Spaceship Apple Comes Down To Earth

  • Posted: 19 October 2011 09:52 AM #31

    DawnTreader - 19 October 2011 04:38 AM
    iphoned - 19 October 2011 04:32 AM

    You are over-reacting, I think, to your own over-optimistic earlier call. 

    The spaceship Apple is intact and well.

    IMHO, all indications are they will do at least 60% revenue growth this year, and likely higher.

    I’m not overreacting at all. I was looking to the September quarter to provide support for revenue growth estimates exceeding 50%. I didn’t find justification in the results. Apple will continue to do well. But the days of frenetic rates of revenue and earnings growth may have come to an end.

    For a $100+ billion enterprise to grow revenue at a 50% rate is remarkable in and of itself.

    Yes I agree we are hitting the issue of big numbers and % growth.  However the greatest issue facing the estimates on the board that I see is estimating growth rates in non-us markets which in their own report is not 60% of revenue.  As with a few companies (e.g. CAT) growth in emerging markets is going to be a major consideration in the future.  I specifically did not use the work impact as impact on revenue is going to be the moving target.  The consideration is based on below:
    1. Going by AAPLs own figures they only have 5% or the worldwide market share on phones.
    2. The same AAPL product offering is not consistent in all countries.
    3. Buying habits of non-American consumers (e.g. Most Asians tend to be very brand conscious and are willing to depart with a greater % of their monthly salary than us in the U.S.)
    These three factors IMHO are going to be a huge challenge for people estimating earnings as the issues are multi-dimensional.

    We are sometimes so jaded in our view here in the U.S. and sometimes draw too many parallels with what is going on here and the rest of the world.  We seem to be almost at saturation here and yes product cycles REALLY matter here.  However had I been in Romania in the past 60 days (oh that’s right I was), heck they just got iTunes turned on and their first taste of the iPad. 
    Just my .02 and thanks for your report.  Why I may not always agree with everyones synopsis I cannot thank you enough for giving me food for thought in my decisions. 

    For my own disclosure I am heavy into Jan 2013 400 options (call).  I have bought and sold them a could of times in the past 6 mos.  I never buy options expiring in less than 3 mos and often try to get them 6 or more.  I don’t short individual stocks but do buy options in ultra short ETFs now and then.  I am a value investor with my own set of metrics and usually have about 11-14 stocks or call options in my portfolio.  I usually don;t consider tax implications when making a sell decision.  All the above rules I follow are due to lessons learned (sometimes hard) and my own tolerance for risk.

         
  • Posted: 19 October 2011 11:29 AM #32

    macorange - 19 October 2011 08:07 AM

    With all due respect to your tremendous leadership of the board for years, I’d recommend you take a few days off.

    Worse than my errors on the quarter is your unsolicited advice. Who are you, anyway?

         
  • Posted: 19 October 2011 12:53 PM #33

    DawnTreader - 19 October 2011 02:29 PM

    Who are you, anyway?

    A proud member of AFB since 2007.

    You seem to have become increasingly hostile over the past year to pseudonymous participation in this forum.  But forums such as this are typically open to those desiring anonymity, which reflects a long American tradition of pseudonymous expression going back to our Founding Fathers.

    In my case, our company has relationships with Apple that, while limited in nature, would nonetheless have a chilling effect on my ability to express myself here.  I’m sure others on this forum have equally valid reasons for remaining anonymous.

    AFB will be a poorer place if pseudonymous posters begin to feel like second class citizens here.

         
  • Posted: 19 October 2011 01:02 PM #34

    Everything is relative.

    Goldman Sachs was expecting 16.9 million iPhones on $7.30 EPS. To them, Apple’s earnings changed nothing in regards to their iPhone growth assumptions.

    I expected 11.7 million iPads (originally expected 11.1 million). This past quarter doesn’t really change my attitude about iPad growth that much.


    Expecting a $10.00 EPS for 4Q11 would imply pretty high growth rates,  which consequently need to be reduced somewhat. For all we know, next quarter could see much better growth rates.


    Everything is relative.

         
  • Posted: 19 October 2011 01:49 PM #35

    macorange - 19 October 2011 03:53 PM
    DawnTreader - 19 October 2011 02:29 PM

    Who are you, anyway?

    A proud member of AFB since 2007.

    You seem to have become increasingly hostile over the past year to pseudonymous participation in this forum.  But forums such as this are typically open to those desiring anonymity, which reflects a long American tradition of pseudonymous expression going back to our Founding Fathers.

    In my case, our company has relationships with Apple that, while limited in nature, would nonetheless have a chilling effect on my ability to express myself here.  I’m sure others on this forum have equally valid reasons for remaining anonymous.

    AFB will be a poorer place if pseudonymous posters begin to feel like second class citizens here.

