I Was Wrong About Apple

Make that three consecutive misses. This time, Apple (NASDAQ: AAPL  ) soundly beat Wall Street's profit estimate while falling slightly short of the consensus revenue target. I was wrong to predict a blowout.

The Mac maker reported $13.81 a share in profits on $54.51 billion in revenue. Analysts were expecting $13.44 a share of profit on $54.73 billion, respectively, according to Yahoo! Finance.

Gross margin fell but to only 38.6%, above the 36% Apple had guided to. Higher margins made more than made up for a sales shortfall on Apple's bottom line.

Like most prognosticators, my model presumed too much from both the iPhone and the iPad, though the latter seems to have done quite well.  Here's where iPad, iPhone, and Mac sales came in during fiscal Q1 versus the median projections compiled by Fortune:

Product

Actual Median Projected Last Year Year-Over-Year Growth

iPhones sold

47.789 million

53.03 million

37.044 million

29.01%

iPads sold

22.860 million

24.40 million

15.434 million

48.11%

Macs sold

4.061 million

5.55 million

5.198 million

(21.87%)

Source: Apple earnings press releases.

On balance, there's a lot to like about Apple's sales numbers. Macs fell, sure, but worries over iPad cannibalization appear to have been misplaced.

And while most were hoping for higher overall iPhone sales, 29% growth is nothing to sneeze at, especially with Research In Motion (NASDAQ: BBRY  ) days away from introducing the BlackBerry 10 and Samsung working on yet another new version of its Galaxy-class Android phones.

Meanwhile, Apple is now sitting on more than $137 billion in cash and short- and long-term investments. That's a huge weapon CEO Tim Cook can wield on behalf of shareholders. At the very least, with the stock trading for less than 9 times next year's earnings -- a ludicrous multiple for such a persistent grower -- it's time to spend some of those billions buying back shares.

Do you agree? Disagree? Please weigh in using the comments box below. And remember: if you're Interested in ongoing guidance, The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, provides regular updates via our Apple research research service. To get instant access to his latest thinking on Apple, simply click here now.


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Comments from our Foolish Readers

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  • Report this Comment On January 23, 2013, at 5:56 PM, sawchain wrote:

    Analysts don't apologize for being wrong. Why should you?

  • Report this Comment On January 23, 2013, at 5:58 PM, ghstflame wrote:

    Probably would prove to be a decent price for share buyback, but I *rarely* ever agree with buy backs. That being said they do really have a mountain of cash.

  • Report this Comment On January 23, 2013, at 5:58 PM, kickbishopbrenna wrote:

    A ludicrous amount for such a persistent grower? Even the best growers flower, bear fruit then die back..guess where we are now then.?

  • Report this Comment On January 23, 2013, at 5:58 PM, JPerryFool wrote:

    I absolutely agree about the share buyback. The cash isn't doing us investors any good just sitting in the Apple coffers. If the stock is underpriced, let's grab the great deal and reduce the number of shares on the market.

  • Report this Comment On January 23, 2013, at 6:00 PM, WCoastGuynCA wrote:

    This is oversold here. The numbers weren't that bad.

    Down 10% on reasonably good numbers.

  • Report this Comment On January 23, 2013, at 6:01 PM, nattyzed wrote:

    Why are Macs declining so much and no one is talking about that? I would have thought iPhone proliferation would have pulled over more PC users to the Apple platform resulting in Mac growth despite the overall desktop market decline. If iPads are displacing mostly Macs, that's a problem. They need to get into the corporate market on the tails of the iPhone / iPad with Macs for the desktop and complete the dislocation of Windows across the board.

  • Report this Comment On January 23, 2013, at 6:10 PM, Beringer1 wrote:

    I think you're looking at this way too positively. Apple is transitioning from a 30-40% growth company to what will be single digits as early as next quarter.

    Throw in increased competition which will eventually take margins far lower than 38% and you've got a big problem.

    Earnings were LESS than last year, and guidance is poor. The CFO came out and admitted they used to lowball guidance and they're not going to do that anymore,so the poor guidance is legit this time

    Also, they failed to even give earnings guidance for the first time. Why? Whatever the answer it, it isn't good

    There are far better places to put your money...

  • Report this Comment On January 23, 2013, at 6:14 PM, RusianCapitalist wrote:

    I disagree about share buy backs. The problem being that buy backs often lead to generous option grants. Look at MSFT nearly all of the stock they retired was replaced by huge option grants thus nullifying the entire reason for the buy backs.

