Apple Reports 4Q 2018 Results: $14.1B Profit on $62.9B Revenue, 46.9M iPhones

[Baymowe335]

I had a conversation this afternoon with my wife about where AAPL is heading. I said we needed to get out of AAPL. I've been an AAPL investor for 11 years now, and have accumulated a multi-million dollar AAPL portfolio.

Here's my main concern: Apple devices have become too expensive even for us (at the physiological level) even though we can afford anything and everything that Apple makes. However, having had very humble beginnings, both of us understand the value of money, and we now consider Apple to be purely a luxury brand. We are not into luxury brands; we buy quality and refuse to buy junk, but we do not buy luxury for the sake of the brandname alone.

Apple has always made overpriced gadgets, but those gadgets offered value even at the inflated prices. I'm typing up this post on a quad-core 2.6 GHz i7 2012 Mac Mini with Fusion Drive, which is still a phenomenal device. Yes, perhaps I overpaid for that computer back in 2012 (a couple hundred bucks) compared to a similarly equipped Windows computer, but six years later, I'm using this Mac Mini and enjoy every minute of it, and it's still phenomenal with only one feature lacking compared to the most advanced Macs: not being able to be unlocked by an Apple Watch.

However, I've been looking for an upgrade path for both my MacBook Pro 2015 and my Mac Mini for years now, and I just do not see any product out there anymore that offers the value because I think the threshold of reason has been crossed by Tim Cook's Apple. There's no regard at Apple to the fact that that people have options now, the fact that Windows is not as horrible as it used to be, the fact that there are some reasonably good Android phones out there, etc. I appreciate the fact that Tim Cook has no understanding of what money means to regular people. He has been filthily rich for so long now that he has lost all sense of reality when it comes to regular people's lives and budgets. I also realize that all other Apple executives who are the decision makers at Apple have no sense of reality either, being so incredibly rich. However, my wife and I still have the sense of reality despite our newly found wealth, and we feel that paying so much money for a MacBook Pro or a new iPad, or a new Mac Mini is just throwing your money away. We are not migrating away from the Apple's ecosystem (yet), as we are now heavily rooted in it, including all the IoT devices that are anchored to the Apple's HomeKit. Migrating away from Apple would be a very disruptive process for us at this time. What is our solution? Our solution is to continue to use our older Apple devices (like the 2012 Mac Mini, the iPhone 7, the iPad Mini 2, the 2014 27" Retina iMac, etc.) without buying anything new. Not because we cannot afford it, but because we feel that it's obscene to spend so much money on these devices. I'm afraid a lot of people with similar backgrounds - whether or not they have the money to spend - are having similar feelings and are putting off their purchases of Apple devices.

So, this is my dilemma. I liked owning AAPL, but I see no plan in the Apple's leadership for the future. Tim Cook's plan for the future seems to continue to raise the prices. Unfortunately, Tim does not understand that he has passed the threshold of decency at this point for most middle class people in the US, Canada, and Europe. Since about 2016, I'm feeling that the direction that Apple has taken with raising the prices is destructive to AAPL. I know, I know, the stock price has been rising, but there's a certain degree of inertia in the behavior of the stock compared to the direction of that the leadership a corporation sets.

Maybe Apple will start using their ARM chips in the Macs come next year. Maybe that's how Apple can lower the pricing while still maintaining the profit margins, and because of the lower prices they will be able to jump-start the sales of Macs. Maybe, Apple has some new amazing gadget up their sleeve that will blow everyone away. However, for now, I see nothing at all other than their desire to keep raising the prices and hoping to show Wall Street a solid growth of gross and net revenues. I don't' think you can fool Wall Street with this strategy. Wall Street folks are not idiots.

I'm saying all of this with a very heavy heart. I love this company, and it makes me sick watching what Mr. Cook is doing with it.

The actual numbers disagree with everything you've said. I'll buy the shares you sell tomorrow. Warren Buffett probably will too. And Apple itself will too.

That said, nice run with AAPL and best of luck.

 

[actcyclist]

No longer reporting unit sales! Wow!

