PLynchJr Posted January 24, 2013 Share Posted January 24, 2013 Exactly what evidence is there that growth will be flat to negative all the sudden? Or that they will have to lower prices? Link to comment Share on other sites More sharing options...
Palantir Posted January 24, 2013 Share Posted January 24, 2013 The biggest driver in their sales has been the iPhone, not Mac, not MacBook, not iPad, not iPod. That market is competitive and can become saturated, leading to slower growth. If they lower prices, they can increase sales. If they introduce another product, they can increase yet again. Link to comment Share on other sites More sharing options...
DCG Posted January 24, 2013 Share Posted January 24, 2013 Exactly what evidence is there that growth will be flat to negative all the sudden? Or that they will have to lower prices? I think this last quarter serves as some evidence. This quarter included several new product releases, including the iPhone 5, iPad 4th generation, the iPad mini, new iMacs, etc, and they sold quite a bit more of them from this quarter last year, yet their revenue and earnings were basically flat with last year. I'm an Apple shareholder, but am trying to look at this quarter from every angle. The near-sighted market looks for growth, and Apple's growth has gone from 90% to expected single digit growth. That said, I think the stock is getting pretty damn cheap. I think they have a good amount of repeat business built in for the next several years. It's nearly impossible to say how much, but a majority of iPhone owners will upgrade to future versions of it. As I said earlier, that might not happen every 2 years as consistently as in the past, but it will happen. Users will also continue to buy apps from the app store, music from iTunes, and more than one apple product. The moronic analysts that are now saying things like 'they don't see a reason Apple should trade for more than it's level of cash' are mind-blowingly obsurd, and I have no idea how companies actually pay analysts to come up with this garbage. While this can change, they still have the most (or one of the most) valuable brands on the planet. Link to comment Share on other sites More sharing options...
Guest wellmont Posted January 24, 2013 Share Posted January 24, 2013 The biggest driver in their sales has been the iPhone, not Mac, not MacBook, not iPad, not iPod. That market is competitive and can become saturated, leading to slower growth. If they lower prices, they can increase sales. If they introduce another product, they can increase yet again. at 7x earnings ex cash, it needs no growth at all to be a good stock. the market is pricing a 20% grower like it's a water utility. Link to comment Share on other sites More sharing options...
Palantir Posted January 24, 2013 Share Posted January 24, 2013 Yeah, but if earnings are declining, that 7x can get expensive, and it's not obvious to me that the Market will value a declining stock correctly. Furthermore, even if you are right the stock can trade sideways for years before reaching a reasonable valuation. I don't have a view on this stock...but just too much momentum and headline risk for me. Link to comment Share on other sites More sharing options...
Guest wellmont Posted January 24, 2013 Share Posted January 24, 2013 Yeah, but if earnings are declining, that 7x can get expensive. Furthermore, even if you are right the stock can trade sideways for years before reaching a reasonable valuation. I don't have a view on this stock...but just too much momentum and headline risk for me. I doubt they are declining. they are slowing. Link to comment Share on other sites More sharing options...
Palantir Posted January 24, 2013 Share Posted January 24, 2013 ^You don't believe iPhone is going to lose any market share? If you do, you don't believe that Apple will reduce prices and therefore margins in order to increase sales? Link to comment Share on other sites More sharing options...
Guest wellmont Posted January 24, 2013 Share Posted January 24, 2013 ^You don't believe iPhone is going to lose any market share? If you do, you don't believe that Apple will reduce prices and therefore margins in order to increase sales? yeah I believe all that. but I don't believe apple has stopped growing. iphone units were up over 20%. it's the silly season again on wall street. Link to comment Share on other sites More sharing options...
Tim Eriksen Posted January 24, 2013 Share Posted January 24, 2013 Exactly what evidence is there that growth will be flat to negative all the sudden? Or that they will have to lower prices? When your company provided guidance (which is no longer low balled) is for sales to only increase 8% (from $39B to $42B) from the year ago quarter and your margins are projected to fall from 47% in that year ago quarter to 38%, it results in gross margin falling from $18.5B to $16B. Sales are still rising but margins and profits are declining. Investors often project trends and it is entirely possible that margins fall further. It seems logical to me that growth investors will likely be exiting which will create downward pressure on the stock price despite what seems like a reasonable valuation. Link to comment Share on other sites More sharing options...
Guest valueInv Posted January 24, 2013 Share Posted January 24, 2013 Yeah, but if earnings are declining, that 7x can get expensive. Furthermore, even if you are right the stock can trade sideways for years before reaching a reasonable valuation. I don't have a view on this stock...but just too much momentum and headline risk for me. I doubt they are declining. they are slowing. They sold 30% more iPhones with one week less in the quarter and under production delays for most of the quarter. Link to comment Share on other sites More sharing options...