  • Report this Comment On January 23, 2013, at 6:15 PM, Liber8 wrote:

    No need to apologize. Apple does not, should not, need a blowout versus estimates. It DID blowout it's own previous numbers handily. Compare Amazon, Netflix and Apple. Is there logic to the market where they are to Apple? Absolutely not. There's no way to know how the market will react to earnings or other news. Remember RIMM's last earnings call. It closed just above $14.00, then the first move was up to $15.50 in a very short few minutes and then down to $12.00 all before the next day's opening. After 2 days of negative trading down to almost $10.50 it turned, consolidated for 2 weeks and is now at $17.25! That's only 4 weeks from the $10.50 low. Time will right this ship - no doubt about it.

  • Report this Comment On January 23, 2013, at 6:16 PM, 13astion wrote:

    sawchain: "Analysts don't apologize for being wrong. Why should you?"

    Beyers DIDN'T "apologize". Admitting you're wrong is a far cry from making an apology. Both stem from being humble, which is good, but only the apology is required when your mistake has harmed someone else.

    One could argue that his (wrong) analysis led some to make bad decisions -- or more correctly, decisions with bad outcomes -- but he didn't make anyone do anything, and all articles here have the disclaimer that nothing should be considered "advice" and to consult your own personal investment advisor before making trades. So really he did no harm to anyone.

    Perhaps politics in this country would be improved if everyone thought carefully about the difference...

  • Report this Comment On January 23, 2013, at 6:16 PM, buddyglee wrote:

    Your the reason I bought at 330 when people said it was overvalued . Don't think these guys can't release a new larger iphone when they need to . Also a retina ipad mini at 399 will sell nicely

  • Report this Comment On January 23, 2013, at 6:17 PM, meridian99 wrote:

    Beringer1,

    I am not saying you are way, but look at this another way. As we see many times, Analysts already saw a pattern of Apple's conservative guidance quarter after quarter, and start to ignore Apple's own guidance. This is where 'high expectation' of Analysts began. Maybe it's not a bad thing for Apple to provide more realistic guidance so that Analysts don't have to guess these 'crazy' numbers.

    nattyzad,

    Many of us (including myself) were waiting for new iMac to come out and they came out very late in December due to whatever the delay. I couldn't buy it sooner even if I wanted to. I certainly wouldn't want to buy an older model. Low Mac numbers appears to be caused by production delay rather than low demand.

  • Report this Comment On January 23, 2013, at 6:25 PM, ayaghsizian wrote:

    I'm the idiot that bought 70 more shares at 459 just now. I feel like the biggest sucker but $459 seems so low. I'm going down with the ship, or going down fighting, whichever saying applies. I'm so mad I bought options around $500. If Apple doesn't go up by April, don't talk to me for a year.

    A company with hundreds of billions in cash with a single digit forward PE multiple now. I formally admit I am the worst investor if AAPL doesn't go above $500. I am the sucker that doesn't understand anything.

  • Report this Comment On January 23, 2013, at 6:26 PM, gdel64 wrote:

    what other company beats its year over year in its most important products and takes a 12% hit after hours? Apple is down over $40 now as of 630 est.

    Please name that company, Macs are down because people are using their phones and Ipads not a computer.

    What is dell doing? Are they selling more computers?

  • Report this Comment On January 23, 2013, at 6:34 PM, Stonesand wrote:

    Apple is a great company (I've been a Mac user since 1984) but they are not perfect. They had no competition in the iPod market (and still don't) but that was in another era.

    Now they have extensive completion in the smartphone market and the tablet market and Apple fans seem to ignore the inroads that their competitors are making with cheap alternatives. Certainly some consumers will continue to pay a premium for the Apple quality but not all consumers are devot Apple fans and price is the prime criteria used in such purchase decisions that direct new consumers to alternative products. This is the main concern any investor should have regarding their stock (disclosure - I recently sold my stock).

    As well, they are sitting on about $135 billion in cash without any direction as to what to do with it - not good and a carryover from the days when Steve was in charge and didn't care about what investors wanted.

    The change (more competition) now taking place in these markets is not new. It's inevitable. Buy their products but buy a different stock is my advice.

  • Report this Comment On January 23, 2013, at 6:37 PM, ayaghsizian wrote:

    I am so pissed. I understand the math but don't understand the psychology. Apple still has growth ahead of it. They're selling more stuff and expected to sell more stuff and I lost money. Don't buy options Fools! Learn from my mistakes. Since I believe Apple should be trading around $560, I'm sure the stock will drop to about $400. I have 3 months left on those options and I'll be buying shares like crazy under $480. Again, I am the sucker. I am so pissed!

