I’m beginning to feel that Apple’s guidance is going to be really bad this quarter. It’s hard to see how Apple is going to guide anywhere near the Street’s EPS. The big problem as I see it is Apple’s belief that its going to have 30% in gross margins in 2009. If Apple holds to this belief, I think its possible that we could have catastrophic earnings guidance. Here’s how it could look if Apple’s management continues to be deluded into thinking that its going to actually have 30% gross margins in 2009:
Notice how bad this guidance would be for Apple’s share price. This assumes that Apple will guide in line with revenue consensus estimates. Here’s another scenario where Apple gives realistic gross margin guidance of 32%.
Even this estimate would be very bad. Wall Street is going to lose its mind with these estimates. They’re going to blame it on the slowing economy and say that Apple’s buisness is breaking down. When in reality, its Apple’s management’s delusions that would cause the collapse. Here’s what would have to happen in order to see passable guidance. Apple would have to guide well above the street’s revenue consensus and have to give bullish gross margin estimates. Here’s a scenario:
I think this guidance might be good enough to satisfy Wall Street. But I just don’t see Apple’s management providing such aggressive estimates. I really think we could see a real catastrophy on guidance. The sad part is that Apple will probably blow out all expectations for Q1. Here’s my preliminary estimates for Q1:
Andy Zaky’s Preliminary Q1 2009 Estimates (in Millions)
Revenue: $11,852
COGS: $7,763
Gross Margin: $4,089 (34.5%)
OpEx: $1,533
Operating Income: $2,556
OI&E: $130
Net, before taxes: $2,686
Taxes: $860
Net Income: $1,826
EPS: $2.01
I’m considering dumping my position in Apple on Tuesday before the close and will probably pick them up again the following day. I think Apple is going to fall a good 10-15% on earnings as a result of these estimates and I think it will struggle to make any meaningful moves to the upside until it reports in January. Maybe at that point Wall Street might get a clue that Apple’s management is really full of shit. Sigh.
One should never underestimate Oppenheimer’s ability to make GOOD NEWS into instant bad news with his incessant pessimism { as provided } thinking the street will punish them if they miss. Instead, the street punishes them RIGHT NOW, meaning the “good news” just announced is worth squat, immediate dumped on because Oppie thinks he is being clever.
Fire the man, today.
Steve Jobs, canned a guy for messing up a little with Mobil-Me implementation, Oppie has done 1,000X the damage in the past two years I have been a fairly large investor.
Time after time, FAB NEWS ... STUPENDOUS results are stillborn whenever he has his mouth open, and a microphone in front of his face.
Frankly, if they gave NO GUIDANCE, it would actually be better for the stock price than letting that clown muck things up over and over with his POOR ME routine.
[quote author=“TanToday”]One should never underestimate Oppenheimer’s ability to make GOOD NEWS into instant bad news with his incessant pessimism { as provided } thinking the street will punish them if they miss. Instead, the street punishes them RIGHT NOW, meaning the “good news” just announced is worth squat, immediate dumped on because Oppie thinks he is being clever.
Fire the man, today.
Steve Jobs, canned a guy for messing up a little with Mobil-Me implementation, Oppie has done 1,000X the damage in the past two years I have been a fairly large investor.
Time after time, FAB NEWS ... STUPENDOUS results are stillborn whenever he has his mouth open, and a microphone in front of his face.
Frankly, if they gave NO GUIDANCE, it would actually be better for the stock price than letting that clown muck things up over and over with his POOR ME routine.
I’m probably the only person who agrees with you. I think he’s a complete dipshit. All Apple has to do is give adjusted earnings estimates or drop subscription accounting for the iPhone and things would dramatically change with the stock price.
What I am wondering about is the report of their cash holdings. I’m wondering what percentage (if any) of it is vulnerable to the present crisis. I’ve read the accounting rules for what can be considered “cash”, and it does seem to include some equity positions. It would not be good if they announce that their cash balance has taken a hit.
[quote author=“andyzaky”][quote author=“TanToday”]One should never underestimate Oppenheimer’s ability to make GOOD NEWS into instant bad news with his incessant pessimism { as provided } thinking the street will punish them if they miss. Instead, the street punishes them RIGHT NOW, meaning the “good news” just announced is worth squat, immediate dumped on because Oppie thinks he is being clever.
Fire the man, today.
Steve Jobs, canned a guy for messing up a little with Mobil-Me implementation, Oppie has done 1,000X the damage in the past two years I have been a fairly large investor.
Time after time, FAB NEWS ... STUPENDOUS results are stillborn whenever he has his mouth open, and a microphone in front of his face.
