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Apple Expected to Report Best-Ever Second Quarter Today With Anticipated Clues About iPhone X Sales
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Looks like my 15% increase in dividends was a good guess. Lol. Glad I bought more two days ago.Yeah, I figure giant buybacks are a given. The percentage raise on dividends is still my big concern. Will they stick with 10% increase as they've done most every year, or go with something a bit more aggressive using their big windfall of cash. If it jumped 25% I'd be unbelievably happy. But they've always been very conservative, so I'm guessing 15%. Better than nothing.
Instead of relying on a solid computer product line, apple is placing all its money on one bet, hoping that iPhone will always generate the profit. They become dependent on one single device. If any other company comes out with a way better alternative, then Apple is in danger.
Apple does appear to be a good, safe investment that will outperform the overall market for the foreseeable future. Warren Buffet looks at cash flow when he makes an investment decision and is quite happy to be making a few percentage points better than the market in the long-term. It's all about expectations.
Having said that, a lot of the Apple stock fans expect the stratospheric rise in value over the past decade to continue unabated. It is inevitable that a company will plateau, the trouble is deciding when that is going to happen and adjusting your profit expectation (and corresponding long-term company value) accordingly. At some point 10% YoY growth in the stock price is going to be the goal and Apple will function more like a commodity company.
Well it turns out the iPhone X is in fact selling just fine.
And paying dividends to shareholders is not "paying off shareholders". This is actually the point of being a shareholder, to receive cash. Same thing when Apple buys back shares. In that context Apple literally gives a specific group of shareholders (the ones who want out and who have chosen to sell) some money. Both things are what a mature corporation is supposed to do. It is supposed to make money and send that money to its shareholders.
That is why this blog isn't running with your story as if it was a scandal. There is no scandal to report.
Would we know what the innovation is when we see it? That's the real question
Not likely. That was Steve Jobs' big benefit to Apple. He developed products nobody knew they needed but eventually depended on. Almost by definition you won't recognize that type of innovation until well after it becomes mainstream.
They've been awash in cash for many years now. It's less encumbered now than it was before, but the opportunities to spend it on capital investment probably haven't improved on that account. Buybacks in the long run have same tax consequences as dividends, assuming they boost the stock price, which is their purpose.
If I told you I hoped your car breaks down so maybe I could get to work a little faster, would that sound okay to you?
The difference being timing. Unless held in a tax deferred account (for instance a retirement account such as an IRA or 401(k)), dividends create a tax liability in the current year.
The increase in share price attributable to a buyback doesn’t create an equivalent tax liability until the shares are sold, which could be many years in the future (and the timing of which is determined by the shareholder).
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"Of increasing importance is continued growth of Apple's services category, including the App Store, Apple Music, iCloud, iTunes, Apple Pay, and AppleCare. "
I guess when it takes 3 years to churn out a new computer, you have to rely on services.
I guess when it takes 3 years to churn out a new computer, you have to rely on services.
iPhone X is not selling anywhere near expectations or anywhere near what it needs to.
"Receiving cash" is not a necessary part of being a shareholder.
In fact, the companies that pay dividends tend to be companies that do not expect any major development phases and do not have a way to put the cash to good use.
Like royalty trusts and pipeline companies: They intend to just keep using the same infrastructure to make the same profits and have no need for the excess cash.
Technology companies are famous for NOT paying dividends because they need to REINVEST in themselves to keep inventing the next great thing.
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Apple is not a financial company.No, I disagree.
Apple guidance is key. Last quarter they gave guidance for this quarter and they will meet it. Whatever the street thinks they want to see, and whatever the whisper numbers are represents a playing field for traders, and not much more than that.
The real story is Apple financial performance - it is "Stellar".
By one measure, if Apple guidance numbers are met for this quarterly report, "iPhone blah blah will have grown 15% last year quarter to this year quarter". You can twist words around and so forth, but Apple is about to show you double digit growth and beat some records today - as they have done over the last many many years actually.
It's the biggest company in the world. It has Billions of dollars. It's nothing but a happy story for Apple. You actually have to really try hard to find something going wrong for their business.
Sure they have problems with this and that - Siri could be better, they were late on the Home Pod release, but so what really? In a longer time period than we will wish for, it all gets fixed up.