  • Report this Comment On January 23, 2013, at 6:50 PM, digitally404 wrote:

    Bravo Tim, I don't hear too many analysts admitting mistakes.

    That said, I don't expect Apple will inch above $500 at it's current valuation based on my model. (sorry ayaghsizian).

  • Report this Comment On January 23, 2013, at 7:27 PM, EquityBull wrote:

    Apple down 50 because street realizes that management has no idea what to do with the cash. They refuse to do a substantial buyback to reduce the float or increase the dividend. Stock down 30% and they passed on both of these? This management and board has no idea how to run the financial side of the company. Warren Buffett would be appauled at the capital allocation.

    I sold my shares after holding for 5 years for two reasons after hours. First is that they refuse to do anything with the cash. Today now more than ever was the time to pull the trigger. Second is that management and board hold zero to very few shares (explaining why they won't reward shareholders) and want you to vote at the shareholder meeting so they can continue to not own a significant stake in apple.

    These two reasons alone have me out of the stock. I need to be in a company that wants to rewards its owners. 137 billion losing 3% to inflation is madness. No special dividend. IT is crazy and the street knows they will hoard this and one day burn through it all never letting shareholders see any of it unless you consider 50 bucks over 5 years something. Wait, 50 is what we lost in 15 minutes after they reported.

    I'm taking what gain I have left and finding other shareholder friendly companies that know how to manage finances and their owners and investing in them.

  • Report this Comment On January 23, 2013, at 7:35 PM, tprooney3 wrote:

    If Apple is done innovating--if the iPad is the final product they ever make and from here on out concentrate on making new versions of what they have, I think the low valuation is appropriate.

    But if Apple still has new product concepts in the works (including a flop or two), I think long-term investors are going to be happy with Apple over the long term.

    My time horizon is 25 years. This is just one of the 100 or so earnings reports I'll be looking over before I begin to think about selling.

  • Report this Comment On January 23, 2013, at 7:49 PM, Risky88 wrote:

    Apple TV is still on its way

    Going to Break ground once again!

    ill buy when others fear the most!

  • Report this Comment On January 23, 2013, at 8:01 PM, TimKnows wrote:

    The pairs trade is still on, stay short AAPL and protect yourself with a long on RIMM, always works and you don't have to crawl to the board and say you are sorry. Are we going to hear from all of the Fools on this board now? A simple sorry might not get your money back from these guys but at least we will know who needs to go back to school here.

  • Report this Comment On January 23, 2013, at 9:00 PM, daveandrae wrote:

    What do I think?

    Having been in this volatile business for the last fifteen looooong years, my personal opinion is simply this..."Why try to catch a falling chain saw?"

    By now it should be painfully obvious to the objective intelligent investor that this particular business is over-hyped, over-owned, leaderless, one dimensional, with shrinking profit margins.....all up against serious competition making cheaper, superior, products.

    Clearly, the trend is downward.

    Having learned the hard way, I can tell you from person experience that it does not make a damn bit of difference that the name on the sign says "Apple"; It is extremely difficult to make money investing in these type of commodity based businesses once the bell on the clock has struck midnight. ( think of Hewlett Packard in 2012, Intel in 2000, and Polaroid/Kodak in the early 70's).

    At the end of the day, earnings (or lack thereof) are what ultimately drive a stock price, and apple's earnings are clearly on their way down. Again, forward earnings will be DOWN, not up. The year over year comps will only get worse as we go further into 2013.

    One must never, ever, forget that a stock does not know that you own it. Nor does it care what you paid. Thus, there is no personal reciprocity whatsoever.

    As for the mountain of "cash", (that's earning 0% interest and thus acts as a negative arbitrage around the company's neck) when was the last time you knew of a company with a mountain of cash that got a premium valuation?

    In all my years of experience it would be never.

    Bottom line-

    Even at a market price of 450 a share, the downside risk is still far greater than the upside potential. A dividend yield of 3.5% or a market price around 300 would get me to take a harder look. Unless or until that happens, I believe there are better places to invest your money.

    Good day.

  • Report this Comment On January 23, 2013, at 10:06 PM, optimuspaul wrote:

    I think the numbers looked good, it seems to me that Apple obviously has plans for the cash. I also think the stock will rebound soon, maybe not tomorrow or even this week, but I have no doubt it will be well above 500 again soon.

  • Report this Comment On January 23, 2013, at 10:17 PM, jdp245 wrote:

    Way over sold IMHO. These are exactly the market overreactions that I love as an investor. I will probably pick some up tomorrow if it stays around $450 or dives lower once the real volume starts. The dividend and cash protect against any huge downside risk and I'm happy to sit on it and cash in a 20% gain a year from now.

