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Here's my question: Why is the stock down 5% on an announcement that beats estimates, and is a record for the company, along with positive guidance. I do not un

Here's my question: Why is the stock down 5% on an announcement that beats estimates, and is a record for the company, along with positive guidance. I do not understand the markets as much as I thought I did.

jonknee 14y ago
They did not beat estimates and their margins took a huge hit.
- Cookingboy 14y ago
  They missed the revenue by less than 1% (despite stock already falling 30% in the past 3 months) and they beat on EPS. Margin was in line with expectation as well.
  - zmmmmm 14y ago
    I think the the combo of increasing revenue but flat on profit is worrying: that tells you something is eating away at the profitability of the company. It jives with the perception that the company has "peaked" and its best days are behind it, that competition is successfully biting into margins.
    - millstone 14y ago
      This exactly describes Google's most recent quarter - profits up 6%, revenues up 19%. Yet investors welcomed those results.
      - zmmmmm 14y ago
        It probably does, but Google's current stock price isn't predicated on the same assumptions as Apples. It's seeing those assumptions threatened that is worrying, not the raw numbers.
- brown9-2 14y ago
  It would seem to depend on whose estimates you are looking at. I'm seeing half the articles report "beat estimates" (in terms of earnings and in terms of iPhone sales) and the other half saying "below estimates". Considering that there are a number of analysts and they produce a range of estimates, it doesn't seem accurate to reduce things to "beat" or "missed" estimates - it's possible to beat most of the estimates but miss a few of them, or vice versa.
banachtarski 14y ago
Which tells you that you know understand the markets more :)
brown9-2 14y ago
Movements like this seem to reflect more on the markets themselves (being irrational) than they do on the company (Apple).
- DannyBee 14y ago
  Yeah, these kinds of crazy movements are also pretty common among some of the tech companies. In the 7 years i've been at Google, our stock has always gone up or down crazily around earnings, no matter what is announced. You will always see articles about how the "market reacted to X" in the announcement when this occurs. X is often different between articles ;)
Cookingboy 14y ago
The expectation has been through the roof. Apple is a huge stock that's mainly being traded on emotion instead of fundamentals now. After the stock sliding down 30% in the past 3 months you'd think even meeting the original analyst expectations from 3 months ago would be a huge boost, but it seems like the expectation remained sky high despite all the negative rumors recently. Apple is a great company with a very healthy business, but AAPL as a stock is not in the same shape.
EvanKelly 14y ago
AAPL is certainly one of the least rational stocks on the market. With AAPL, people have come to expect huge growth and huge earnings calls. AAPL actually missed revenue estimates by a little, which may have caused concern for some who always expect tremendous quarterly reports. As the stock has fallen below $500 in after-hours trading, I think we'll see a correction in the morning from limit-orders that may have hit while the market was closed.
- jbverschoor 14y ago
  The thing is, it already went down from 700 the last couple of months
kryptiskt 14y ago
Because there's an expectation of beating estimates built into the the whole ritual of quarterly earnings for a high flyer. It's a sad ritual, but estimates are thought to be conservative and trust put in circulating whisper numbers.
jusben1369 14y ago
NY Times headline: Apple Revenue Misses Again, iPhone Disappoints
corresation 14y ago
Why is the stock down 5% on an announcement that beats estimates, and is a record for the company, along with positive guidance. Because revenue growth is starting to fade away and margins are being hurt. Despite a lot of really, really ridiculous things said about equities here on HN (or any tech board), the market is quite rational and future-facing. Look back on all of the absurd conspiracy theories about options traders keeping AAPL down, and compare with the reality that it is down 6% aftermarket today. Of course it's down from enormous heights, so in no universe is Apple in imperiled or any nonsense like that, but it simply isn't the darling that it was a year+ ago.
- millstone 14y ago
  It's currently down over 10% aftermarket. I don't think it's fair to characterize Apple as "down from enormous heights." Throughout 2012, Apple's P/E meandered between 13-15, which puts it in the company of stocks like IBM and MSFT, and below Oracle. Even at its 700+ highs, Apple's P/E never came close to that of Google. It doesn't seem like a bubble.
  - corresation 14y ago
    Sorry I didn't mean to imply that it was a bubble or anything like that, but rather just that having a market cap of $700 billion put them in very limited company. It was a well earned position, however.
elliotanderson 14y ago
They're starting to hit the law of large numbers. As @gruber pointed out, 3 years ago they were making $50 billion annually and they just announced they were making $54.5 billion in a _quarter_. You can't expect 20% increases every quarter when you're at the top of the market.

jonknee 14y ago

They did not beat estimates and their margins took a huge hit.