    Whatever.  rolleyes

         
  • Posted: 19 October 2011 01:56 PM #36

    Sammy the Walrus IV - 19 October 2011 04:02 PM

    Everything is relative.

    Goldman Sachs was expecting 16.9 million iPhones on $7.30 EPS. To them, Apple’s earnings changed nothing in regards to their iPhone growth assumptions.

    I expected 11.7 million iPads (originally expected 11.1 million). This past quarter doesn’t really change my attitude about iPad growth that much.


    Expecting a $10.00 EPS for 4Q11 would imply pretty high growth rates,  which consequently need to be reduced somewhat. For all we know, next quarter could see much better growth rates.


    Everything is relative.

    I’m forecasting 50% revenue growth in FY 2012 which is an impressive outcome considering the bulk of that growth will come from two products that produced 65% of the company’s revenue in the September quarter.

    Even if the Mac continued at the September quarter’s extraordinarily high rate of growth, it would actually contribute at a rate below the aggregate expected average.

    For a $110 billion enterprise, 50% revenue growth is more than enough to propel the share price significantly higher. The questions I wanted to have answered from the September quarter have now been pushed to the December quarter. The performance of the retail stores and Apple’s decision not to fill the global channel with iPad supply ahead of the holiday quarter are my two biggest concerns. The iPhone, at least through the March quarter, will take care of itself.

    23% of Apple’s revenue in the quarter was sourced from Asia-Pacific (exclusive of Japan and the retail stores). That’s good news but can create a concern if there’s a hiccup in China sales anytime over the next few quarters.

         
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    Posted: 19 October 2011 02:58 PM #37

    Orange may have been a little ham handed in his points but I think they are valid as to your mea culpa.  It seems that we all gave in to a little group think and forget how key iPhone numbers are to the main metrics on Apple.

    But your tone in your mea culpa seems to suggest that growth rates we have seen over the last 2 or three years are now forever off the table.  I just don’t see that yet.  The markets apple is playing in now are just too huge and the new additions to the middle class with money to buy these products are growing at rates (in India, and Asia) that I think very few people truly are taking into account when figuring market share and growth rates.

    No this was a slip we all made but this is not the start of a new lower normal for Apple at least not yet.  I think a week or so of perspective and you will come to the same conclusion.

    eric in Austin

         
  • Posted: 19 October 2011 03:01 PM #38

    DawnTreader - 19 October 2011 04:38 AM

    I’m not overreacting at all.

    DT, with the greatest respect…yes you are.  You are beating yourself up, when the rest of the analyst community (institutional investors included) were calling for much higher revenue/earnings, etc.

    I feel your pain though.  It’s very hard to put so much emotional energy into a forecast, then be so wrong.  Your analysis was not overboard.  It was clear and defensible.

    That Apple boo boo’d with the launch of the 4S, and world economic conditions kept consumer dollars in their pockets isn’t anybody’s fault.

    Should we have seen it?  Since 2007 I have cleared $3.5 million.  In that period I lost $4.5 million to the bank meltdown, and $1.2 million this year.  In order to have lost that much I grossed $9.2 million.  Now why on earth could someone with the ability to gross so much, not see the calamity looming ahead of them?  All I can say is, I’m not alone.  Nobody is perfect.

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  • Posted: 19 October 2011 03:05 PM #39

    mcharliem - 19 October 2011 11:51 AM
    iphoned - 19 October 2011 05:41 AM

    Quick, back-of-the-envelope check…

    Looks like if the Q4 sequential revenue growth(-1%)  was same as sequential units growth (24%), they would have met the high-end of the blogger estimates…so that alone seem to account for the “miss”.

    I guess I don’t understand how lower iPhone4 sales that Apple claimed was the culprit would produce this disparity (units growth vs revenue)...I would have thought the two numbers moved in tandem?

    Can anyone explain?

    I may be totally off base here, but isn’t a big chunk of this revenue/units short fall due to the iCloud deferred revenue?  Look at the cash flow from operations for the quarter…  10.4B. Isn’t that a phenomenal number for a quarter with so much pent up iPhone demand?  What am I missing?

    I posted last night that ASPs were down across the board.  Unit sales were down in North America and Japan.  Only one thing can cause that combination: weak economies.

    Buyer’s spent less, and what they did spend was on lower priced products/models.

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  • Posted: 19 October 2011 04:02 PM #40

    Gregg Thurman - 19 October 2011 06:05 PM
    mcharliem - 19 October 2011 11:51 AM
    iphoned - 19 October 2011 05:41 AM

    Quick, back-of-the-envelope check…

    Looks like if the Q4 sequential revenue growth(-1%)  was same as sequential units growth (24%), they would have met the high-end of the blogger estimates…so that alone seem to account for the “miss”.