  • Report this Comment On January 23, 2013, at 10:23 PM, nonzerosum wrote:

    Share buybacks make perfect sense whenever the FCF yield is higher than what cash earns. In fact, when borrowing costs are low like right now, it is prudent to load up on long term debt to use for buybacks. Why? Because its a once in a lifetime arbitrage opportunity. Borrow at 3%, earn 10% - as long as interest coverage is conservative (think 8-10x). Interest rates won't be this low forever. It is unconscionable for Apple directors not to increase buybacks because they have a fiduciary duty to maximize share price.

  • Report this Comment On January 23, 2013, at 10:51 PM, BHruska wrote:

    Its the law-of-large-numbers. Impossible to grow at large percentages indefinitely.

  • Report this Comment On January 23, 2013, at 10:56 PM, mountainhighml wrote:

    One of Buffett's suggestions to Jobs, when Apple had far less cash on the balance sheet, was to institute an aggressive share repurchase program. He did not take that suggestion, however. Now, with Apple a screaming buy, I do not understand management's reluctance to aggressively buy back shares, using the current massive cash hoard, unless they think Apple's future is on the decline.

  • Report this Comment On January 24, 2013, at 12:02 AM, falsedawn wrote:

    I just don't get the attraction to this stock. They sell electronic gadgets. Not like other manufacturers can't do it cheaper. Margins are inevitably going to zero.

    I keep hearing "oversold", "must be worth more" etc, but I've been around so long and I've heard it all before.

    I predict that in 20 years, this stock will be worthless. Technology is the future, but it won't manifest itself in ipads, ipods, iphones and other trivialities.

  • Report this Comment On January 24, 2013, at 12:12 AM, jordanwi wrote:

    Guys, it grew by 14 million dollars yoy (essentially flat). This is the inflection point, and investors fear that they won't grow further. It's simple. I get that it's a "really big number", but the market cap is proportionally big. Scale back the revenues and scale back the market cap proportionally. Observe the growth trajectory.

    Hopefully they'll find other avenues of growth, or we've got a MSFT on our hands, although I'm not convinced AAPL has the moat MSFT does with it's office/xbox division.

    Long AAPL :(. Live and learn.

  • Report this Comment On January 24, 2013, at 1:16 AM, daveandrae wrote:

    This is NOT the bottom.

    Hell, in my opinion, this is just the start of the decline. Why? General Sentiment is still way too bullish.

    If you wanna know what a bottom looks like on a stock, take a look at these posts I pulled it out of my investment notes when I was buying General Electric stock eighteen months ago.

    I should note that you had to be a subscriber to Barrons magazine in order to reply to the recommendation to BUY GE stock at these price levels.

    
Edd Mcdermott wrote: 
"We bring good things to ruin" should be their new motto. Andrew Liveris (DOW Chemical) and Immelt are leaders who stated their dividend will not be cut on their watch...Both, quickly proceeded to slash dividends. Fool me once...etc, etc.Perhaps bifurcation of GE will benefit new and old investors.

    Link

    02:17 pm ET October 21, 2011
Tina Patalano wrote: 
If I bought GE every time Barron's recommended it, I'd be broke.

    Link

    01:46 pm ET October 23, 2011
Zen Cheru Veettil replied: 
Haha..GE is always "cheap" if you think that GE Capital can bring in trading profits like it used to

    Link

    02:12 pm ET October 24, 2011
David Abel replied: 
I will not soon forget the day GE, under Immelt, sold those "special shares with a 10% dividend" to Warren Buffett. Everyone that held common GE shares got an instant "haircut" that day. Sorry - GE is one dog that will never go in my portfolio anytime again.

    Link

    




    04:06 pm ET October 21, 2011
Herman Unanski wrote: 
Get rid of Jeff Immelt, and I will think about buying some! How does he survive with his track record of failure? Any other American company would have fired him long ago!

    Link

    06:30 pm ET October 21, 2011
Myron Harvist wrote: 
I think the 3 people above hit it right on the head. It's a company like Microsoft - should be doing better, but ain't.

    Link

    08:54 pm ET October 21, 2011
Kirk Cornwell wrote: 
We are talking about a company with well over ten billion shares outstanding. The "strong capital position " is a feature of an almost incomprehensibly complex balance sheet. A. prolonged "15%" growth rate is virtually impossible here. Buy on the dip? Maybe. Sell on a pop. sounds wise too.