Cookingboy 14y ago
They missed the revenue by less than 1% (despite stock already falling 30% in the past 3 months) and they beat on EPS. Margin was in line with expectation as well.
- zmmmmm 14y ago
  I think the the combo of increasing revenue but flat on profit is worrying: that tells you something is eating away at the profitability of the company. It jives with the perception that the company has "peaked" and its best days are behind it, that competition is successfully biting into margins.
  - millstone 14y ago
    This exactly describes Google's most recent quarter - profits up 6%, revenues up 19%. Yet investors welcomed those results.
    - zmmmmm 14y ago
      It probably does, but Google's current stock price isn't predicated on the same assumptions as Apples. It's seeing those assumptions threatened that is worrying, not the raw numbers.
brown9-2 14y ago
It would seem to depend on whose estimates you are looking at. I'm seeing half the articles report "beat estimates" (in terms of earnings and in terms of iPhone sales) and the other half saying "below estimates". Considering that there are a number of analysts and they produce a range of estimates, it doesn't seem accurate to reduce things to "beat" or "missed" estimates - it's possible to beat most of the estimates but miss a few of them, or vice versa.

banachtarski 14y ago

Which tells you that you know understand the markets more :)

brown9-2 14y ago

Movements like this seem to reflect more on the markets themselves (being irrational) than they do on the company (Apple).

DannyBee 14y ago
Yeah, these kinds of crazy movements are also pretty common among some of the tech companies. In the 7 years i've been at Google, our stock has always gone up or down crazily around earnings, no matter what is announced. You will always see articles about how the "market reacted to X" in the announcement when this occurs. X is often different between articles ;)

Cookingboy 14y ago

The expectation has been through the roof. Apple is a huge stock that's mainly being traded on emotion instead of fundamentals now. After the stock sliding down 30% in the past 3 months you'd think even meeting the original analyst expectations from 3 months ago would be a huge boost, but it seems like the expectation remained sky high despite all the negative rumors recently. Apple is a great company with a very healthy business, but AAPL as a stock is not in the same shape.

EvanKelly 14y ago

AAPL is certainly one of the least rational stocks on the market. With AAPL, people have come to expect huge growth and huge earnings calls. AAPL actually missed revenue estimates by a little, which may have caused concern for some who always expect tremendous quarterly reports. As the stock has fallen below $500 in after-hours trading, I think we'll see a correction in the morning from limit-orders that may have hit while the market was closed.

jbverschoor 14y ago
The thing is, it already went down from 700 the last couple of months

kryptiskt 14y ago

Because there's an expectation of beating estimates built into the the whole ritual of quarterly earnings for a high flyer. It's a sad ritual, but estimates are thought to be conservative and trust put in circulating whisper numbers.

jusben1369 14y ago

NY Times headline: Apple Revenue Misses Again, iPhone Disappoints

corresation 14y ago

Why is the stock down 5% on an announcement that beats estimates, and is a record for the company, along with positive guidance. Because revenue growth is starting to fade away and margins are being hurt. Despite a lot of really, really ridiculous things said about equities here on HN (or any tech board), the market is quite rational and future-facing. Look back on all of the absurd conspiracy theories about options traders keeping AAPL down, and compare with the reality that it is down 6% aftermarket today. Of course it's down from enormous heights, so in no universe is Apple in imperiled or any nonsense like that, but it simply isn't the darling that it was a year+ ago.

millstone 14y ago
It's currently down over 10% aftermarket. I don't think it's fair to characterize Apple as "down from enormous heights." Throughout 2012, Apple's P/E meandered between 13-15, which puts it in the company of stocks like IBM and MSFT, and below Oracle. Even at its 700+ highs, Apple's P/E never came close to that of Google. It doesn't seem like a bubble.
- corresation 14y ago
  Sorry I didn't mean to imply that it was a bubble or anything like that, but rather just that having a market cap of $700 billion put them in very limited company. It was a well earned position, however.

elliotanderson 14y ago

They're starting to hit the law of large numbers. As @gruber pointed out, 3 years ago they were making $50 billion annually and they just announced they were making $54.5 billion in a _quarter_. You can't expect 20% increases every quarter when you're at the top of the market.