We were just going to see how sales of the Xs and Xr were really doing next quarter, now we'll never know. Maybe sales of the XR were as bad as indicated by the fact that stock wasn't sold out. We won't know now,

 

[ryanmcv]

Profits are up. Record breaking even. How does a company sell less of most of their core products yet make more money?

They innovate. Also, don't underestimate the low overhead "services" and Apple Care. I imagine Apple Care is extremely profitable.

Or, they raise prices.

 

[FFR]

Profits are up. Record breaking even. How does a company sell less of most of their core products yet make more money?

They innovate. Also, don't underestimate the low overhead "services" and Apple Care. I imagine Apple Care is extremely profitable.

I can believe that. Never really bought apple care, but due to the high cost of replacing the new iPhones picked up apple care plus for both my iPhone X’s max and both of my series 4 apple watches this year.

 

[sirozha]

So you found value in a 2012 Mac mini that you say may have been overpriced by a couple hundred bucks, but a 2018 Mac mini that may be overpriced by a couple hundred bucks is a bridge too far?

I think the 2018 Mac Mini at the configuration I would consider worth it is overpriced by more than a few hundred bucks. The low-end configuration is using an i3 CPU, which is - even though a quad-core - only has four threads. So, it's an extremely stripped down version of the quad-core CPU. I do more than just peruse Facebook with my Macs. I need powerful machines, so once I configure the 2018 Mac Mini with the specs that I need, it costs $2100 (without a screen). To get a 5K screen with it is another $1300. That's $3400 before taxes. Similarly equipped iMac (non-Pro) is a couple hundred dollars more. I consider these prices to be obscene. Apparently, I'm not the only one, judging by the sales numbers that Apple released for the 4th quarter of 2018.

 

[FFR]

Or, they raise prices.

Yup and consumer believe they are justified because they are still purchasing apple products, can’t say the same for android oem at the moment.

 

[Baymowe335]

What a coincidence so am I, apple is killing it this quarter, have you seen the guidance for next quarter?

Android oems must be pissed right about now.... you know because no is buying their phones.

$89-$93B and analysts are "disappointed." Well, last year they said $84-$87B and they came in over $88B. This year, I don't think anyone will be disappointed if they come in over the high end of guidance, say at $95B.

What am I saying, of course they'll be disappointed. And I'll keep buying shares.

 

[sirozha]

The actual numbers disagree with everything you've said. I'll buy the shares you sell tomorrow. Warren Buffett probably will too. And Apple itself will too.

That said, nice run with AAPL and best of luck.

I'm not selling. I don't sell on dips. However, next time we approach $230, I may bail.

 

[Baymowe335]

Yep. Nobody else reports sales why should Apple? Of course it won’t stop IDC and others from putting out bogus estimates. And the market isn’t liking it. Stock down now over 7%.

The stock isn't down because of the no unit sales announcement. The market is disappointed about guidance (which is stupid) and trading is always low volume after hours. It' almost like you're saying a reaction 30 minutes after the numbers are out actually matters.

I love when AAPL stock goes down because 3 things happen.

1) I can buy more.
2) Apple can buy more.
3) Warren Buffett can but more.

See you in 7 years when there are 1/2 as many shares outstanding.

 

[Jefe's MacAir]

Or, they raise prices.

While everyone else is lowering prices? Nope.

The price of everything has gone up. That's the result of 15+ years of flat inflation and a now burgeoning economy. The $15/hr. minimum wage doesn't help either. But you already know that because you are familiar with basic economics.

 

[TroyBoy30]

Gonna be a bad day when the iPhone flops

 

[falainber]

Yup and consumer believe they are justified because they are still purchasing apple products, can’t say the same for android oem at the moment.

Consumers are purchasing fewer Apple products at higher prices. Sooner or later Apple will hit a wall. You can squeeze consumers only that much. Raise prices, say another five percent, and they may have a disaster.

 

[haydn!]

Apple achieved greater revenues through higher retail prices, not increased sales.

Apple not publishing sales volumes moving forward is obviously being interpreted by the stock markets as an admission that sales volumes will fall in the near to mid term, hence the decline in share price.

 

[hans1972]

I've been an AAPL investor for 11 years now, and have accumulated a multi-million dollar AAPL portfolio.

