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Apple to Announce Q1 2014 Earnings on January 27
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Yes and no. At some point maintaining above-market levels of growth becomes improbable, if not impossible. Growing at 20% is a lot easier if you are a niche player (as Apple was from 1997-2001) than when you are one of the dominant players (as Apple has been since at least 2010). Even if Steve Jobs were still alive and running Apple the company would be facing stiff competition. After all, it was under his watch that Samsung became a big supplier, and that Google had their CEO on their board while developing a rival operating system.
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True. Samsung missed expectations by a significant amount, yet it got a relative pass so far from the market.
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If so, then you've been through much longer periods of time between game-changing product releases. For instance, the iPod was released in October 2001. The first iPhone wasn't released for 5.5 years in June 2007. The iPad came 2.75 years later in March 2010, but remember it was actually in development before the iPhone. I doubt even if Steve Jobs had lived that we'd have seen another game changer by now. I don't see the TV as a game changer. First of all, it's a much smaller market than the mobile phone market. Second, TVs aren't the kind of thing that people buy every year or two (even in the analog days phone upgrades were common). It's the same with watches. Technology, although it changes rapidly, moves in fits and starts. We had an explosion of new products, from Apple and others, in the early 2000s. Now we are in a period of enhancement rather than introduction of radical new products. Seriously, how much changed between Apple in 1997 and Apple in October 2001? Sure, Apple released some improvements to the Mac line, but nothing was really "revolutionary." Even the original iPod had a ho-hum reception (it was a pricey, Mac-only accessory) for the first year or so.
heh heh, how many product categories have revenue potential of 6-10B a quarter? that is how much additional revenue Apple has to generate now to show 20-30% yoy growth given that their revenue in fiscal 2013 range from mid-30B to mid-40B. Apple needs to sell 40M Iwatch at $200 a pieces to generate 8B revenue. You think Apple can sell that many wearable in a quarter? The truth is that there is not that many untapped categories that is big enough to fuel Apple yoy growth in revenue, let alone earning.
There are plenty of no growth, high dividend company out there that is selling between 7-10x P/E.. With 40ish earning a year, Apple is selling around 13x or so trailing PE now. We better hope that Apple will show some growth in the Jan 27 earning release both in term of fiscal 1Q14 earning and guidance for fiscal 2Q14. Fiscal 2013 show yoy lower earning from fiscal 2012. If fiscal 2014 show similar kind of earning decline when compare to fiscal 2013 number, Apple will trade in the low end of the 7-10x PE range and with $40ish earning, 7-10x pe get you a stock price range of $300-450...Like it or not, stock market reward company with growth and Apple cannot show any earning growth even though they are buying tons of stock already.
Four years is an eternity in consumer products, especially in technology, and that 17 year wait you speak of so cavalierly nearly killed the company, so that analogy is about as scary as they come. Apple has real, serious competition in the two markets they most recently pioneered, and that is why we've seen this flatlining of the company's earnings growth. If I didn't think that more was coming and fairly soon I'd be a former investor, but I think it's more than clear that they have to move more quickly than they have over the last few years, lest this become a trend.
At this point we aren't even talking about "above market" growth, we are talking essentially no growth, or actually for several recent quarters, negative growth. So I can't agree with your "yes or no" appraisal. Yes, the game is growth. Full stop. I didn't make any reference to Steve Jobs, so I am not as you might imagine one of those people who blames Tim Cook. The game has become steadily more difficult for Apple but they have won at it by pulling rabbits out of their magic hat, one after another. This is what they do, this is what people expect them to do. Regularly.
You can talk about other product intervals, but these are essentially meaningless comparisons. When facing competition of the kind they are now in their key markets they simply have to move faster, or they will not only find that their earnings are not growing, but that consumers will look elsewhere for visionary products.
What happened at Apple between 1997 and 2001 is, as we know now, they became committed to making the next big thing, and the next big thing after that, and the next big thing after that. I don't believe that these big things are at an end, or should even be at a pause, and despite keeping up with the rumors as a matter of sport, I know that most of them miss the real events by a mile. At the same time, I am not an apologist for Apple. If it looks like their feet are dragging, I will say so -- as both fan of the company for 30+ years, and an investor for more than half that time. I am neither because I think they make nice, evolutionary products. I expect them to continue to make the totally unexpected, completely real. This is the company and culture that Steve Jobs built, and I expect Apple to be that company for years to come.