Apple is primed to be boosting R&D to the highest in the sector - higher than Amazon for instance. Forget the "sector" - I'd guess that Apple R&D expenditures will be the highest in the world. Would I be wrong about that guess? I wonder. How much money does the government spend on airplanes and space programs etc compared to the Billions Amazon and Apple are spending on tech? I'd like to get a feel for that scale of R&D expenditures and then see if it's "1990" again for Apple. lol.
Apple is primed to up the dividend and make a huge buyback of stock announcement here.
India is growing and guess who is getting all the profits from "smartphone" revenues?
China maybe had a hiccup - but probably Apple in comparison to the others, did ok.
Are we on track for the "services revenue doubling by 2020" or whatever year Tim Cook promised? Probably yes, ahead of the predicted growth rate would be my guess.
So in a nutshell - Apple guidance has been right for many quarters. All news is noise. If their guidance looks attractive to you, you can be very safe going long with Apple with a lot of money. That same large lump of money would not be nearly as safe anywhere else.
Safe slam dunk performance practically guaranteed for the next several years!
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The "world's assessment" of any topic has been completely wrong so many times in the last several years.
I hate to go political, but Decades ago, did you ever see a "Gallup poll" or other "polls" get an election wrong? The world's assessment of the USA presidential election was completely wrong. Same for the UK "Brexit". They even did a "NOVA" episode on the topic to lick their wounds and make regular brainwashed people accept the "world assessment". Funny stuff.
I can list many more bad "world assessments", but you might not like to hear it.
Instead go get some AAPL stock.
Instead remind yourself that "Apple's assessment" has been right on the money for many many quarters. Their guidance has been the truth for so long, and I can't doubt it now, nor should you.
They are a technology company.
The only thing that matters is where their technology is going which is nowhere fast.
They are milking ten year old ideas while being eclipsed on every level by hungrier competitors.
Services, Mobile, Desktop, The Living Room: Better smarter harder working companies are KILLING Apple in all those areas.
If you think their financial performance means that they have a bright future, you do not understand how the technology industry works. (Just ask PALM...or IBM)
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Actually their unit sales LOOK pretty good. That's why investors and quants load up on their stock.
My problem is what they AREN'T doing, which is inventing the next great thing.
The last time they did that was last decade.
You can't rest on your laurels that long in technology.
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WHERE is your proof iPhone X isn’t selling near expectations? NO expectations were ever published by Apple and Cook just REPEATED iPhone X is THE most popular iPhone each and every week since release. It’s slso the first time the premium iPhone has ever been the best selling.
iPhone X is meeting or exceeding the expectations of Apple, directly accordingly to Tim Cook and the numbers certainly support that.
He said it is “Super Bowl” winning product and he couldn’t be more proud of it.
iPhone revenue was up 14% y/y and units were comfortably up 3%. The higher ASP of $728 was specifically called out as being driven by iPhone X.
iPhone X was THE most popular phone in China, confirmed on the call. Think that’s not a big deal? That is huge. China revenue was up a whopping 21%.
Exactly what are you talking about?
I know you are wedded to your ideas of what tech innovation looks like. And I understand that it doesn't look like what Apple is doing. Your dismissal of the wearables part of Apple clearly shows that this hardware/tech doesn't count to you. But I'm still going to respond a bit here even though I'm shouting into the wind.
I don't think anyone's expectations as to how a $1,000 smartphone was supposed to sell as in number of units is or was so valuable that a minor miss is a crisis. I'm going to say that iPhone X sold well enough to result in massive revenues and massive profits. Can we agree on that?
As for shareholders or the value of shares, yes receiving cash today is not necessarily part of being a shareholder. But receiving cash eventually is the only thing that a share is worth. You can get that cash by a dividend. Or by selling to someone else who expects to get cash from the company in the future. But the expectation has to be there that eventually the share is going to result in cash coming your way. For Apple, the cash return time is now. Apple is a very mature company. Quite old in tech years. It may not be the time for other tech companies to pay cash, but eventually they have to. (The other exit is to be acquired, but that just means the acquiring company is supposed to pay the shareholders eventually, that doesn't change that eventually cash has to go to the shareholders or the shares won't have value.)
