7 ms·

Apple Sales Gain Slowest Since ’09 as Competition Climbs

36 points by tshtf 14y ago

KaoruAoiShiho 14y ago
If anyone's confused by the stock price, it's simple. Profits are flat since this time last year. This time last year the stock was around $420 and that's where the stock is heading today.
- padmanabhan01 14y ago
  So, for the same profits, we had a stock price of 420 this time last year and ~515 today. So, you automatically assume 420 was the right number and 515 is not, and that it will head toward what you think is the right number? Got it.
  - KaoruAoiShiho 14y ago
    It's a $458.00 as I'm typing. I don't necessarily think 420 is more right, I'm just explaining the situation. Many commentators were confused by the price movement. Don't shoot the messenger. But to justify a higher price today you would have to believe that apple is more competitive in the overall market this year than it was last year and I don't think it is.
    - fleitz 14y ago
      Sure, but the question is then why AMZN earnings justify 250 times the prices of APPL earnings, or GOOG earning justify twice the price. Also, growth of growth is flat, not actual growth which is still quite positive. Last year they made $25 billion, this year they made $41. But of course the rate of growth is smaller than the year before last when they only made $14 billion. This according to Wall St means they are failures. Lets put it this way, APPL's earnings growth is twice GOOG's total earnings.
      - chucknelson 14y ago
        I would love for someone to explain how Amazon's P/E is justified. It seems like insanity when you see how Amazon's core business model does not revolve around profits (or so it seems).
        tedunangst 14y ago
        Amazon's business model revolves around future profits. The stock price reflects that. P/E isn't a particularly useful indicator of anything.
        chucknelson 14y ago
        Future profits that are coming...when? Considering their margins seem to always be razor thin, I'm not sure what investors are expecting.
      - jarek 14y ago
        > This according to Wall St means they are failures. No, it doesn't. (edit: they are failures when it comes to keeping up their growth rate, yes.) But if previous stock price was arrived at by assuming rate of growth would stay constant, the stock will drop if rate of growth drops, as according to best available prediction the company will be worth less in the future than you had previously expected. Stock prices are influenced by all kinds of predictions, guesses, and voodoo for present and future. It's a good idea to not to attach too many personal feelings or judgments like "winner," "best," or "failure" to the stock for this reason.
- arrrg 14y ago
  But wasn’t the current quarter one week (so seven percent) shorter than the year ago quarter? Does that matter?
  - glasshead969 14y ago
    I don't know if its good or bad for apple but I hate it when articles fail to mention this difference when comparing.
  - pazimzadeh 14y ago
    That's right. http://www.apple.com/pr/library/2013/01/23Apple-Reports-Record-Results.html http://www.apple.com/pr/library/2013/01/23Apple-Reports-Reco...
  - aetherson 14y ago
    Probably doesn't matter a ton. What seems to be driving the modest sell of Apple right now are: 1. Revenue slightly below estimates. Analysts knew that this quarter was a week short and built that into the estimates. 2. Profit MARGIN way down from year-ago-quarter. It doesn't matter that this quarter is short, it's the ratio of profit to revenue, not the gross amount of profits. Also, profits short of expectations, and, again, the short quarter was built into expectations.
- millstone 14y ago
  Google's profits were nearly flat since this time last year, yet they're up 25%.
  - gdilla 14y ago
    Right. Isn't stock also an indication of future performance expectation (at least in some part)?
    - aetherson 14y ago
      It's ENTIRELY an indication of future performance expectation.
  - arcticfox 14y ago
    Over the past year, Apple has shown (slight) vulnerability, whereas Google has looked like an even more formidable competitor moving forward
    - _Simon 14y ago
      What is this assumption based on?
  - robryan 14y ago
    It is probably as simple as Google beat expectations while Apple missed expectations, these expectations being priced into the share price before the announcement. The share prices are now just correcting based on the actual results.
- HSO 14y ago
  Right, except they now have 137bn in cash and equivalents, the quarter was a week shorter (~ 7 percent more of everything at a constant rate), they explicitly warned that ramp-up would affect margins and availability in their last call (and the margins actually are better, so go figure about the margins next quarter and on), etc etc... So, yeah, I guess I'm kind of confused now by the market reaction. Perhaps you can explain to me again the rationale? But perhaps I shouldn't be confused, really. I should finally learn from history to not overestimate humanity.
  - Steko 14y ago
    "the rationale" Joe Bull thinks maybe Apple will have a super blowout beat $60 bln quarter the way last xmas quarter beat estimates by a mile. If so the stock will go north of $600 fast, maybe push $700. Didn't happen so he sells.
  - j-g-faustus 14y ago