Others are entitled to lower expectations. I just don't understand them.
Rumors aside, Apple has said that new products are coming out in 2014. Let's see what they come up with. As Samsung has shown with the Galaxy Gear, being "first" with a lousy product doesn't provide much of an advantage, if any at all. If the rumored larger iPhone, iWatch, larger iPad, or whatever turn out to be good products, no one will care whether Samsung came out with devices a few months earlier. After all, the iPod wasn't "first," nor was the iPhone.
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I'm only commenting on your erroneous claim that flat reported earnings equals no growth. $900 million in deferred revenue means around 5-7% growth when you compare apples to apples. And that's despite giving up around $1 billion in software revenue.
If "we all know why" stocks behave as they do, we'd all be rich. Anyone that attempts to boil it down to one factor is just being silly.
New products of some type or kind come out every year. I think what we are all really talking about is a new category product, one that can drive the bottom line. I'm not overly concerned about whether another company beats Apple to market with a new category product (especially when they suck), but when this happens the clock does tick, and Apple's entry has to be that much better to turn the heads of consumers. They did this with the iPod, but the iPhone and especially the iPad were product types that consumers had not seen before. Had Google moved a little faster with Android then they might have caught the fancy of consumers before Apple had an open shot at those markets. How different history might have been then. Apple's burden is that they have to be the best, and they have to do it faster now than they have in the past. It isn't like they don't have the resources.
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I'm only commenting on your erroneous claim that flat reported earnings equals no growth. $900 million in deferred revenue means around 5-7% growth when you compare apples to apples. And that's despite giving up around $1 billion in software revenue.
It wasn't erroneous. Flat earnings is no growth, by definition. Deferred revenues are not earnings, and they get treated like footnotes in the quarterly reports in any event.
I've probably said it a hundred times on these boards: I never try to figure out why the markets do what they do on any given day, week, or month. But over the longer term, it's all about earnings growth, and the expectation of earnings growth. That might rate as silly in your book, but it happens to be completely accurate.
Sure, but you are referring to flat reported earnings. Apple announced a change in their accounting model. You can't make apples to apples comparisons across the different models.
If Apple decided to revert to the old iPhone subscription models, it does not mean their iPhone earnings shrunk by 80%!
Deferring revenues does not mean they don't exist. It's simply a case of moving numbers around on a spreadsheet.
Am I not supposed to notice that you added something to your previous claim?
Sure, but you are referring to flat reported earnings. Apple announced a change in their accounting model. You can't make apples to apples comparisons across the different models.
If Apple decided to revert to the old iPhone subscription models, it does not mean their iPhone earnings shrunk by 80%!
Deferring revenues does not mean they don't exist. It's simply a case of moving numbers around on a spreadsheet.
Am I not supposed to notice that you added something to your previous claim?
Revenues aren't earnings. Some portion of those revenues will be earnings. We don't know how much yet. That was the main point I was making. The second was that the markets don't much consider the impact of earnings not yet booked. As you may recall the markets pretty much discounted deferring earnings from the iPhone, when Apple booked them that way, this despite the fact that some of the analysts were loudly predicting a coming "earnings tsunami" as a result. So as a practical matter, it's more than just shifting the numbers around. It's also the case that these deferred revenues aren't going to move the needle much if only because they are from a part of Apple's business that isn't growing. The bottom line: $900m in deferred revenue doesn't mean that much for a company that books $1b in profit on a weekly basis.
I didn't add anything to my previous "claim" (though it's kind of peculiar to be referring to investors' interest in earnings as a "claim" in the first place). Investors are willing to look down the road a little, but these days one quarter seems to be about it for most companies. This is why so much attention is focused on guidance; it's the official peek into next quarter's earnings.
I hear all kinds of strange rationales on these boards for investing in Apple. Some people seem to have almost existential reasons, as if it gives them a warm, fuzzy feeling, or a brag factor, or whatever else I don't know. I say, if you're not in it for the money then do yourself a favor and invest in something else. Those of us who are in it for the money know that growing earnings is the ticket. It's what investors look for, and not surprisingly, it is how companies measure their success.
You will also notice that my first post to this thread was to point out that the use in the article of "record quarter" doesn't mean very much. First of all, it referred only to revenues, and second, if a company isn't posting a "record quarter" every quarter, then this means they are going backwards. Investors hate that, and for good reason.
