for that remains to be seen. CC transcript: http://seekingalpha.com/article/1364041-apple-s-ceo-discusses-f2q13-results-earnings-call-transcript I'm troubled by this quarter. It looks to me like competitive pressures are, in fact, taking a toll in a way that makes it far less certain that unit sale growth will compensate adequately for ASP and GM decline. That means that folks are betting on the pipeline to provide earnings maintenance. I may have to rethink whether I want to hold onto my small position in AAPL. What price did you buy it at? $399.99. Link to comment Share on other sites More sharing options...
txlaw Posted April 24, 2013 Share Posted April 24, 2013 Oh no! iPhone ASP declined by 3%. Competitive pressures are eroding margins !Run for the hills! ;D ;D ;D Yeah, but look at the slowdown in YoY unit and revenue growth for iPhone. That's the more troubling aspect of their quarter, at least with respect to iPhone. (Edit: And, yes, I realize that the headline YoY figures are lower because of channel inventory bump last year. Even adjusting for this, there's quite a slowdown.) Could the slowdown be because they haven't dropped ASPs enough for the older iPhone models? Tim Cook noted that Apple "recently made [iPhone 4] even more affordable to make it even more attractive to those first-time buyers [in China] and so we’re hopeful that will help iPhone sales in the future." We could see greater ASP drop going forward -- whether revenue growth will compensate for that remains to be seen. CC transcript: http://seekingalpha.com/article/1364041-apple-s-ceo-discusses-f2q13-results-earnings-call-transcript I'm troubled by this quarter. It looks to me like competitive pressures are, in fact, taking a toll in a way that makes it far less certain that unit sale growth will compensate adequately for ASP and GM decline. That means that folks are betting on the pipeline to provide earnings maintenance. I may have to rethink whether I want to hold onto my small position in AAPL. It is going to slow down, there is no two ways about it. There isn't only more competition, but the competition is better...and the business is becoming very commoditized. No different than any other business...whether it's operating systems, laptops, search engines, advertising, etc. You will never completely outlast the competition...you can only extend your longevity. And that's where I think people are wrong. Apple has gone from will grow to a trillion to will be demolished by the competition...the pendulum has swung too far the other way now. I think Apple can last many years, with very modest growth, and pay out alot of capital to shareholders over that time. No different than INTC, DELL, MSFT, etc. Cheers! 1, Samsung spends 4x Apple on marketing. Yet Apple can easily afford to spend 10x Samsung but doesn't. Why doesn't Cook increase marketing to juice up growth? 2, Apple spend $10B in capex last year. What did they spend it on? Would they spend it if they weren't looking at growth? Increasing marketing spend might work to increase unit sales, especially abroad. But Tim Cook said nothing about that. But maybe they're planning on doing this. As for capex, who knows what they spent it on? Hopefully datacenters for their cloud services tied to their ecosystem. For now, I will just watch until things get clearer. If it turns out that iPhone 6 will be radically different and will be tied to the sale of Apple cloud services, and that people are gonna sign up for those services in droves, maybe my worries will be unfounded. Link to comment Share on other sites More sharing options...
Guest wellmont Posted April 24, 2013 Share Posted April 24, 2013 What I don't understand, is why Apple bought back 0 shares last quarter. Thats what it appears to me from comparing the statement of cashflows for the 6 months ended this quarter to the statement of cashflows for the 3 months ended last quarter. $0 spent this quarter. If they think the stock is such a great deal, why are they not buying? A $50 billion buyback approved doesn't really mean anything UNLESS THEY ACTUALLY ACT ON IT! Were there any regulations preventing them from buying last Q? Like 10k needed to be filed? because they don't see it like you do. they aren't "value" investors. they don't see a low share price and start salivating. this is why they have a well earned reputation as poor capital allocaters. How often does Tim Cook talk about capital allocation? And would he even talk about it were it not of grave concern to some of his more vocal shareholders? A culture has been instilled in this company that management owns the cash, not the shareholders. Link to comment Share on other sites More sharing options...
DCG Posted April 24, 2013 Share Posted April 24, 2013 Cramer outdoes himself here.... WOW http://www.cnbc.com/id/100668341 WTF is he talking about....apple buying Dish or Sprint would make no sense. Link to comment Share on other sites More sharing options...