Apple does not have a good way to put all of its cash to good use. Apple will agree with you there. It is spending billions on R&D, but even those billions are swamped by its cash flow. It can either spend it on investments that it doesn't feel comfortable with or it can send it back to shareholders.
Anyway, innovation is not something you can just buy at the corner store. I think Apple still shows it with things like the chips in its iOS devices or in the wearables market. I think the design is still very good. And I think its economy of scale advantages in hardware give it huge advantages.
I do have a question for you though. What is the "next great thing" that another tech company has invented and brought to market that is so much better than what Apple has done in the last ten years? Google and Facebook make money off ads and that hasn't changed in ten years. Microsoft makes money off of Windows and Office Suite and that is very old. Amazon sells stuff like it has for 20 years. So what is your example of a "next great thing" that has come out in the last ten years and resulted in a company making serious profit from that thing? Let's set the hurdle of serious profit here low because you are unimpressed by the Apple Wearable devices, call it $3 billion a year in profit. (By the way, I'm not challenging that there aren't anything like that. I'm sure you will come up with stuff. I just can't think of any that doesn't have its roots well older than 10 years ago.)
Maybe I am not being clear about the difference between the 2000's Apple and this decade's Apple. Or maybe you are too young to remember.
2000's Apple would choose an entire industry that had objectively bad design, bad paradigms, and bad usability, and explode it.
They would go thermonuclear (to quote Steve) and burn it to the ground.
For example:
- It's hard to remember Desktop hardware before the iMac. (1998)
- It's hard to remember Desktop UX before OS X. (2001)
- It's hard to remember MP3 players before iPod. (2001)
- It's hard to remember Music before the iTunes store + iPod stack. (2003)
- It's hard to remember Smartphone hardware before iPhone. (2007)
- It's hard to remember Mobile before iOS. (2007)
- It's hard to remember laptops before Ultrabooks (2008)
Since then...crickets. Also-rans, tries that failed, tries that were better than other tried but achieved modest success in a crowded market space.
By comparison, the Steve innovations were so self-evident that they literally rocked civilization.
The Tim "innovations" are iterative. They are sleeker versions of existing products. In some cases they are worse versions of existing products.
Apple is operating the way Sony operates and that makes me sad.
(Sony famously changed the world by inventing the Walkman paradigm of portable music. Now they make sleek TVs and sleek android phones.)
"Next great things" from other companies? They abound.
- It's hard to remember shopping before Amazon got the model right in the 2010's. Apple missed that one.
- It's hard to remember services before AWS and Azure got the model right in the 2010's. Apple missed that one.
- It's hard to remember automotive before Tesla got the model right in the 2010's. Apple missed that one.
Every one of these was a trillion-dollar market that was being done badly by lazy old companies.
These were ripe for Apple to use it's brilliance, it's unique philosophy, it's laser focus, and it's fraction-of-a-trillion-dollar cash pile to fix and make amazing. And get rich off of.
Instead they sat the last ten years out, preferring instead to sell incrementally sleeker cellphones and tablets for incrementally more money, year after year, for 11 years. (Yes, they made some peripherals but none of them changed the world.)
Hiding in the safe eddies like that was amazing for the stock price and amazing for the balance sheet. As is just giving away their money which is what they are doing now.
The risk that they are taking though -- something that is not quantified anywhere on their shiny happy balance sheet -- is that no single innovation in technology can carry you for very long.
Unless they pull something out of their hat pretty soon, they risk becoming another Sony. Constantly recycling the same high-margin sparklies that other companies mke, adding a new twist here and there and laughing all the way to the bank.
It's a good business to be in but not where I personally want to see Apple competing.
[doublepost=1525283778][/doublepost]LOL PS their laptops are objectively bad now and only 15% of smartphones run iOS.
I am literally incapable of finding a positive spin about their current place in the technology world.
Their place in the financial world, of course, remains enviable.
If only having a lot of money meant you were good at technology...
MacRumors users rejoice. AAPL up 4.42%.
And I know y'all hate SNAP, so you'll be pleased to know it's down almost 22% today. And yes, it will go lower. They're finished.