Your understanding is fairly accurate..Sustained revenue is not a bad thing, but what is going to drive the cost up is an upwards trend in earnings and margins etc..If i have a million dollars parked and want to bring them to apple, i want to see them grow..most investors want that, your real long term investors are onboard (have been for years) so the market now on in would be controlled by the short-mid term investors.
As mentioned by yourself and others, the spike in earnings will most likely come from higher profit margins and given the current dynamics of the industry it is unlikely that apple could sustain higher margins with its existing products (due to competition at varied price points)..This then calls for new product launches and good old INNOVATION and that has traditionally been where apple has been a MARKET MAKER for many products, getting them out of the door in a form and function that no one has and that people REALLY WANT..The Iphone did it in mobile phones and the IPAD did this in tabs..As Tim Cook has mentioned earlier in one of his interviews, new product categories will be introduced in 2014...If apple sticks to its usual self of introducing game changing (from the market prospective) products, you can expect significant movement in overall margins and consequently earnings..Its tough to bring out GAME CHANGING stuff every few years ..
You are just shifting the goalposts. We weren't talking about what the market considers. We were talking about about actual earnings growth. Assuming reported earnings are flat ($13.1 billion), 900 million in additional revenue would translate to earnings growth YOY. It's not hard math.
And, again, that's after Apple gave up around a billion in actual software revenue in addition to the deferred hardware revenue.
Sure you did. I highlighted it in bold.
Again, that's a gross oversimplification. Look at Amazon as an obvious example.
Sure, it's tough. Some might say it's even unfair to expect Apple to be releasing game-changing products on a regular basis. But this is what Apple does, and they now have all the resources they could possibly need at their command to keep on doing it. Apple is the company that does what nobody else can, or even thought to do. Everybody is looking to lift that crown from their heads. They have to continually prove that they deserve to wear it. Nobody said it should be easy. We will see what 2014 brings.
Ive Leaving Apple one day will hurt Apple much more than Steve leaving. Talking now, not the 90's as no Steve there almost killed Apple. (in saying that we don't know how Apple would have fared if Steve was never fired).
Iphone Launch : 2007
IPAD Launch : 2010
I think 2014 fits that story fairly consistantly in that category (Mobile devices)..The 12.9 inch IPAD seems interesting given that the original ipad was never meant to be a PRODUCTIVITY or an extensively useful EDUCATION or BUSINESS device..If apple thinks that this is a category large enough to require a fresh product then I am sure they will look to tweek their technology and R&D to offer a sollution for what the customer base really needs from that class of device..Apple is one company that takes a product which seamingly meets a niche market demand and does it so well that it becomes a mainstream consumer device...Thats why the larger ipad is interesting to me from a product prospective, and why I think that apple would come out with a product that creates a distance between it and the IPAD family (Perhaps apple does not even call it an IPAD) and blurs the line between your basic tablet and your mac book air..
The iWatch and other tech being speculated enters the domain of wearables which is a nascent industry at the moment, so here is where apple can really come out and WOW the market with a product that really gives the customer what he/she has never had before..
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Ive has designed a ton of stuff for Apple. What you just said is so so wrong. There was even an Ive design exhibition (in Germany I believe). If you said "full quarter of Johnny Ive not needing Steve's final ok" then you'd be correct.
The goalposts are where they've always been. As I pointed out, the numbers you are talking about are of marginal significance, at most. Nobody seriously cares about fractions of a percent. You are also adding revenues to earnings, which is bad math.
Amazon isn't an obvious example of anything. They are pushing their top-line growth very aggressively, but at some point this needs to turn into earnings or the game is over, at least as far as investors are concerned. It's also going to be over for the company at some point as they can't continue to spend money they aren't making forever.
Look, two ways to go here. Either we discuss the issues, or you play the game where you try to "catch" me at something. The first I will do. The second I will definitely not do. Your choice.
Not at all. We aren't talking about fractions of a percent. We are talking about around 5% growth in earnings using the previous model assuming Apple reports 13.1 billion in profits for the December quarter.
Roughly (Assume 25% tax rate)
($900 million * 75%) / $13.1 million = 5.15%
And yet you claimed that it's all about earnings growth and expectations of earnings growth for next quarter. Amazon has neither and are still trading at an insanely high P/E ratio.
You seem to think this is about word games. It's not. It's about actual revenue that you think should be ignored. I simply disagree.