DCG Posted April 24, 2013 Share Posted April 24, 2013 The biggest disappointment with the conf call to me is that is sounds like there may not be any new product releases/updates until the fall. This is typical though--were you expecting something sooner? How is this typical? Apple has been in a schedule of releasing major product updates in the spring and fall for many years. Link to comment Share on other sites More sharing options...
jeffmori7 Posted April 24, 2013 Share Posted April 24, 2013 Is it possible that what Cook implied was no new line of products (watch, tv, etc) until fall, but that we could yet see minor upgrade this spring? Or was it about any new products? Link to comment Share on other sites More sharing options...
racemize Posted April 24, 2013 Share Posted April 24, 2013 The biggest disappointment with the conf call to me is that is sounds like there may not be any new product releases/updates until the fall. This is typical though--were you expecting something sooner? How is this typical? Apple has been in a schedule of releasing major product updates in the spring and fall for many years. I guess you mean the iPad releases in recent years? Sure, but we got a fuller release last fall, so I wasn't expecting one. The iPhone and other minor refreshes (e.g., for computer line) have typically been late summer, as I recall. Link to comment Share on other sites More sharing options...
LC Posted April 24, 2013 Share Posted April 24, 2013 What I don't understand, is why Apple bought back 0 shares last quarter. Thats what it appears to me from comparing the statement of cashflows for the 6 months ended this quarter to the statement of cashflows for the 3 months ended last quarter. $0 spent this quarter. If they think the stock is such a great deal, why are they not buying? A $50 billion buyback approved doesn't really mean anything UNLESS THEY ACTUALLY ACT ON IT! Were there any regulations preventing them from buying last Q? Like 10k needed to be filed? Apple reminds me of the line "look for a business that needs a new CFO not a new CEO" Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 25, 2013 Share Posted April 25, 2013 Lets hope the stock price stays low for more buying from me and Apple. I'll second that wish! We may get our wish; AAPL is done $10 in pre-market. Got one order in. Hopefully, many more to come this quarter. Link to comment Share on other sites More sharing options...
Viking Posted April 25, 2013 Share Posted April 25, 2013 Apple is going to give Wall Street a migraine. They are focussed on making decisions that benefit the company over the long term. New products releases are now nearly impossible to predict. Cannibalization? They welcome it! Excess cash? Buy back stock (no expensive aquisitions). I love the fact they are not trying to impress Wall Street and instead are running the business for the long term benefit of shareholders, employees etc. Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 25, 2013 Share Posted April 25, 2013 Apple is going to give Wall Street a migraine. They are focussed on making decisions that benefit the company over the long term. New products releases are now nearly impossible to predict. Cannibalization? They welcome it! Excess cash? Buy back stock (no expensive aquisitions). I love the fact they are not trying to impress Wall Street and instead are running the business for the long term benefit of shareholders, employees etc. It is the most poorly understood company out there. But everyone thinks they're an expert on it. And it is damn cheap and going to be buying back 60B of stock and low prices. I couldn't ask for more! Link to comment Share on other sites More sharing options...
siddharth18 Posted April 25, 2013 Share Posted April 25, 2013 http://www.theonion.com/articles/weeping-tim-cook-spotted-screaming-for-help-at-ste,32104/ Link to comment Share on other sites More sharing options...
DCG Posted April 25, 2013 Share Posted April 25, 2013 I don't know that it's that APPL is not understood; I think the issue is that most institutional investors have the patience of 2-year-olds, and base all their investing decisions on what everyone else is doing. Link to comment Share on other sites More sharing options...
