When companies forecast lower sales or profits, their stocks usually take a hit. It's not always easy to tell whether it's having a fire sale or burning down. Maybe it is time to get out -- or maybe it's time to buy more!
To help tell the difference, we pair up the dour guidance news with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best stock pickers think the companies still have the power to turn lemons into lemonade, maybe investors should take notice.
Previous or Consensus Estimate
|Apple (Nasdaq: AAPL )||***||$10.23||$7.65||Q412 EPS|
|Qualcomm (Nasdaq: QCOM )||*****||$0.89||$0.78 - $0.84||Q412 EPS|
Don't blindly sell into their bearish outlook -- you still need to do some research. Use the announcement as a jumping-off point for additional research.
Hanging up on growth
Must Apple succumb to a faster-than-annual schedule of updating the iPhone if it is to meet analyst sales and earnings expectations? That's the conventional wisdom being spouted over the miss Apple recorded yesterday after it sold "only" 26 million iPhones, much less than the 28 million to 29 million Wall Street was forecasting. Seems consumers held off on purchasing new units in anticipation of the new model expected to be released this fall, though Europe's economic woes did play a role, too.
I'm not buying into the conventional wisdom that Apple needs to act like Samsung or -- heaven forefend! -- Nokia (NYSE: NOK ) and Research In Motion (Nasdaq: RIMM ) . Because when the new iteration hits the market, analysts are expecting it to be one of the biggest debuts ever, with as many as 50 million units sold. If Apple fell into the trap of issuing an iPhone every few months, they'd lose their icon status quickly and devolve into just another commodity.
I view the drop in Apple's stock yesterday as a buying opportunity. The company continues to grow and expand and there's no indication that the "miss" is anything more than analysts playing their game. I've rated it to outperform the market indexes on CAPS, joining with those like CAPS member JustCommonSense, who feels that with weak rivals at home Apple can look to China as its next big opportunity. But tell me in the comments section below or on the Apple CAPS page if you agree the new lower price represents a good buy-in point.
Dialing up growth
For the same reason, I wouldn't worry about Qualcomm's lower guidance, since it's still dealing with supply constraints from earlier this year brought on by Taiwan Semiconductor, but if comments by Skyworks Solutions (Nasdaq: SWKS ) are to be believed, a ramp-up in specific programs -- one of which is presumably the iPhone 5 -- that are only just beginning will more than offset any general smartphone slowdown.
Skyworks is essentially joined at the hip with Qualcomm, so if it's expecting these programs to hit in the September-ended quarter we ought to expect Qualcomm to do so as well. Both Skyworks and Qualcomm are also locked into Samsung's popular Galaxy S3 smartphone (and Nokia, too, but they continue to lose share).
Qualcomm's earnings came in at the low end of expectations and third-quarter guidance was disappointing, too. However, the chip maker did say it expected a "strong December quarter" and that plays into the ruminations above.
Shares of Qualcomm are down 16% from their peak, but I expect them to regain that ground soon enough and will be maintaining my outperform rating on CAPS. As CAPS member mwlove notes, Taiwan Semi "can't remain under productive forever, and Samsung will start manufacturing some of Qualcomm's 28nm products."
Give voice to your opinion on Qualcomm's prospects by commenting below, then rate its chances of beating the Street on the Qualcomm CAPS page.
Looking under rocks
The mobile revolution is still powering outsized returns and still has a lot of room to run. Indeed, The Motley Fool thinks we're still in early innings on what may be a trillion-dollar revolution. Find out which stock the Fool thinks will be cashing in on it in a special report you can download for free! But hurry, because it's available only for a limited time.