Apple has always made overpriced gadgets, but those gadgets offered value even at the inflated prices. I'm typing up this post on a quad-core 2.6 GHz i7 2012 Mac Mini with Fusion Drive, which is still a phenomenal device. Yes, perhaps I overpaid for that computer back in 2012 (a couple hundred bucks) compared to a similarly equipped Windows computer, but six years later, I'm using this Mac Mini and enjoy every minute of it, and it's still phenomenal with only one feature lacking compared to the most advanced Macs: not being able to be unlocked by an Apple Watch.

I feel a disconnect when someone has a portfolio of Apple stocks in the $2-5 million range, is concerned about maybe paying $200 too much for a Mac Mini six years ago.

Here is what you forget in your analysis: If Apple's sales falls because of high prices, they can just lower their prices. It is that easy.

Apple stock price is not really dependent on what Apple does with the Mac. They are concerned with iPhone and services. So why you are focusing on the Mac is really strange.

 

[sirozha]

Consumers are purchasing fewer Apple products at higher prices. Sooner or later Apple will hit a wall. You can squeeze consumers only that much. Raise prices, say another five percent, and they may have a disaster.

Maybe Tim will see what's happening and will adjust the pricing? However, Apple kind of painted itself into a corner. If they lower the prices, they will increase the volume but lower the profit margins, for which they will be punished by Wall Street. If they keep raising the prices, they will increase the profit margins and gross/net income, but they will lower the sales volume, for which they will be punished by Wall Street. I believe they decided not to report the sales volume anymore because they decided that they will continue to raise the prices.

 

[Rogifan]

The stock isn't down because of the no unit sales annoucement. The market is disappointed about guidance (which is stupid) and it's low volume after hours. It' almost like you're saying a reaction 30 minutes after the numbers are out actually matters.

I love when AAPL stock goes down because 3 things happen.

1) I can buy more.
2) Apple can buy more.
3) Warren Buffett can but more.

See you in 7 years when there are 1/2 as many shares outstanding.

I guess I was basing my comments more on the CNBC analysts all of whom seemed to really be taken by surprise with this announcement. Gene Munster was the only one who thought it made sense. I wish Cook would have said metrics x, y and z matter more now and oh by the way none of our competition provides unit sales data so why should we?

 

[mi7chy]

Their strategy is working so they should keep raising prices. Imagine a prestigious $2K starting iPhone and flaunting to your neighbors and co-workers.

 

[tromboneaholic]

Consumers are purchasing fewer Apple products at higher prices. Sooner or later Apple will hit a wall. You can squeeze consumers only that much. Raise prices, say another five percent, and they may have a disaster.

It's not about hardware prices, it's about Services.

They want Apple stock to be valued the same as other software and services companies like Google. Apple stock would much higher if it were valued at the same P/E as Google.

They are getting away from a cyclical product release model and into a slow and steady growth model.

 

[sirozha]

I feel a disconnect when someone has a portfolio of Apple stocks in the $2-5 million range, is concerned about maybe paying $200 too much for a Mac Mini six years ago.

Here is what you forget in your analysis: If Apple's sales falls because of high prices, they can just lower their prices. It is that easy.

Apple stock price is not really dependent on what Apple does with the Mac. They are concerned with iPhone and services. So why you are focusing on the Mac is really strange.

Of course Mac sales make very little difference for the AAPL price. I used my Mac Mini just as an example of an overpriced Apple product offering a good value over a longer life time.

However, the iPhone pricing is following the same trajectory as the Mac pricing. In fact, everything that Apple is making is now on the same trajectory - ever rising prices. There is no accident that the sale volumes have stagnated even in iPhones, which is the main source of revenue for Apple and the main driving force for AAPL.

As both of us are witnessing tonight, Wall Street doesn't simply care about a blowout quarter. They are looking at it from the perspective of where the company is heading. So, where is Apple heading exactly? Tim Cook cannot use the strategy of raising the prices forever. This strategy will have a crashing end when he prices Apple products out of most everyone's budget.

That gold Apple Watch (1st generation) that cost $12,000 and was outdated one year later was a good clue of how Tim Cook thought he could make money for Apple.