    Consider a simple model where the "fair value" of a company is the sum of their next 10 years of profit: If a company made $1m last year and is expected to stay flat for the next decade, it's worth $10 million. If a company made $1m last year and profits are expected to grow 10% annually, it's worth $16 million. If a company made $1m last year and profits are expected to grow 100% annually, it's worth $1 billion. The implicit model for stock pricing is more complicated, but you can see correlations even in a simple model like this. Nobody knows what will happen several years into the future, so it's mostly bets and speculations. Especially in high-growth companies, where many of the bettors appear to believe that trees grow to heaven, and the company's yearly profits will soon exceed the world GDP. So the stock of high-growth companies sell at an enormous markup compared to current profits. By the same token, that markup can evaporate very quickly if a formerly-high-growth company shows any sign of slowdown. In terms of the simple model above: If traders used to think that the $1m-profit company would grow 60% annually for the next decade, and something happens that makes them believe that it won't be more than 40%, the value of the company would immediately drop by more than 60%.
    - millstone 14y ago
- digikata 14y ago
  I think Benjamin Graham's Mr. Market allegory is applicable here: http://www.investinternals.com/2009/08/grahams-mr-market-allegory.html http://www.investinternals.com/2009/08/grahams-mr-market-all...
- seiji 14y ago
  Idea: using the assumption of stock prices being based on future growth (and not outright mass un-correlateable manipulation), Apple is the most profitable company ever -- and nobody can see beyond that. Average people can't imagine anything bigger. They think it must fall. They don't understand technology or nonlinearites.
Osmium 14y ago
I have no knowledge of the financial world, so maybe someone can help me with this and what it means... Apple is now a $50b/quarter company, with a $480b (edit: now $430b) market cap and $140b in cash. Surely this means that, within a few years, Apple will have enough cash to buy itself? This seems like a dangerous situation for a company to be in. For whatever reasons, there seems to be little confidence in Apple lately, but it can't be denied that they're still making substantial growth quarter over quarter. Is this current situation not unsustainable? Edit: thanks everyone for the explanations, it's very much appreciated
- recoiledsnake 14y ago
  >Apple is now a $50b/quarter company That's revenue and can't buy anything with revenue since you have to pay for the salaries, hardware, stores etc. You should look at profit which is $13B/quarter right now.
  - Osmium 14y ago
    Thanks for the correction -- but doesn't this still mean that, if Apple completely plateaus and they have no more growth whatsoever, Apple would still reach its current market cap ($430b) in cash within about 6 years? And this is presumably an overestimate because its current stock price probably has further growth priced into it, so either Apple will reach that target sooner as a result of an increase in profits or, if profits remain the same, their market cap will fall further? I'm just not sure I understand the implications of a company acquiring so much cash that it matches its own market cap. I ask because, this fact alone, seems to suggest to me that they're very much undervalued right now. But I'm not sure if I'm missing something.
    - kryptiskt 14y ago
      Why do you think the stock will stay level? Investors take cash on hand into account. Also, Apple is distributing some cash as dividends. Stocks seldom trade under the book value of the company, but it sometimes happens. The business may be bad and the stock is just anticipating, or the book value may be hard to realize in cash (hard to cash in on goodwill)[1]. None of that applies in Apple's case. [1] And very occasionally there is something that is just that much undervalued.
deleted 14y ago
[deleted]
angersock 14y ago
We've seen this before, we'll see this again. Apple may do better in tablets than Samsung, or Microsoft, or LG, or Toshiba, or whoever. Apple may do better in phones than Nokia. Apple may do better in laptops than Dell or Asus. Sadly, that isn't enough--with sufficiently tight margins, they need to do better than !Apple (better than all competitors, not any competitor), and in the long run, that's not going to happen. They're going to get pushed out by more competitors in hardware, and honestly I don't think their software play is good enough to save them.
- cageface 14y ago
  I agree. Unless their software engineering improves pronto they are in trouble. Hardware in this market is headed for commodification. It's still their game to lose but they really need to nail a lot of things in iOS 7 and so far I don't see any sign of the kind of leadership that would require.
  - alwaysinshade 14y ago
    > so far I don't see any sign of the kind of leadership that would require. As of 29 October 2012 - Eddy Cue in charge of maps/cloud services, Craig Federighi in charge of iOS/OSX, Jony Ive in charge of human interface and hardware design. It'll be interesting to see how iOS 7 pans out, because these guys are very good at what they do.
    - cageface 14y ago
      Ive is a brilliant hardware designer but software UX is a whole different ballgame and his ability there is currently a big question mark. Cue and Federighi were both on board when a number of architecturally questionable APIs were added (Storyboards, AutoLayout), so they're a bit of an unknown too. That's why there's so much riding on iOS 7. Contrast this to Google which has a strong, stable team in place that's been doing superb work for the last few Android releases and you can see why people are a little gun shy about APPL right now.
  - seiji 14y ago
mmanfrin 14y ago
It also recorded its largest quarterly revenue.