    I guess I don’t understand how lower iPhone4 sales that Apple claimed was the culprit would produce this disparity (units growth vs revenue)...I would have thought the two numbers moved in tandem?

    Can anyone explain?

    I may be totally off base here, but isn’t a big chunk of this revenue/units short fall due to the iCloud deferred revenue?  Look at the cash flow from operations for the quarter…  10.4B. Isn’t that a phenomenal number for a quarter with so much pent up iPhone demand?  What am I missing?

    I posted last night that ASPs were down across the board.  Unit sales were down in North America and Japan.  Only one thing can cause that combination: weak economies.

    Buyer’s spent less, and what they did spend was on lower priced products/models.

    Cash flow from operations in FQ3 was 11.1B, and this past qtr it was 10.4B. This number obviously takes ASP into account and given the big slowdown in iPhone sales, I just don’t find 10.4B to be a didsapointing number at all. Odds are we’re going to be over 15B next qtr too.

         
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    Posted: 19 October 2011 04:49 PM #41

    Do appreciate the balanced review of earnings and the intellectual honesty.

         
  • Posted: 19 October 2011 05:42 PM #42

    eric in Austin - 19 October 2011 05:58 PM

    Orange may have been a little ham handed in his points but I think they are valid as to your mea culpa.  It seems that we all gave in to a little group think and forget how key iPhone numbers are to the main metrics on Apple.

    But your tone in your mea culpa seems to suggest that growth rates we have seen over the last 2 or three years are now forever off the table.  I just don’t see that yet.  The markets apple is playing in now are just too huge and the new additions to the middle class with money to buy these products are growing at rates (in India, and Asia) that I think very few people truly are taking into account when figuring market share and growth rates.

    No this was a slip we all made but this is not the start of a new lower normal for Apple at least not yet.  I think a week or so of perspective and you will come to the same conclusion.

    eric in Austin

    eric:

    In my view sustained 50% revenue growth (on average) over the next 4 to 6 quarters is remarkable for a $100+ billion company. Over 8 quarters it would move Apple’s annual revenue to around one-quarter of a trillion dollars in two years. I’ll take that any day.

    The September quarter numbers reveal challenges for management and those challenges will be addressed. I had been modeling 50% revenue growth for FY 2012 prior to the results and I was expecting some indications I could move the revenue growth estimate higher.


    Back to the other issue: I do not mind people using pseudonyms or even cartoon characters to represent themselves. My numbers are fair game. But personal attacks or unsolicited personal “advice” are out of bounds especially from people I don’t know and who won’t reveal their names. When the attacks turn personal, a person should put a name to their comments.

         
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    Posted: 19 October 2011 05:44 PM #43

    When the attacks turn personal, a person should no longer be welcome here.

    This is a persistent problem in the AFB.

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  • Posted: 19 October 2011 05:46 PM #44

    Gregg Thurman - 19 October 2011 06:01 PM
    DawnTreader - 19 October 2011 04:38 AM

    I’m not overreacting at all.

    DT, with the greatest respect…yes you are.  You are beating yourself up, when the rest of the analyst community (institutional investors included) were calling for much higher revenue/earnings, etc.

    I feel your pain though.  It’s very hard to put so much emotional energy into a forecast, then be so wrong.  Your analysis was not overboard.  It was clear and defensible.

    That Apple boo boo’d with the launch of the 4S, and world economic conditions kept consumer dollars in their pockets isn’t anybody’s fault.

    Should we have seen it?  Since 2007 I have cleared $3.5 million.  In that period I lost $4.5 million to the bank meltdown, and $1.2 million this year.  In order to have lost that much I grossed $9.2 million.  Now why on earth could someone with the ability to gross so much, not see the calamity looming ahead of them?  All I can say is, I’m not alone.  Nobody is perfect.

    Greg:

    Simply put: Apple pushed much of the revenue recognition I expected in the September quarter to the December quarter. Considering all circumstances, the outcome wasn’t so bad. There are challenges revealed in the numbers.

    The soccer player analogy was used as a graphic example. I expected much of the revenue that’s deferred to the December quarter to be picked-up in the September quarter. I went one way, Apple moved another. That’s all.

    As I said above, I’m modeling 50% revenue growth in FY 2012. The only thing that’s changed is I don’t have empirical support to move the revenue growth rate higher and I will leave that rate “as is” in my forecasts.

         
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    Posted: 19 October 2011 05:49 PM #45

    Is a $160B quarter doable for Apple in FY ‘12?  Yes, if iPhone can approach the 40-50M/qtr. run rate while iPad approaches 15-20M/qtr. units.

    I’d wait for holiday quarter numbers and the possibility of the China iPhone market really opening up before I make that projection, though.

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.