Again, it's the same issue that we saw when Apple was deferring the majority of the iPhone revenue. People continually made comparisons to other companies that did not defer any revenue. It's simply not an apples to apples comparison.
Or never knew they even wanted before. That's the real secret. Apple's history of pulling off this trick is why I don't understand all the preemptive grousing about how a product that nobody has even seen is going to totally suck. Like, this is what Apple does, release totally sucky products. The downside for Apple is anticipation is so high that they have to knock it out of the park at every try. Anything less will be seen as a failure, especially now when something less than stupendous will be seen as a "sure sign" that only Steve could run Apple. I so want to get over that hump. I so want to see Tim Cook stroll out onto a stage and hold up a product that will make everyone gasp again. In the meantime, I will be drumming the tabletop feeling just a little worried, and impatient.
One must also remember that with an ever increasing lineup of succesfull products a lot of time and effort has to be devoted to refreshes..It was easy to get into a PHONE business when all you essentially had on your plate was music players and PHC's..Now you have enormous succesfull production lines of iphones, ipads, mac books and what not..And the value and sheer size of apple's sales also makes logistics a nightmare a fact often overlooked..It takes a lot of time to strike the sort of production deals that apple does given the volume their products are looking at ..Its not as simple as designing the perfect watch (to their ability) and producing a millions of coppies..
Nobody said it was going to be simple. If it was simple, anybody could do it. Apple isn't just anybody.
Apple does have more products to juggle today, but they also have far greater resources available now than they did when the iPod or iPhone were developed. They also now have a huge installed base to leverage. These advantages far outweigh the advantages of being a far smaller company with a much lower profile than they have today.
Apple's stock isn't going anywhere, eben if they report near the low end. They trade at 9 times earnings. 9 times earnings!
Prediction; Apple will sell 75million iphone 6's in the first 90 days and their stock will jump to $800 plus. Analysts don't understand the pent-up demand for a larger-screen iphone. Tens of millions of Samsung users will switch in the first year. Hopefully, they come through with 2 sizes, a 4.5" and a 5". And leave the 4" available for eternity. For the life of me, i don't understand how a half-trillion dollar company can't release 3 different size phones to satisfy 95% of the smartphone market. Samsung produces, what, 30 different models? If Apple had these three sizes this past year, they would have sold 35% more iphones. Time to drop the mantra of the 4-inch screen is the perfect size, because it's not. Not for me, not for tens of millions of others that are buying your competitors products alone on screen size. I witness it everytime i go into an ATT, just recently where a 45 yr old ladyloved the iphone, but went with the larger screen S4. It's sickening, as a stockholder. I'm dumping at $800, and I think aapl will reach that in late 2014.
Prediction; Apple will sell 75million iphone 6's in the first 90 days and their stock will jump to $800 plus. Analysts don't understand the pent-up demand for a larger-screen iphone. Tens of millions of Samsung users will switch in the first year. Hopefully, they come through with 2 sizes, a 4.5" and a 5". And leave the 4" available for eternity. For the life of me, i don't understand how a half-trillion dollar company can't release 3 different size phones to satisfy 95% of the smartphone market. Samsung produces, what, 30 different models? If Apple had these three sizes this past year, they would have sold 35% more iphones. Time to drop the mantra of the 4-inch screen is the perfect size, because it's not. Not for me, not for tens of millions of others that are buying your competitors products alone on screen size. I witness it everytime i go into an ATT, just recently where a 45 yr old ladyloved the iphone, but went with the larger screen S4. It's sickening, as a stockholder. I'm dumping at $800, and I think aapl will reach that in late 2014.
Also, companies that have little to no growth typically trade at 10 times earnings. Apple trading at such low a multiple means the market expects zero growth from Apple, which is entirely possible some years due to them being the largest corporation ever. Hard to grow earnings 30% when to do that you have to sell an additional 50 million devices. 30% growth can't go on forever; look up the Law of Large Numbers. This law will prevent Apple from surpassing $800 anytime this decade.
Nice points, however if Apple was to trade at 7 times earnings of $40, they would be valued at right around the cash/securities holdings they'll have in 5 years. Investors have to face the fact that Apple will trade between $500-$800 for the foreseeable future, which is fine to me since it's very low-risk with a dividend.
I hope aapl goes down to $400 again. It'll give aapl the opportunity to buy-back millions of shares and i'll scoop up a few myself