Frankly, if they gave NO GUIDANCE, it would actually be better for the stock price than letting that clown muck things up over and over with his POOR ME routine.
I’m probably the only person who agrees with you. I think he’s a complete dipshit. All Apple has to do is give adjusted earnings estimates or drop subscription accounting for the iPhone and things would dramatically change with the stock price.
Do you guys really believe he gives guidance without the blessing of the board? I find that difficult to imagine.
[quote author=“iBill”][quote author=“andyzaky”][quote author=“TanToday”]One should never underestimate Oppenheimer’s ability to make GOOD NEWS into instant bad news with his incessant pessimism { as provided } thinking the street will punish them if they miss. Instead, the street punishes them RIGHT NOW, meaning the “good news” just announced is worth squat, immediate dumped on because Oppie thinks he is being clever.
Fire the man, today.
Steve Jobs, canned a guy for messing up a little with Mobil-Me implementation, Oppie has done 1,000X the damage in the past two years I have been a fairly large investor.
Time after time, FAB NEWS ... STUPENDOUS results are stillborn whenever he has his mouth open, and a microphone in front of his face.
Frankly, if they gave NO GUIDANCE, it would actually be better for the stock price than letting that clown muck things up over and over with his POOR ME routine.
I’m probably the only person who agrees with you. I think he’s a complete dipshit. All Apple has to do is give adjusted earnings estimates or drop subscription accounting for the iPhone and things would dramatically change with the stock price.
Do you guys really believe he gives guidance without the blessing of the board? I find that difficult to imagine.
He’s the CFO. He’s given a lot of latitude to guide as he sees it.
Apple management does not care about the stock price on a day to day basis. The management team has said this publicly. This is a lesson they learned from Google and Warren.
Apple will give guidance it knows it can meet. I believe this is the right decision, as its the lesser of two weevils.
If you are a long term investor this is fine, buy the stock and wait as guidance doesn’t mean sh*t.
If you are a swing trader, Eric has given you plenty of information to know what to do.
[quote author=“donahchoo”]Apple management does not care about the stock price on a day to day basis. The management team has said this publicly. This is a lesson they learned from Google and Warren.
Apple will give guidance it knows it can meet. I believe this is the right decision, as its the lesser of two weevils.
If you are a long term investor this is fine, buy the stock and wait as guidance doesn’t mean sh*t.
If you are a swing trader, Eric has given you plenty of information to know what to do.
That’s only partially true. If I was managing the company, Apple would be a lot higher than it is today. Management’s guidance affects the company’s long term share price. So does management’s earnings strategy in general. There’s no chance in hell that Apple would be sitting at $102.00 a share right now if Apple reported adjusted earnings or if it fully accounting for iPhone revenue. Wall street is too preoccupied with P/E ratios and growth. Wall street simply does not give a shit about deferred revenue.
Moreover, the difference between Apple offering shitty and good guidance this quarter is huge. If Apple offers terrible guidance, the stock price will indeed plummet into the $70-$80 range and remain there for a significant amount of time. Apple will not rally when Wall Street believes that the recession is destroying Apple’s business. It will be like GOOG when GOOG sat in the low $400s this summer. Yet, if Apple offers strong guidance, the exact opposite will occur. On Tuesday, Apple will likely rally into the $120s if it provides a strong report with good guidance. IT will also give Wall Street a reason to rally the stock into the New Year under the impression that Apple isn’t as affected by the slowing economy as first thought. Google will be making some solid moves to the upside on any market rally now that Wall Street believes that Google’s core business has remained in tact.
Think of it this way. Do you think Apple would be sitting at $102 a share right now if it reported $6.30 this year. Even with a 20 P/E that’s over $120 a share. That’s just an example of how management’s actions can affect the share price in the long term. Instead of collapsing from $180 as it did in late august, Apple probably would have collapsed from $220 a share. And why? Because management decided that it didn’t want to make iPhone users pay a measly $10.00 to get the software update 2.0 that iPod Touch user paid for. Give me a fracken break!
If Mr. Market undervalues an investment, buy it. If management disappoints sell it.
The wise proverb ends, ” ............. and the wisdom to know the difference”
That what investors do. All this whining about guidance is juvenile. Keep writing letters to investor relations, maybe they will give you a cookie like mom used to.
[quote author=“donahchoo”]Apple management does not care about the stock price on a day to day basis. The management team has said this publicly. This is a lesson they learned from Google and Warren.
Apple will give guidance it knows it can meet. I believe this is the right decision, as its the lesser of two weevils.