    Link

    02:50 pm ET October 22, 2011
Dana Mauch wrote: 
Stock action would benefit greatly with a 1-2 reverse stock split. 10 billion plus shares outstanding is a little much.

    Link

    02:08 pm ET October 24, 2011
David Abel wrote: 
This recommendation is almost too funny. The management of GE under Immelt has been one crisis after another. And as noted above, their balance sheet is almost incomprehensible. Then there is the millstone of GE Capital - that you can always count on for some sort of minor financial disaster every year. Oh - and last but not least - about four years ago GE was a compnay that traded in the mid-$30s - about double what it sells for now.

    October 21st, 2011 closing price – 16.31

    Dividend yield - 4.17%

    Price to book - 1.39

    Trailing p/e – 13.4

    Five year average – 9.95

    Ten year average -10.52

    Forward p/e – 10.59

    Market cap - 172.9 billion

    Revenue Backlog – 191 billion

    Shares outstanding 10.6 billion

    January 23rd, 2013 closing price – 21.94.

    Total Return (assuming dividends were reinvested) – 40.55%

  • Report this Comment On January 24, 2013, at 1:39 AM, Upswinger wrote:

    One word---China---start buying now---all other comments and results are meaningless-1 Billion people live there-if this stock does not hit $1000 or splits before then but effectively becomes a $1000 stock- I will be surprised.

  • Report this Comment On January 24, 2013, at 2:04 AM, AEMuss wrote:

    Nobody seems to be talking about the fact that the December quarter this year was one week shorter than it was last year.

  • Report this Comment On January 24, 2013, at 2:30 AM, KevAZ wrote:

    It really wasn't a bad earnings report. Apple was rewarded in the past for under-promising and over-delivering so I can only blame management for creating the market psychology at work today. It is time for management to realize that they are running a business and not Santa's workshop - sound financial management must accompany the building of toys in this case. It is high time for management to return value to shareholders in the form of a buyback (my preference at this valuation) or increased dividends - but they may worry this further sends the signal that the growth story is over. I would also urge my fellow shareholders to exercise their voting rights and require that board members retain significant shares (against their recommendation). I'm not sure that I want board members who would not love to own every share of a business in which I invest.

  • Report this Comment On January 24, 2013, at 6:20 AM, mrshastri wrote:

    Remember Intel back in September 2000? From $74 all the way down to $20 twelve years later.

    OUCH!!!!

  • Report this Comment On January 24, 2013, at 6:26 AM, ravens9111 wrote:

    First of all, it's the GUIDANCE that crushed the stock. AAPL lowered guidance yet again. Anyone surprised?

    Second, the mini iPad has not been on the market long enough to announce cannibalization of sales. Wait for next quarter to see if that is no longer an issue.

    Third, consumers are very much aware that competitors are able to offer much similar products with high quality features. The Samsung Galaxy S3 is a formidable product. Windows 8 tablets and phones are gaining traction.

    Fourth, PC sales are not going away anytime soon. Sure, Dell and HP have been hammered due to a lower outlook on sales. However, they have continued to innovate and now have tablet-like laptops that can provide greater computing power with the same mobility. Convert your laptop to a tablet will be a serious threat moving forward. As they continue to innovate, those devices will become thinner and lighter weight to compete on the market. With BB10 on the horizon, who knows if a successful launch will dampen iPhone sales even further?

    The bottom-line is that it appears AAPL has hit a peak in growth, at least in the near term. If growth continues to decelerate, and a more constant growth rate comes in play, then a new equity forecast model will need to take place to value the stock. As growth continues to slow, the stock will have to remain stagnant until investors have more visibility with their future earnings. What's the catalyst to continue growing earnings at a high rate? At some point, markets will become saturated. I see less people willing to pay for an upgrade on their iPhones and iPads. Innovation in products have been lacking. An iTV could be that catalyst, but at this point, it has only been speculation.

    I'm looking for AAPL to hit around $350-$420. A new wave of buyers will come in when the annual dividend yield hits 3% (value investors). The low P/E is not a great measure to value the stock at this point when earnings are decelerating. A stock buyback is really not going to happen. How much of the cash on hand is overseas? Will AAPL really be willing to bring that money back and pay taxes for the benefit of shareholders? I doubt it. The only thing I see AAPL doing to reward shareholders going forward is to increase the dividend. I really don't see that happening either, evidenced by the lack of a Special Dividend before the end of the year in anticipation of increased tax rates.

  • Report this Comment On January 24, 2013, at 6:50 AM, earnest6 wrote:

    The Apple report was not great but it was not bad either. If shares sink towards $400, I shall increase my Apple holdings. Market psychology will eventually shift. Anyway, the time to buy is when people are terrified and there is blood in the streets. That time is fast approaching. Apple is not Citigroup--it will rise again.

