CNBC “Fast Money” Idiocy

  • Posted: 27 October 2010 11:21 PM

    Can’t believe the idiocy at CNBC coming out of Apple’s SEC filing regarding how GREATLY increased sales of iPads will drop the next quarter’s GM to 36%. Not a word about how great sales of any product with positive operating margin (which iPad has in spades) can only help the bottom line. The CNBC folks don’t have the brains to understand that PROFIT PER SHARE is the name of the game, not gross margin.

    And this idiocy got spread like wildfire in the various analyst blogs tonight. UGGH!

    http://www.thestreet.com/_yahoo/story/10901976/1/fast-money-recap-apples-speed-bump.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

         
  • Posted: 28 October 2010 02:11 AM #1

    If this affects the stock price negatively, it is just an opportunity for those who understand reality to pick up some shares at a discount.

    IMO, Fast Money has become a wasteland.  In the beginning with Dylan Ratigan, Eric Bowling, Tim Strazini, Jeff Macke, and Guy Adami, the show was halfway decent.  Every change since has reduced the quality of the content.  I almost never watch it any longer.

    While I am at it, daytime Erin is one reason that CNBC in general is a wasteland.

         
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    Posted: 28 October 2010 02:12 AM #2

    There’s a recurring theme in these blogs…................  the talking heads (shills for their hedge-hog buds) are all saying they would be buyers in the 290-300 range. I highly suspect that’s where aapl is headed. Get ready for more FUD and a lower price.

      cheers
          JohnG

         
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    Posted: 28 October 2010 04:30 AM #3

    I think you should read and watch more carefully. I was watching it live, and they said it was no big deal, this lower margin thing was already mentioned during earnings call, Apple’s margins have gone up and down before, and that they’d love a pullback so they could get in AAPL cheaper. Only the dopey Asian host took the contrarian view.

    Blame the dumb wire services which first ran the (admittedly stupid) story. CNBC just happens to be but one of two financial shows airing at the time.

    Hannibal - 28 October 2010 02:21 AM

    Can’t believe the idiocy at CNBC coming out of Apple’s SEC filing regarding how GREATLY increased sales of iPads will drop the next quarter’s GM to 36%. Not a word about how great sales of any product with positive operating margin (which iPad has in spades) can only help the bottom line. The CNBC folks don’t have the brains to understand that PROFIT PER SHARE is the name of the game, not gross margin.

    And this idiocy got spread like wildfire in the various analyst blogs tonight. UGGH!

    http://www.thestreet.com/_yahoo/story/10901976/1/fast-money-recap-apples-speed-bump.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

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  • Posted: 28 October 2010 10:02 AM #4

    JDSoCal:
    Actually, I did read the story carefully. It is true that the greatest damage was done by follow-up blogs, but those blogs took their lead from the tone of the Fast Money program. Which was:
    - Oh well, this has happened to Apple before and the GM will eventually come back towards the 40s.
    - Don’t worry, Apple will sell enough iPhones (with high margin) to offset the low margin of the iPad.
    - Don’t worry, AAPL still looks good long-term and this is a good buying opportunity.
    - Don’t worry, Apple will eventually get its iPad margin act together.

    The Fast Money comments all gave a negative cast to the immediate gross margin issue instead of concentrating on the no-brainer essentials.  Not a word about how this is actually a sign of great upcoming iPad success and that INCREASED profits are the end objective for any company, not gross margin, and that this is GOOD NEWS for Apple!

    Thus my frustration with such TV boneheads who get paid for idiocy.

         
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    Posted: 28 October 2010 07:23 PM #5

    Guys, you’re missing the point. The point is that people have been looking for an excuse to sell on. When Apple can introduce a product but only maintain high demand through collapsing margins then some of the magic is gone. Collapsing margins suggest maturing product lines and a slowing of growth. Whether or not slowing of growth comes to fruition doesn’t matter because equities tend to trade on the here and now and for now, margins are compressing.

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    Posted: 28 October 2010 07:26 PM #6

    JDSoCal - 28 October 2010 07:30 AM

    CNBC just happens to be but one of two financial shows airing at the time.

    Poor FBN: nobody loves you.