And I know y'all hate SNAP, so you'll be pleased to know it's down almost 22% today. And yes, it will go lower. They're finished.
Funny, you know the AWS and Azure stuff was one profitable tech thing that has come out in the last ten years that I thought of. I’m sure you are right that the profit dramatically exceeds $3 billion a year.
Tesla is amazing, but since it makes no profit and doesn’t sell that many cars, I would not count it. Anyway we know Apple has spent billions on car tech. They just haven’t come close to anything to release yet.
Amazons online sales model doesn’t count as a next big thing over the last ten years because it pre-dates that. Amazon is doing great, but go back ten years and the website wasn’t that different than it is now. However I do think Alexa could be a game changer and Apple may be missing this by overpricing and engineering the HomePod.
Anyway, we see that identifying the next great thing is apparently pretty hard, even over a period as long as ten years.
Love all those Apple innovations you list under Steve. They were great. And yes I’m old enough to remember them. Heck I had a bunch of them and have been using Macs since the 512k Mac in the late 80’s. I think Apple Watch will prove to be a big enough hit though to rank up there with those things. That product is just getting started. I’d say Apples chip work, work on security, and work on battery tech and performance are as innovative as the things you listed. They are just innovative in a different way.
Services are a far more lucritive business these days. It's generally easier to adapt them and keep them going. easier to change direction as well as you're not necessarily reliant on actual goods that require manufacturing, supply lines and technological innovation.
What I find interesting about Apple's services growth is how reliant it still is on Apple's hardware line. Unlike service competitors, Apple's closed ecosystem with proprietary software makes their service industry very tied to the success of iOS products. Should there be a catastrophic decline in iOS usage (just speculating, we've seen no evidence of this), It's likely that Apple's service revenues would also drop off in relation.
Apple needs to keep selling iOS devices en mass to keep services growing. This is why leading up to these announcements there's always wild speculation. if Apple does not meet it's expected device sales, there'd be concerns that other product categories will drop off as well. Especially since most of the other categories rely on iOS device sales. "Other" is mostly iOS accessories and Apple watch.
but overall moot point as currently they've met their targets. However to truly gain investors confidence that their services will be a big deal, Apple will need to start opening up more and more services to other platforms.
The great technology innovations by other companies are each on their own trajectory, but I list them because they are "world changers" not "profit makers".
If you're in tech for profit, you're in it for the wrong reason and will eventually be killed off.
I like the old Apple; one that prioritized changing the world and considered the balance sheet to be a peripheral enabler of that goal.
Balance sheet gains and stock market gains were incidental to the old Apple, and they would bravely and proudly lose money on big ideas that they just couldn't not try.
That's how we got amazing things such as how music works now. Apple did that for the world because they weren't afraid of their shareholders.
The new Apple sees technological advancement as peripheral -- a way to keep the balance sheet healthy and the stock price up.
What they don't realize is that when you are a technology company that starts to see technology as peripheral, you are already dead.
"Oh the stock price is down? Quick make a sleeker phone. Oh profits are low? Quick invent a high-margin accessory. Oh laptops sell like crap now because they're horrible? Stop putting money into the laptop business."
Congratulations Apple; you just became Sony.
[doublepost=1525373263][/doublepost]Haha PS a topical article:
https://www.zerohedge.com/news/2018...the+survival+rate+for+everyone+drops+to+zero)
Apple is so conservative now that the finance people find their high level of risk aversion "refreshing".
When your banker is congratulating you on how few risks you take, you need to re-evaluate.
If you are a technology company that has made its' brand "risk aversion" and "same old same old", you might as well give the money back to shareholders then padlock the front door.
HOLY CRAP THEY ARE LITERALLY GIVING THE MONEY BACK TO SHAREHOLDERS.
You read it here first folks. Goodnight, sweet prince.
Okay. I get your point. Let's see how this plays out. I suspect the $10 billion in R&D is actually resulting in some amazing technology. It just isn't the type that you think is game changing enough. Also I think some tech companies are doing one of two things (A) unsustainably giving away their tech at a price (sometimes free) that is only supported by venture capital funds that will dry up or (B) relying on advertising money and monitization of their customer's personal information. I worry more about those companies being around in the next few years.