  • Report this Comment On January 24, 2013, at 7:54 AM, mikecart1 wrote:

    Anyone not at least buying some Apple now to even just start a position should not bother investing in the other 6000-7000 stocks. You gotta ask yourself 1 simple question:

    Will Apple ever EVER be higher than $465+/share that it is now premarket sometime in the future?

    If your answer isn't yes, then you should put your money in a mattress and light it on fire. This isn't about $1000/share or anything. This is about betting against a company that is STILL beating previous year numbers, that has over $100 BILLION in CASH, that if they do nothing the next 10 years, they are still doing something.

    Apple is the closest guarantee in the market today. At worst, it will just become another JNJ - which isn't that bad either!

  • Report this Comment On January 24, 2013, at 8:11 AM, magnaman1969 wrote:

    Apple TV?? Its already here= Samsung Smart TV.

    Sell Apple...buy RIM

  • Report this Comment On January 24, 2013, at 8:14 AM, thesullster wrote:

    Can you imagine the activity on AAPL when Samsung releases the S4 ?

    The iphone5 didn't really stem the growth of the S3 as far as I can tell.

  • Report this Comment On January 24, 2013, at 8:32 AM, hodgepdg wrote:

    Yes, They just sell electronic gadgets but they do it better then everyone else! This is still a great company. I do not know much about stock but I know a great product when I see it. This company sold more of it's products then it did the year before and has tons of cash on hand yet the stock drops? There is no way this stock does not rebound. I have an Iphone and look at other options this time around but you know what there are one like like it. The mini ipad is an awesome product. You are also going to see many companies switching their employees to iphones and ipads.

  • Report this Comment On January 24, 2013, at 9:06 AM, SoBe305 wrote:

    All these analysis again misses the fact that the quarter AAPL was reporting was one week shorter than prior quarters to which they are compared. It makes a big difference when it is adjusted 13 vs 14 weeks.

  • Report this Comment On January 24, 2013, at 9:57 AM, PuddinHead42 wrote:

    There were reports before earnings that Apple had cut way back on orders, this was a pretty be yellow flag. Not a surprise they missed again.

  • Report this Comment On January 24, 2013, at 10:28 AM, GregAK wrote:

    I worry that fundamentals do not matter when it comes to Apple. They just reported record revenue and earnings, record iPhone and iPad sales yet the stock drops 8% from yesterdays close. I know that Apple did not meet some analyst estimates, but shouldn't performance matter more? This doesn't make sense. Emotion rules the day and I am not sure I can invest under these circumstances. It is tantamount to gambling rather than investing in the current climate. Look at NFLX today... this is very irrational.

  • Report this Comment On January 24, 2013, at 10:42 AM, maniehols wrote:

    The hordes of cash are off shore and I doubt AAPL will bring it back. For those who have not figured it out yet, the stock market is not a level playing field and common sense does not prevail ! Look at AAPL closing price yesterday, look at their after hours trading volume and then tell me this is a level playing field.

  • Report this Comment On January 24, 2013, at 10:46 AM, maniladad wrote:

    After reading all the comments, it seems that those advocating for a further fall in stock price and a dismal future for Apple are more logical and analytic. Those who are bullish on Apple seem more emotional with an element of loyalty and somewhat vague on specifics. That scares me a little because Apple is my second-biggest position. (Used to be first but Apple sank and Novo Nordisk went up.) Being neither logical nor analytical and being slow to learn I'm attempting to grab that falling chainsaw and just put in a bid for more Apple shares. Speaking somewhat emotionally and entirely devoid of specifics, Apple is still a company of great people with great products and I believe they will rise to the challenge of the competition. Long on Apple long-term.

  • Report this Comment On January 24, 2013, at 9:10 PM, Arthur1111 wrote:

    "Make that three consecutive misses". I do not get the impression that you lost any money. Interseting!!

    Apple did not buy shares back when the shares were much cheaper. Why would they do it now?

    I have been advising readers to sell Apple and buy RIMM since September. I posted many, many, I mean many comments on this regard. I am still making the same statement :

    SELL APPLE AND BUY RIMM. It is really that simple. Take the emotions out. We are in the business of making money. Who the hell cares if Apple has all these billions of dollars in cash if at the end of the day you lose money.

    Don't get me wrong. I invested in Apple last year. But, 2013 is RIMM's year.

  • Report this Comment On January 25, 2013, at 12:18 PM, jrj90620 wrote:

    Apple better figure out how to get rid of that cash.It's going to be devaluing,a lot faster,in the future.