 

[69Mustang]

Pretty sure no one cares ''cept brand fanatics that derive some sort of self worth from identifying with a commodity electronics company.

Hahahaha, seriously doubters were saying iPhones weren’t selling “as well as apple hoped”.

Ok....that’s hilarious.

200,000 increase in units sold isn’t really flat, when everyone else in the smartphone market are losing sales. Also taking into account the 29% increase in revenue yoy for said 200,000 units not bad at all when you when the entire smartphone market is contracting.
did you notice the asp rising as well? Or do you cherry pick to support your conclusions?

Right Samsung galaxies aren’t selling, and their asp and revenue in mobile have cratered, and according to you only brand fanfics care about current market conditions.

Remind me did you sell your note for a pixel or is it sitting in a drawer?[/QUOTE]
Aw bud, don't be pedantcally disingenuous. In any financial discussion a YoY growth rate of less than 1% is considered flat. Considering it's less than a half percent... let's be real.

Your phone stats are made up as well. Everyone else in the smartphone industry isn't losing sales. Multiple reports every qtr back my claim. Your conflating the overall market being down with every vendor being down. That's not it works.

Also go re-read my quote. I mention the increased ASP. So there's that. We can continue to to engage but if you're going to debase the discussion with ad hominem bs about phone choice, I'd rather you did it with someone else who engages on that level.

 

[grumnz]

Shareholders will be happy, but for customers Apple is getting worse and worse.

It is possible to be both you know. I find it works out well.

 

[hans1972]

I think the 2018 Mac Mini at the configuration I would consider worth it is overpriced by more than a few hundred bucks. The low-end configuration is using an i3 CPU, which is - even though a quad-core - only has four threads. So, it's an extremely stripped down version of the quad-core CPU. I do more than just peruse Facebook with my Macs. I need powerful machines, so once I configure the 2018 Mac Mini with the specs that I need, it costs $2100 (without a screen). To get a 5K screen with it is another $1300. That's $3400 before taxes. Similarly equipped iMac (non-Pro) is a couple hundred dollars more. I consider these prices to be obscene. Apparently, I'm not the only one, judging by the sales numbers that Apple released for the 4th quarter of 2018.

When you are a millionaire you should really try to adopt to a more upper middle class life style and not fret about a few hundred dollars. I believe you will be much happier if you allow yourself and your wife to be a bit more luxurious in your buying choices.

 

[haydn!]

The actual numbers disagree with everything you've said.

No they don't. This quarter, Apple's revenue growth is from services and higher retail prices only. Hardware sales are flat or down across the board. Apple is also forecasting relatively flat revenue for the next quater compared to last year, despite iPhones, Macs and iPads all retailing at higher retail prices compared to last year. The fact Apple won't be announcing volumes next quarter indicates they're expecting them to fall. With the increase in retail/average selling price offsetting this initially. But the year after will be a different story. Apple will either need to increase prices again or lower them to pull back volumes.

 

[FFR]

$89-$93B and analysts are "disappointed." Well, last year they said $84-$87B and they came in over $88B. This year, I don't think anyone will be disappointed if they come in over the high end of guidance, say at $95B.

What am I saying, of course they'll be disappointed. And I'll keep buying shares.

Tell me about it, it’s hilarious.
Samsung the largest smartphone maker in the world and has units dropping by 10 million units while thier asps are dropping and apple is doomed because they sold 200,000 more units yoy while increasing ASps to near record levels.hilarious indeed.

95 billion, I’m pretty sure they will beat that and some here will still call it disappointing. Apple is doomed /sarcastic.

 

[cardfan]

No they don't. This quarter, Apple's revenue growth is from services and higher retail prices only. Hardware sales are flat or down across the board. Apple is also forecasting relatively flat revenue for the next quater compared to last year, despite iPhones, Macs and iPads all retailing at higher retail prices compared to last year. The fact Apple won't be announcing volumes next quarter indicates they're expecting them to fall. With the increase in retail/average selling price offsetting this initially. But the year after will be a different story. Apple will either need to increase prices again or lower them to pull back volumes.

Yep, that's why their stock is tanking.