Apple Earnings: iPhone 6 Can't Come Soon Enough

This quarter's earnings results were mostly a non-event.

Jul 22, 2014 at 6:47PM

Apple (NASDAQ:AAPL) reported earnings following market close on Tuesday, reporting $37.4 billion in sales, ahead of the midpoint of its guidance of $36 billion to $38 billion, but missing the consensus of $37.99 billion. However, Apple zoomed ahead of its gross margin guidance of 37%-38%, coming in at 39.4%. 

For the fourth quarter, Apple is calling for revenues in the current quarter of between $37 billion and $40 billion, gross margins of 37%-38%, operating expenses of between $4.75 billion and $4.85 billion, other income of $250 million, and a tax rate of 26.1% -- driving a net income range of $6.72 billion and $7.9 billion. 

What does all of this mean for shareholders? 

Not a whole lot
The company beat bottom-line expectations for the most recent quarter and, assuming the midpoint of fourth-quarter guidance, missed expectations in its guidance for the current quarter. However, given that the launch of new products -- probably new iPhone models in late September and new iPads in October -- won't really be felt until the first quarter of the company's fiscal 2015, this doesn't mean that much. 

Of course, it is important that Apple's older products exhibit staying power on a year-over-year growth basis, but this year is a quite a bit different. For the first time, Apple is likely to launch not one, but two new high-end iPhone products. On top of that, weak iPad sales, down yet again year over year, could potentially be due to people who are waiting for iPad models with Touch ID capability, or an iPad Mini with Retina Display, a thinner chassis, and a better quality display.

The point is, Apple's product pipeline is filled with fundamentally game-changing products, and -- though these products aren't official -- consumers and investors alike understand that they're coming. That Apple was still able to generate $7.7 billion in net income (more than chief competitor Samsung Electronics (NASDAQOTH:SSNLF) was able to generate in operating income following the launch of its Galaxy S5 flagship) against this backdrop is impressive. 

Any dip may be short-lived
I really blame overzealous analyst estimates for the "miss" here, but although these results may seem disappointing on the surface, any dip in the stock is likely to be short-lived as Apple's large buyback program will happily buy dips. 

Further, given that Apple's guidance is probably once again skewed toward the conservative side, it wouldn't be surprising at all to see Apple do better than what the midpoint of the issued guidance ranges suggests. 

Foolish bottom line
What will really matter in the end is how the iPhone 6 and the refreshed iPad products perform in the fall. If iPhone 6 can outgrow the high end of the smartphone market by taking share from others, like Samsung, and if the next generation of iPad products can compel the installed base to upgrade and attract more new customers, then Apple's sales, profit, and ultimately stock price could move to new highs before the calendar year is out. 

In short, take a deep breath and relax; it's going to be a boring quarter. 

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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