  • Report this Comment On January 25, 2013, at 2:49 PM, SkepikI wrote:

    ^ If Apple does "figure out how to get rid of that cash" instead of profitably redeploy it or otherwise reward its owners, its going to be devaluing a lot faster in the future.

    The psychology of this whole situation is so interesting to me that I violated a couple of my cardinal principles and got in for a pinch at $437/sh

    Always dangerous violating cardinal principles...

  • Report this Comment On January 26, 2013, at 9:42 AM, PRHSydney wrote:

    The 22% drop in iMac sales YOY is due to many Mac laptop users believing they can get way with an iPad hence buying or upgrading their iPads rather than their Macbooks. This explains part of the reason for the 48% increase in iPads. Much of the remaining shortfall in Macs sales is due to upgraders waiting for the new iMac, which wasn't available for much of the qtr. and then was supply constrained. Another factor is the failure of Apple to provide upgrades of the Mac Pro desktop in 2012. There are many heavy duty users like myself who will return to buying Mac Pro when a new compelling upgrade is released (there is no substitute for expandability, comprehensive I/O in the fields of engineering, design, science, pro audio and video, medical etc.) Those that say desktop PC's are finished, don't have a clue - they're only looking at the trivial social media / fluff end of the spectrum. Where do they think the heavy duty content they are consuming actually comes from? Certainly not off a tablet!

    Also it's ironic that those that buy iPads immediately find they need to encase it in protective cases/ sleeves etc because it doesn't have a lid like the laptop. Many then buy external keyboards etc. - and end up with something as bulky as a Macbook Air, but without the input/output options of a laptop. Many will eventually realize they still need a laptop or desktop and they will upgrade - hence Mac sales will level off or even rebound.

    Taking into account 13 weeks in the qtr rather than 14 last year, leads to this last quarters results being underestimated by 7.7%!

    Also 61% of sales are outside US, with China hardly penetrated yet. I have experience with China and I am sure China will buy many millions of iPhones and iPads, because they purchase mainly on perceived status symbol value. I have seen Chinese ethnic tribesman carting a CRT TV around on their camel from camp to camp, with a niche carved out for it in the wall of their underground rock cut homes - without it ever being plugged in to electricity (there is none) - all done as a show of status. They will pay a premium for Apple products so long as they are perceived as the highest status brand!

    Looking at the media comment and ANALyst's wild imaginings since late 1012 it is clear there is too much focus on these people's "expectations" of sales / revenue / earnings rather than the actual figures presented by Apple. Only Apple has the facts and data to make realistic forward estimates, everyone else is making unsubstantiated guesses based on incomplete information. They then get so upset and indignant when their guesses prove wrong and they attack Apple, frighten investors and precipitate a drop in AAPL share price.

    I have seen a concerted effort by many to try to drive down AAPL share price - I presume so they can then buy in at artificially low prices. I have been watching APPL since the early 1980's and if you factor in the 2 for 1 shares splits in 1987, 2000 and 2005, the shares have increased in value by a massive 2,500 X ie. 250,000%. I have heard innumerable times over the last 30 years the media referring to "beleaguered Apple", "Rotten to the Core" "Take a bite out of Apple" - so cliched, unfunny and so wrong. They have been predicting the demise of Apple since 1984. So none of this current nonsense that the "sky is falling" is new to me. Since 1984 I have been warning - "DON'T BET AGAINST APPLE".

  • Report this Comment On January 26, 2013, at 12:02 PM, CSMSR wrote:

    Buy good management. Buy when the multiple is historically low.

    The key to Apples long term prospects could very well be what they do with their cash. They most likely are looking carefully at the prospects of buying a up and coming tech company whose products will add synergy to their overall value and or take them to new directions that are ground breaking and innovative.

    Increasing the dividend or splitting the stock would also add to the prospect that they will become more responsive to their stockholders. Now would be the time to do that.

  • Report this Comment On January 26, 2013, at 12:06 PM, CSMSR wrote:

    One more thing.

    The stock price broke through the long term trend line, which sent the chartists running to the door.

    That is a bad omen.

  • Report this Comment On January 26, 2013, at 4:17 PM, Imac007 wrote:

    Know your neighborhood. Apple has about 2/3 institutional investors so the rest are individual investors. One third is a high number for individuals. Google, for example has 85% institutional ownership. Institutions did not sell off for tax reasons. That is an individual investor issue. Institutions sell of at year end to re-balance portfolios. This year the combination of the two sell off groups led to a dramatic drop in share price before year end. Over 800 mutual funds owned Apple and would have had to re-balance. With the price as low as it is those buyers want to re-buy. They do not however, want to reinvest until the trend reverses. Pension plans, mutual funds and other monthly contribution funds need to find a place for new contributions each month and Apple is attractive but not until the trend changes.