Palantir Posted January 24, 2013 Share Posted January 24, 2013 ^You have a point. Let's change tracks and look a little closer at this. The "market noise" says that Apple is no longer a growth story. The reasoning behind this is that they missed WS expectations. However, expectations are an artificial construct, let's throw those expectations out, and look at actual performance. We see major growth in iPhone sales. But for the year, revenue has not grown as fast as sales, which implies price declines. Same goes for iPad, units sold is up dramatically, but revenue, not as much. Mac and iPod are shrinking. So they've sold more, but they're charging less for them. If this is the case, then conversely, it's a good thing, IMO as they're getting their products into more hands, it'll decrease margins, but increase overall profits. Link to comment Share on other sites More sharing options...
polangevin Posted January 24, 2013 Share Posted January 24, 2013 ^You have a point. Let's change tracks and look a little closer at this. The "market noise" says that Apple is no longer a growth story. The reasoning behind this is that they missed WS expectations. However, expectations are an artificial construct, let's throw those expectations out, and look at actual performance. We see major growth in iPhone sales. But for the year, revenue has not grown as fast as sales, which implies price declines. Same goes for iPad, units sold is up dramatically, but revenue, not as much. Mac and iPod are shrinking. So they've sold more, but they're charging less for them. If this is the case, then conversely, it's a good thing, IMO as they're getting their products into more hands, it'll decrease margins, but increase overall profits. They haven't charged less in the case of the iPhone. They paid a much higher price to their suppliers as there was a lot of new products for the quarter and the suppliers are still going thru the learning curve process. I expect a good chunk of those margin compression to be temporary as you can see with the iPhone average selling price. Link to comment Share on other sites More sharing options...
Guest wellmont Posted January 24, 2013 Share Posted January 24, 2013 appl needs a rising stock to keep employees happy and keep them from leaving for fb and goog. it used to be very arrogant about returning cash to owners. I suspect after this rout they will be less so. and that will get big investors back in it. Link to comment Share on other sites More sharing options...
Palantir Posted January 24, 2013 Share Posted January 24, 2013 They haven't charged less in the case of the iPhone. They paid a much higher price to their suppliers as there was a lot of new products for the quarter and the suppliers are still going thru the learning curve process. I expect a good chunk of those margin compression to be temporary as you can see with the iPhone average selling price. Then why hasn't revenue growth matched growth in units sold? Link to comment Share on other sites More sharing options...
polangevin Posted January 24, 2013 Share Posted January 24, 2013 They haven't charged less in the case of the iPhone. They paid a much higher price to their suppliers as there was a lot of new products for the quarter and the suppliers are still going thru the learning curve process. I expect a good chunk of those margin compression to be temporary as you can see with the iPhone average selling price. Then why hasn't revenue growth matched growth in units sold? Like I said, they paid a higher price for components. They haven't had to lower selling prices (at least not for iPhone) but there has been margin compression. When there's gross margin compression it can mean two things: 1st) you charge less: we know this is not the case based on average selling price 2nd) you pay more: this is the case and management already indicated that in the previous conference call (Q4 2012). Link to comment Share on other sites More sharing options...
PlanMaestro Posted January 24, 2013 Share Posted January 24, 2013 Apple suppliers: already moving on. http://blogs.ft.com/beyond-brics/2013/01/24/apple-suppliers-already-moving-on/#axzz2IsUfVpfg Link to comment Share on other sites More sharing options...
Palantir Posted January 24, 2013 Share Posted January 24, 2013 Paying more for components would raise COGS, how would it hurt Revenues? Link to comment Share on other sites More sharing options...
DCG Posted January 24, 2013 Share Posted January 24, 2013 Yeah, but if earnings are declining, that 7x can get expensive. Furthermore, even if you are right the stock can trade sideways for years before reaching a reasonable valuation. I don't have a view on this stock...but just too much momentum and headline risk for me. I doubt they are declining. they are slowing. They sold 30% more iPhones with one week less in the quarter and under production delays for most of the quarter. They sold 30% more, but the profit was pretty much the same as last year. Link to comment Share on other sites More sharing options...
PLynchJr Posted January 24, 2013 Share Posted January 24, 2013 Ever heard of the iPad Mini? Link to comment Share on other sites More sharing options...
Palantir Posted January 24, 2013 Share Posted January 24, 2013 Ever heard of the iPad Mini? No. What is it? Link to comment Share on other sites More sharing options...
polangevin Posted January 24, 2013 Share Posted January 24, 2013 Paying more for components would raise COGS, how would it hurt Revenues? That's right. That's why gross margins were 38,6% instead of 44,7% in the comparable quarter last year. The question is: Is margin compression permanent or not? I think most of the margin compression we noticed for the iPhone is temporary based on the fact that average selling prices were stable for the past 9 months and that the iPhone 5 was a new product. The other part is the iPad. Most of the Margin compression with the iPad is probably permanent as the iPad Mini is a lower margin product bur over the long run, I think they'll end up generating more volume growth than what they'll lose on gross profits. Link to comment Share on other sites More sharing options...
Palantir Posted January 24, 2013 Share Posted January 24, 2013 You haven't answered my question. I pointed out that sales were not growing as fast as units sold. Why is that? You noted that increasing payments to suppliers was the reason. Why would that hurt sales? If you were referring to something else, then the question still stands: Why haven't sales grown as fast as units sold? Link to comment Share on other sites More sharing options...
Parsad Posted January 24, 2013 Share Posted January 24, 2013 Well, I guess ValueInv and Wellmont will be happy...we've started nibbling on Apple stock. Hopefully it keeps going down! Cheers! Link to comment Share on other sites More sharing options...
txlaw Posted January 24, 2013 Share Posted January 24, 2013 Well, I guess ValueInv and Wellmont will be happy...we've started nibbling on Apple stock. Hopefully it keeps going down! Cheers! Great minds think alike. Link to comment Share on other sites More sharing options...
Palantir Posted January 24, 2013 Share Posted January 24, 2013 Great minds think alike. http://ts1.mm.bing.net/th?id=H.4807452257944024&pid=1.7 Link to comment Share on other sites More sharing options...
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