36 points by tshtf 14y ago

If anyone's confused by the stock price, it's simple. Profits are flat since this time last year. This time last year the stock was around $420 and that's where the stock is heading today.

padmanabhan01 14y ago
So, for the same profits, we had a stock price of 420 this time last year and ~515 today. So, you automatically assume 420 was the right number and 515 is not, and that it will head toward what you think is the right number? Got it.
- KaoruAoiShiho 14y ago
  It's a $458.00 as I'm typing. I don't necessarily think 420 is more right, I'm just explaining the situation. Many commentators were confused by the price movement. Don't shoot the messenger. But to justify a higher price today you would have to believe that apple is more competitive in the overall market this year than it was last year and I don't think it is.
  - fleitz 14y ago
    Sure, but the question is then why AMZN earnings justify 250 times the prices of APPL earnings, or GOOG earning justify twice the price. Also, growth of growth is flat, not actual growth which is still quite positive. Last year they made $25 billion, this year they made $41. But of course the rate of growth is smaller than the year before last when they only made $14 billion. This according to Wall St means they are failures. Lets put it this way, APPL's earnings growth is twice GOOG's total earnings.
    - chucknelson 14y ago
      I would love for someone to explain how Amazon's P/E is justified. It seems like insanity when you see how Amazon's core business model does not revolve around profits (or so it seems).
      - tedunangst 14y ago
        Amazon's business model revolves around future profits. The stock price reflects that. P/E isn't a particularly useful indicator of anything.
        chucknelson 14y ago
        Future profits that are coming...when? Considering their margins seem to always be razor thin, I'm not sure what investors are expecting.
    - jarek 14y ago
      > This according to Wall St means they are failures. No, it doesn't. (edit: they are failures when it comes to keeping up their growth rate, yes.) But if previous stock price was arrived at by assuming rate of growth would stay constant, the stock will drop if rate of growth drops, as according to best available prediction the company will be worth less in the future than you had previously expected. Stock prices are influenced by all kinds of predictions, guesses, and voodoo for present and future. It's a good idea to not to attach too many personal feelings or judgments like "winner," "best," or "failure" to the stock for this reason.
arrrg 14y ago
But wasn’t the current quarter one week (so seven percent) shorter than the year ago quarter? Does that matter?
- glasshead969 14y ago
  I don't know if its good or bad for apple but I hate it when articles fail to mention this difference when comparing.
- pazimzadeh 14y ago
  That's right. http://www.apple.com/pr/library/2013/01/23Apple-Reports-Record-Results.html http://www.apple.com/pr/library/2013/01/23Apple-Reports-Reco...
- aetherson 14y ago
  Probably doesn't matter a ton. What seems to be driving the modest sell of Apple right now are: 1. Revenue slightly below estimates. Analysts knew that this quarter was a week short and built that into the estimates. 2. Profit MARGIN way down from year-ago-quarter. It doesn't matter that this quarter is short, it's the ratio of profit to revenue, not the gross amount of profits. Also, profits short of expectations, and, again, the short quarter was built into expectations.
millstone 14y ago
Google's profits were nearly flat since this time last year, yet they're up 25%.
- gdilla 14y ago
  Right. Isn't stock also an indication of future performance expectation (at least in some part)?
  - aetherson 14y ago
    It's ENTIRELY an indication of future performance expectation.
- arcticfox 14y ago
  Over the past year, Apple has shown (slight) vulnerability, whereas Google has looked like an even more formidable competitor moving forward
  - _Simon 14y ago
    What is this assumption based on?
- robryan 14y ago
  It is probably as simple as Google beat expectations while Apple missed expectations, these expectations being priced into the share price before the announcement. The share prices are now just correcting based on the actual results.
HSO 14y ago
Right, except they now have 137bn in cash and equivalents, the quarter was a week shorter (~ 7 percent more of everything at a constant rate), they explicitly warned that ramp-up would affect margins and availability in their last call (and the margins actually are better, so go figure about the margins next quarter and on), etc etc... So, yeah, I guess I'm kind of confused now by the market reaction. Perhaps you can explain to me again the rationale? But perhaps I shouldn't be confused, really. I should finally learn from history to not overestimate humanity.
- Steko 14y ago
  "the rationale" Joe Bull thinks maybe Apple will have a super blowout beat $60 bln quarter the way last xmas quarter beat estimates by a mile. If so the stock will go north of $600 fast, maybe push $700. Didn't happen so he sells.
- j-g-faustus 14y ago
  Consider a simple model where the "fair value" of a company is the sum of their next 10 years of profit: If a company made $1m last year and is expected to stay flat for the next decade, it's worth $10 million. If a company made $1m last year and profits are expected to grow 10% annually, it's worth $16 million. If a company made $1m last year and profits are expected to grow 100% annually, it's worth $1 billion. The implicit model for stock pricing is more complicated, but you can see correlations even in a simple model like this. Nobody knows what will happen several years into the future, so it's mostly bets and speculations. Especially in high-growth companies, where many of the bettors appear to believe that trees grow to heaven, and the company's yearly profits will soon exceed the world GDP. So the stock of high-growth companies sell at an enormous markup compared to current profits. By the same token, that markup can evaporate very quickly if a formerly-high-growth company shows any sign of slowdown. In terms of the simple model above: If traders used to think that the $1m-profit company would grow 60% annually for the next decade, and something happens that makes them believe that it won't be more than 40%, the value of the company would immediately drop by more than 60%.
  - millstone 14y ago
digikata 14y ago
I think Benjamin Graham's Mr. Market allegory is applicable here: http://www.investinternals.com/2009/08/grahams-mr-market-allegory.html http://www.investinternals.com/2009/08/grahams-mr-market-all...
seiji 14y ago
Idea: using the assumption of stock prices being based on future growth (and not outright mass un-correlateable manipulation), Apple is the most profitable company ever -- and nobody can see beyond that. Average people can't imagine anything bigger. They think it must fall. They don't understand technology or nonlinearites.