VAL9000 Posted April 25, 2013 Share Posted April 25, 2013 It's not exactly a huge surprise what's going on here. We've been talking about margin compression, increasing competition, and slowing sales for months now. That it takes a couple of quarters of proof before the market reacts isn't cause for excitement. Apple is going from insanely great to roughly average pretty quickly. Q1 2012 Operating Margin: 39%, Q1 2013 Operating Margin: 29%. That's a 25% drop in a single year and there's nothing special about that year. We're just watching a steady grinding down of the business. Here's a little Porter Five Forces analysis for you, centered around Apple: Suppliers - Actively looking to diversify their income stream away from Apple. This means less bargaining power for Apple, and more competition for the same service. This will drive up costs. Plus it's been widely reported that Chinese labour costs are increasing. This is going to be passed to Apple. - Cirrus Logic just got publicly boned by Apple over poor component forecasting. Correcting for this in the future will drive up costs. Customers - Carriers have more comparable devices to offer and sell, not just Apple products. Competitors are offering more variety, better price points, and more aggressive marketing activity. This will reduce revenues by either volume or ASP. New Entrants - Competition has already arrived, but the cost of building hardware at scale is decreasing rapidly. The cost of software is free to competitors. Additional phone software competitors being launched (Mozilla, Facebook, Chinese forked Android). Substitutes - Most popular apps available on all flavours of phone. - With the core value moving from Apps to web services, the OS substitution game is getting hotter. Industry Rivalry - Intense. Look at the amount of money being put into marketing, acquisitions, R&D, lawsuits, patents, and patent protection. No fault of Apple's, but they are in a poorly structured industry. As WEB says, "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact." This whole thing is painfully reminiscent of RIM from 2009-2012. Next thing I'm going to hear about how Tim Cook should not have been trusted because he gave aggressive forecasts about his business. That said, a P/E of 12 is probably a good place to buy Apple, but you should buy it with a net margin assumption of 10%. i.e. Full Freight = 330bn - Cash = 120bn (after tax) - Business = 210bn - 210bn = 12 P/E * 17bn earnings - 17bn earnings = 170bn revenue @ 10% margin ~$351/share. Link to comment Share on other sites More sharing options...
nkp007 Posted April 25, 2013 Share Posted April 25, 2013 Apple is going to give Wall Street a migraine. They are focussed on making decisions that benefit the company over the long term. New products releases are now nearly impossible to predict. Cannibalization? They welcome it! Excess cash? Buy back stock (no expensive aquisitions). I love the fact they are not trying to impress Wall Street and instead are running the business for the long term benefit of shareholders, employees etc. It is the most poorly understood company out there. But everyone thinks they're an expert on it. And it is damn cheap and going to be buying back 60B of stock and low prices. I couldn't ask for more! I would argue that Apple is one of the most understood companies out there. People parse through its data like it's a Fed statement. Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 25, 2013 Share Posted April 25, 2013 I would argue that Apple is one of the most understood companies out there. People parse through its data like it's a Fed statement. Some say Apple defines zero edge. Funny how the results played out … nothing happened. Link to comment Share on other sites More sharing options...
Parsad Posted April 25, 2013 Share Posted April 25, 2013 Apple is going to give Wall Street a migraine. They are focussed on making decisions that benefit the company over the long term. New products releases are now nearly impossible to predict. Cannibalization? They welcome it! Excess cash? Buy back stock (no expensive aquisitions). I love the fact they are not trying to impress Wall Street and instead are running the business for the long term benefit of shareholders, employees etc. It is the most poorly understood company out there. But everyone thinks they're an expert on it. And it is damn cheap and going to be buying back 60B of stock and low prices. I couldn't ask for more! I would argue that Apple is one of the most understood companies out there. People parse through its data like it's a Fed statement. LOL! I would agree. Perhaps, ValueInv was referring to the company's fundamentals and valuation that is misunderstood. Apple is not a hard company to understand, but the markets are acting like it is going out of business in five years. Cheers! Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 25, 2013 Share Posted April 25, 2013 Apple is going to give Wall Street a migraine. They are focussed on making decisions that benefit the company over the long term. New products releases are now nearly impossible to predict. Cannibalization? They welcome it! Excess cash? Buy back stock (no expensive aquisitions). I love the fact they are not trying to impress Wall Street and instead are running the business for the long term benefit of shareholders, employees etc. It is the most poorly understood company out there. But everyone thinks they're an expert on it. And it is damn cheap and going to be buying back 60B of stock and low prices. I couldn't ask for more! I would argue that Apple is one of the most understood companies out there. People parse through its data like it's a Fed statement. LOL! I would agree. Perhaps, ValueInv was referring to the company's fundamentals and valuation that is misunderstood. Apple is not a hard company to understand, but the markets are acting like it is going out of business in five years. Cheers! If you think that 1, competition is eroding Apple's margins 2, Apple is not innovating 3, Competition has caught up with Apple then you do not understand Apple. Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 25, 2013 Share Posted April 25, 2013 It's not exactly a huge surprise what's going on here. We've been talking about margin compression, increasing competition, and slowing sales for months now. That it takes a couple of quarters of proof before the market reacts isn't cause for excitement. Apple is going from insanely great to roughly average pretty quickly. Q1 2012 Operating Margin: 39%, Q1 2013 Operating Margin: 29%. That's a 25% drop in a single year and there's nothing special about that year. We're just watching a steady grinding down of the business. Here's a little Porter Five Forces analysis for you, centered around Apple: Suppliers - Actively looking to diversify their income stream away from Apple. This means less bargaining power for Apple, and more competition for the same service. This will drive up costs. Plus it's been widely reported that Chinese labour costs are increasing. This is going to be passed to Apple. - Cirrus Logic just got publicly boned by Apple over poor component forecasting. Correcting for this in the future will drive up costs. Customers - Carriers have more comparable devices to offer and sell, not just Apple products. Competitors are offering more variety, better price points, and more aggressive marketing activity. This will reduce revenues by either volume or ASP. New Entrants - Competition has already arrived, but the cost of building hardware at scale is decreasing rapidly. The cost of software is free to competitors. Additional phone software competitors being launched (Mozilla, Facebook, Chinese forked Android). Substitutes - Most popular apps available on all flavours of phone. - With the core value moving from Apps to web services, the OS substitution game is getting hotter. Industry Rivalry - Intense. Look at the amount of money being put into marketing, acquisitions, R&D, lawsuits, patents, and patent protection. No fault of Apple's, but they are in a poorly structured industry. As WEB says, "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact." This whole thing is painfully reminiscent of RIM from 2009-2012. Next thing I'm going to hear about how Tim Cook should not have been trusted because he gave aggressive forecasts about his business. That said, a P/E of 12 is probably a good place to buy Apple, but you should buy it with a net margin assumption of 10%. i.e. Full Freight = 330bn - Cash = 120bn (after tax) - Business = 210bn - 210bn = 12 P/E * 17bn earnings - 17bn earnings = 170bn revenue @ 10% margin ~$351/share. You have a pretty wild imagination, I'll give you that. Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 25, 2013 Share Posted April 25, 2013 Boy, looks like developers are not interested in Apple anymore ;): http://gigaom.com/2013/04/25/wwdc-sold-out-in-minutes-but-ticket-less-developers-can-follow-along-at-home/ Link to comment Share on other sites More sharing options...
Parsad Posted April 25, 2013 Share Posted April 25, 2013 If you think that 1, competition is eroding Apple's margins 2, Apple is not innovating 3, Competition has caught up with Apple then you do not understand Apple. I think 1) & 3) is happening as we speak...yet those margins will still be higher than its peers, even though they will come down. On 2), I also think Apple is still innovating, but so are its competitors. Nothing worse than someone falling in love with a stock. I highly recommend you not do that...whether it is Apple, Fairfax, Berkshire, Google or any other stock. Market prices are there to serve you...that is the only thing you can control, as management and companies (even the best) will falter at times. Cheers! Link to comment Share on other sites More sharing options...
nkp007 Posted April 25, 2013 Share Posted April 25, 2013 Apple is going to give Wall Street a migraine. They are focussed on making decisions that benefit the company over the long term. New products releases are now nearly impossible to predict. Cannibalization? They welcome it! Excess cash? Buy back stock (no expensive aquisitions). I love the fact they are not trying to impress Wall Street and instead are running the business for the long term benefit of shareholders, employees etc. It is the most poorly understood company out there. But everyone thinks they're an expert on it. And it is damn cheap and going to be buying back 60B of stock and low prices. I couldn't ask for more! I would argue that Apple is one of the most understood companies out there. People parse through its data like it's a Fed statement. LOL! I would agree. Perhaps, ValueInv was referring to the company's fundamentals and valuation that is misunderstood. Apple is not a hard company to understand, but the markets are acting like it is going out of business in five years. Cheers! If you think that 1, competition is eroding Apple's margins 2, Apple is not innovating 3, Competition has caught up with Apple then you do not understand Apple. :o Link to comment Share on other sites More sharing options...
VAL9000 Posted April 25, 2013 Share Posted April 25, 2013 If you think that 1, competition is eroding Apple's margins 2, Apple is not innovating 3, Competition has caught up with Apple then you do not understand Apple. :o I lol'd. Link to comment Share on other sites More sharing options...
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