If you are a long term investor this is fine, buy the stock and wait as guidance doesn’t mean sh*t.
I tend to agree with donahchoo.
[quote author=“andyzaky”]Wall street is too preoccupied with P/E ratios and growth.
Wall street simply does not give a $#!% about deferred revenue.
This is Wall Street’s problem, but my (and AFB’s) advantage. If AAPL was perfectly priced, where would we find value in the company? If Wall Street traders, who are quite often saddled with drugs, can’t find value in AAPL, I will find it for them and sell it to them as gold.
[quote author=“andyzaky”]Moreover, the difference between Apple offering shitty and good guidance this quarter is huge. If Apple offers terrible guidance, the stock price will indeed plummet into the $70-$80 range and remain there for a significant amount of time. Apple will not rally when Wall Street believes that the recession is destroying Apple’s business. It will be like GOOG when GOOG sat in the low $400s this summer. Yet, if Apple offers strong guidance, the exact opposite will occur. On Tuesday, Apple will likely rally into the $120s if it provides a strong report with good guidance. IT will also give Wall Street a reason to rally the stock into the New Year under the impression that Apple isn’t as affected by the slowing economy as first thought.
Andy, it seems as if you believe that Apple has a perfect forecasting models and can see the future with perfect clarity. I think that Apple has several good forecasting models with a range of results. With the economy in recession, the range of forecast EPS from the different models and assumptions has increased. Therefore what Apple considers with confidence that it can deliver has increased.
I would like Apple to continue giving conservative guidance, but I have become open to Apple giving forecast only for revenue, which has far less deviation from the norm.
Do you guys really believe he gives guidance without the blessing of the board? I find that difficult to imagine.
I believe he influences the board to agree on just this.
Look, it isn’t like I’m speculating, is it?
Anyone here, ALL OF YOU, know that the very moment the anemic guidance is given, within SECONDS you can watch the afterhours charts go into WWII dive bomber mode. There isn’t some “speculation” on my part, it is DIRECT, immediate, and you can tell when Oppie utters that comment without listening to the confernce call, just watching the live non delayed charts.
And then they come and PROUDLY announce a few months later they ‘beat guidance’! Whoopie….
Only to within ten minutes later KILL THE UP that beating guidance should produce.
I have nine quarters under my belt now watching this play out, and every time, I KNOW KNOW KNOW that they beat the numbers, and KNOWING KNOWING that Peter will say the majic words that NEGATES any and all good numbers.
Frankly, whereas one would look forwards with anticipation when a firm you invest seriously in is coming out with spectacular results, but ALL OF YOU every last one of the posters here, people I’ve come to like and trust, will SHORT, HEDGE, or SELL prior to any event that Peter Oppenheimer is going to talk, just because you KNOW what happens no matter what the actual profits, the actual sales, the actual massive profits.
Oppie Talks = Apple Tanks?
Agree with above about the usual negative guidance from Oppenheimer. It was bad in good times I cannot imagine how bad it will be in this economic climate. However it will be tempered by shocking sales of iPhones which is what the market wants to know most. Still a drop back to $90 would not be surprising.
Andy not to nitpick on the analysis, but why so high of OPEX for the Dec qtr?
The last four qtrs 1208, 1159, 1206, 1030. With the Iphone the Opex expense were taken out upfront which would result in a greater increase in OPEX as a percentage of revenue since we are not recognizing all the Iphone revenue. I would expect the RD cost 300 and SG&A of 950 Total 1250 vs 1533.
[quote author=“TanToday”]One should never underestimate Oppenheimer’s ability to make GOOD NEWS into instant bad news with his incessant pessimism { as provided } thinking the street will punish them if they miss. Instead, the street punishes them RIGHT NOW, meaning the “good news” just announced is worth squat, immediate dumped on because Oppie thinks he is being clever.
Fire the man, today.
Steve Jobs, canned a guy for messing up a little with Mobil-Me implementation, Oppie has done 1,000X the damage in the past two years I have been a fairly large investor.
Time after time, FAB NEWS ... STUPENDOUS results are stillborn whenever he has his mouth open, and a microphone in front of his face.
Frankly, if they gave NO GUIDANCE, it would actually be better for the stock price than letting that clown muck things up over and over with his POOR ME routine.
What, you don’t want to hear Oppenheimer guide saying he hopes that Apple will be able to sell one mac computer, an iPhone or two and a couple more iPods?
Usually, when a business is doing well, it tends to spend profusely. However, because of Oppenheimer, costs didn’t rise as fast as revenue. Apple is blessed to have him.