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    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

    For those who look, a flash allows one to see farther.

         
  • Posted: 28 October 2010 07:38 PM #7

    Eric (“Guys, you?re missing the point…....”):

    Strongly disagree. Apple is not maintaining high demand with the iPad via margin sacrifice, it is creating a whole new product category and going for the whole banana in this new space. EPS is the substance on which investors base stock prices, not GM.  36 % of greatly increased revenue is worth more than 40% of baseline revenue. 

    These analysts absolutely missed the point of what is happening with the iPad and their read will be forgotten when the next quarter’s earnings come in. This is FUD and therefore misleading, it is not insight.

    [ Edited: 28 October 2010 07:54 PM by Hannibal ]      
  • Posted: 28 October 2010 09:57 PM #8

    I just posted this on another part of this site:

    An inventory build in the quarter in advance of the iPad blitz in this quarter could account for the magian decrease.? Actualy, there was a $600,000,000 increase in inventory year over year.? The manufacturing cost would be carried in the cost of goods sold.? The offsetting revenue would show up in the current quarter, giving the margin a big boost.? At cost (ca&300;/unit for both the iPad and iPhone) this would mean a build of 2,000,000 units.? It could represent a margin change of 3 percentage points.

    Apple added close to 5000 distribution points for this blitz, which would require building a significant inventory position for this blitz.

    Apple is early on the learning curve for making iPads.? They are in the area where there manufacturing costs are dropping rapidly.

    There can be other reasons for margin loss other than cutting price.

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  • Posted: 29 October 2010 12:26 AM #9

    Eric Landstrom - 28 October 2010 10:23 PM

    [..] Collapsing margins suggest maturing product lines and a slowing of growth.[...]

    Eric, I have two problems with this clause.

    1) The word “collapsing” is unjustified hyperbole.

    2) Maturing product lines are not the only possible cause of contraction of a company’s overall gross margins.  For example, since all products do not have the same margins, product revenue mix can be a cause.  Moreover, in the case of Apple it is the new product that has the lower margins; Cook explicitly stated two quarters ago that iPad was being priced aggressively to seize market share.

    It is also worth pointing out that gross margins are not the be all and end all of evaluating a company’s performance.  If they were, we’d all be MSFT shareholders.  And you can see how that has worked out for the last decade or so.

         
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    Posted: 29 October 2010 12:44 AM #10

    A short-term issue, at best.

    People forget Apple’s margins used to be just over 30% and everyone was going gaga.  The “Apple is going for share” story is starting to take hold and the numbers will become far too compelling to ignore.  All that, and GM is unlikely to fall below 35%.

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    Posted: 29 October 2010 02:19 AM #11

    Hannibal - 28 October 2010 01:02 PM

    Thus my frustration with such TV boneheads who get paid for idiocy.

    Yeah, the more I thought about this today the more it pissed me off.

    BREAKING NEWS! APPLE RESTATES IN SEC PAPERWORK EXACTLY WHAT IS SAID LAST WEEK DURING EARNINGS EVENT. SELL MORTIMER, SELL!

    Journalistic atrocity.

    Mav - 29 October 2010 03:44 AM

    A short-term issue, at best.

    Tell that to those holding short-term calls. ;-(

    Eric Landstrom - 28 October 2010 10:26 PM
    JDSoCal - 28 October 2010 07:30 AM

    CNBC just happens to be but one of two financial shows airing at the time.

    Poor FBN: nobody loves you.

    I’d love to love FBN, but stupid Charter has it bundled as part some premium package I can’t figure out.

    [ Edited: 29 October 2010 02:21 AM by JDSoCal ]

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    Posted: 29 October 2010 02:40 AM #12

    JDSoCal - 29 October 2010 05:19 AM

    ...

    Mav - 29 October 2010 03:44 AM

    A short-term issue, at best.

    Tell that to those holding short-term calls. :-(

    These guys are not the main target.  The goal is to force a long overdue correction in the indices.  The shorts are hopping around and need to win for once.

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  • Posted: 29 October 2010 07:10 PM #13

    Turley Mueller reveals another cause for margin contraction and this one appears to be an actual cause in the case currently under discussion.

    Nice catch, Turley.