    The media and analysts are primarily to blame. The buy recommendation here was not a bad call. I can tell a number of contributors here did not listen to the conference call. In fact, many media articles show the same lack of research. The law of large numbers applies here but not in the way analysts traditionally throw it into articles. Apple iPhone sales grew 25% year over year in this quarter. That means they had to increase production by 10 Million phones to supply the growth. I remember that Apple held a training about a year ago for factory workers that was attended by 1.3 million employees. Some of the increased production can be attained by factory machinery efficiency increases, but it is likely increases in staff would need to be about 250,000 or more, not counting churn, across the system. Apple have a healthy budget that buys and installs production equipment in both supplier facilities and assembly plants. Imagine growing so fast that you are having to give suppliers a shot in the arm and they still can't keep.

    The word "constrained", was heard repeatedly during the conference call. The launch of the iPhone 5 initiated in September was massive. Over 30 countries in one week and over 100 before Xmas. A significant ramp in production. Refreshes in all product lines meant pressure on all capacity. It took from September until mid-December before online orders would not face delays, just in time for Xmas. "Constrained" means that they could not keep up with orders. They still have not caught up with iPad mini, iPhone 4 or iMac orders yet. During the call they indicated that they expect to catch up by the end of this quarter. Even if they only experience a growth of an additional 10 million phones, for the Xmas quarter next year, which would be a deceleration in growth rate, they would need at least 300,000 more workers and facilities for them to work from. Suppliers need to increase capacity to meet the growth. Finding people, training them, building out infrastructure, sourcing suppliers, innovating, maintaining quality, re-tooling for new products are just some of the logistic problems. Retina Displays apparently come in sheets. They are cut to size. Adding Retina Displays to iPad 3&4, which are significantly larger than phone screens, plus adding 13" & 15" MacBook models, would have meant significantly more than a year over year increase of 25%. That production increase would likely have been over 100%. Is it any wonder the iPad mini did not have that display?

    Sitting behind a desk, forecasting 25-30% anticipated growth, shows a complete lack of insight into what expectations they are setting. Apple is setting world records. Imagine expecting an elite performer, like Michael Phelps, to set a world record every time he competes, then criticizing him because it did not exceed the record by enough to satisfy the journalist/analyst. I think we will see more frequent upgrades, like the iPad refresh. This should help prevent a lull with pent up demand just before the busiest season. This should increase the number of buying surges they experience, with each release.

    Apple's analysis of the decrease in iMac sales, was that supplier issues with the display plus the 14 week vs 13 week comparison, would have put them ahead of the marketplace demand for computers. In fact, there was solid demand that should translate into a percentage gain in market share. Their subsequent reporting is going to include computers and iPads on the same line on the balance sheet. This is meant to give a truer picture as buyers transition to tablets and away from desktop platforms.

    Tim Cook is the right guy to continue to deal with supply chain management. People in that field consider him a leading expert. He is having to deal with issues that people in that business have never seen, like dealing with this level of large number issues. I wish I could find more companies that are growing so fast they can't keep up. A recent article criticized Apple analysts because their record of accurate forecasting was out by more than Apple's "miss??". Some people writing articles about Apple seem to have a David complex wanting to bring Goliath down. They forget that Apple was David, quality armed its slingshot and the consumer made it king. As I've heard it said "behold a piece of sky before me, oh no, just another piece by C. Little, first initial I." The author here took the path less travelled but I do not think him wrong. Time will prove him right. Disclosure: I am starting to scale in at this price.

  • Report this Comment On January 26, 2013, at 4:25 PM, EquityBull wrote:

    Actually the DEATH CROSS you have to admit was dead right this time. I'm not a chart guy but maybe time to start becoming one..

  • Report this Comment On January 26, 2013, at 5:28 PM, Imac007 wrote:

    A point about the sell-off in January. Much of it is due to individual investor stop loss settings. Most institutional use would be very limited since dumping large numbers via stop-loss would be catastrophic to the market. Some investors that sold off prior to year end are constrained from buying because of the wash-sale rule. Those who wanted to claim a loss for tax purposes fall into this category. They need to wait at least 30 days from time of disposition before repurchase or the loss is not deductible. This rule lowers the number of potential buyers, who have a predeliction to Apple stock. Less demand = price pressure.

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