Sustaining profits isn't an achievement. The name of the game is growth.
Even if Apple has NO growth it will be better than the DECLINE Samsung just reported.
Apple is killing right now. Increasing sales. Share. And margins.
Time and again, you are utterly wrong.
I've been an investor in AAPL for nearly 17 years, so I will match my interest in Apple's longterm prospects against anyone here, including you. Especially you, as it turns out.
Also that 20-30% growth figure you're quoting were during years where Apple had recently introduced a new product category. The iPad (Apple's most recent foray into a new category) is nearly 5 years old and the iPhone is approaching a decade. These categories are mature for Apple and they will like see single digit growth in the future. That being said, if/when Apple introduces a new category (tv, wearable, etc) their growth will rocket right back to 20-30% per year (for 2-3 years at least).
Finally, to tie it all together, if Apple maintains its huge sales volumes and moderate (worst case scenario) growth they could easily offer a 4-5% dividend with all that cash they generate. I'm sure investors would be more than happy to receive a quarterly fat check + enjoy continued stock price increases (let's say 5% bare minimum). A guaranteed 10% return a year isn't too bad.
Patient?! LOL. It's been less than four years since the iPad. I guess for a speculator such as yourself that's a long time indeed. For us investors, it's nothing. We waited four years between the iMac and the iPod and 6 years between the iPod and the iPhone (not to mention 17 years between the original Mac OS and OS X). We've been reward well for our patience. As for the speculators, some of them win, some of them lose. I don't shed a tear for any of them.
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.
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.
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.
Well, it certainly appears to be true that the article is taking only revenues into account, since it quotes only those estimates along with gross margins. I also don't see investors being too impressed with differed revenues. I don't know how they book revenue from giving away software at any point in the future.
In any case, I think we all know why AAPL is stuck in low gear. It's because they are no longer posting 20-30% YoY earnings growth. In reality they are posting little to none. Kind of puts the concept of a "record quarter" into proper perspective.
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.
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.
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.
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?![]()
You are correct, the lack of new products and the maturing of their existing products is the reason for the lackluster growth. Unfortunately, even for the patient investor, it seems like Godot would get here faster than a new product from Apple. In the meantime I am consoling myself with the dividend.
As for returns, I would not consider anything guaranteed. Except for treasury notes, I suppose.
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.
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 ..
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).No matter how much money Apple makes, it will never be the same without Steve.
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.
Should be neat to see what a full quarter of Johnny Ive's first full design,
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.
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.
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..
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..
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.