Osmium 14y ago

I have no knowledge of the financial world, so maybe someone can help me with this and what it means... Apple is now a $50b/quarter company, with a $480b (edit: now $430b) market cap and $140b in cash. Surely this means that, within a few years, Apple will have enough cash to buy itself? This seems like a dangerous situation for a company to be in. For whatever reasons, there seems to be little confidence in Apple lately, but it can't be denied that they're still making substantial growth quarter over quarter. Is this current situation not unsustainable? Edit: thanks everyone for the explanations, it's very much appreciated

recoiledsnake 14y ago
>Apple is now a $50b/quarter company That's revenue and can't buy anything with revenue since you have to pay for the salaries, hardware, stores etc. You should look at profit which is $13B/quarter right now.
- Osmium 14y ago
  Thanks for the correction -- but doesn't this still mean that, if Apple completely plateaus and they have no more growth whatsoever, Apple would still reach its current market cap ($430b) in cash within about 6 years? And this is presumably an overestimate because its current stock price probably has further growth priced into it, so either Apple will reach that target sooner as a result of an increase in profits or, if profits remain the same, their market cap will fall further? I'm just not sure I understand the implications of a company acquiring so much cash that it matches its own market cap. I ask because, this fact alone, seems to suggest to me that they're very much undervalued right now. But I'm not sure if I'm missing something.
  - kryptiskt 14y ago
    Why do you think the stock will stay level? Investors take cash on hand into account. Also, Apple is distributing some cash as dividends. Stocks seldom trade under the book value of the company, but it sometimes happens. The business may be bad and the stock is just anticipating, or the book value may be hard to realize in cash (hard to cash in on goodwill)[1]. None of that applies in Apple's case. [1] And very occasionally there is something that is just that much undervalued.

deleted 14y ago

[deleted]

angersock 14y ago

We've seen this before, we'll see this again. Apple may do better in tablets than Samsung, or Microsoft, or LG, or Toshiba, or whoever. Apple may do better in phones than Nokia. Apple may do better in laptops than Dell or Asus. Sadly, that isn't enough--with sufficiently tight margins, they need to do better than !Apple (better than all competitors, not any competitor), and in the long run, that's not going to happen. They're going to get pushed out by more competitors in hardware, and honestly I don't think their software play is good enough to save them.

cageface 14y ago
I agree. Unless their software engineering improves pronto they are in trouble. Hardware in this market is headed for commodification. It's still their game to lose but they really need to nail a lot of things in iOS 7 and so far I don't see any sign of the kind of leadership that would require.
- alwaysinshade 14y ago
  > so far I don't see any sign of the kind of leadership that would require. As of 29 October 2012 - Eddy Cue in charge of maps/cloud services, Craig Federighi in charge of iOS/OSX, Jony Ive in charge of human interface and hardware design. It'll be interesting to see how iOS 7 pans out, because these guys are very good at what they do.
  - cageface 14y ago
    Ive is a brilliant hardware designer but software UX is a whole different ballgame and his ability there is currently a big question mark. Cue and Federighi were both on board when a number of architecturally questionable APIs were added (Storyboards, AutoLayout), so they're a bit of an unknown too. That's why there's so much riding on iOS 7. Contrast this to Google which has a strong, stable team in place that's been doing superb work for the last few Android releases and you can see why people are a little gun shy about APPL right now.
- seiji 14y ago

mmanfrin 14y ago

It also recorded its largest quarterly revenue.