The Sky is NOT Falling - And Other Observations From Apple’s Quarterly Results

| Editorial

Apple's quarterly results announced on April 26 weren't as rosy as some would have liked. But there isn't a company on the planet who who wouldn't trade places with Apple in a heartbeat: US$10 billion in profits gained against global economic headwinds. Let's have some perspective.

Individuals get to provide opinions everywhere we look on the Internet. Even this author. But the eternal temptation is to second-guess Apple and use recent financial results to rationalize otherwise negative feelings about the company. In fact, no one person can outthink an entire corporation of geniuses. But it is possible for one author to provide some good insights. I'll try.

Apple's Guidance

There are few things that Apple's executive team overlooks. It's their business to know where the business is going and how the world's customer demand and economics will affect the next quarter's results.

For example, on January 26th, 2016, at the previous earnings report, Apple projected revenue of between $50 and $53 billion. The actual result was 50.6 billion. While this was on the low side of guidance, it was within guidance. No one cam accuse Apple's executive of having their heads in the sand, of being delusional and misguided about the forthcoming quarter. They did their homework, gave us a really good estimate, and they met the guidance.

But because Apple didn't do better than they projected, everyone is in a tizzy, and the stock tanked. When the ability of the investors to make fast money dries up, they get cranky.

It's All in the Pipeline

Another thing to remember is that Apple has a pretty good feel for what customers are buying—even if some individuals have gripes about Apple's product portfolio not meetig their personal needs. It causes us pain that we cannot see what Apple has in store. A temporary downturn combined with Apple's secrecy about its product pipeline casts some into a fretful state.

The fact is that Apple does several important piece of analysis. The company knows what products are fading and are no longer the money makers. A simple example is the iPod. They also know what products and services are hot and can be expected to lead them into the future. They also plan for new product introductions, at the right time, that will surprise and delight customers.

Soon, we'll see the results of the iPad Pro (9.7-inch). Later in the year, we'll likely see an Apple Watch 2.0, an iPhone 7, exciting new MacBook Pros (and maybe a new Mac Pro) and who knows what else Apple has up its sleeve. These products will sustain and nourish Apple. As new products always do.

Today, we don't have any visibility into Apple's planning and the corresponding pipeline. The temptation is to despair.

Separating Investment from Products

Smart investors generally know how to make money from Apple stock. When Apple exceeds expectations, the stock rises. The opportunity arises to take money from the previous cycle's optimists.

However smart investment is a totally different activity than the appreciation for and use of Apple's products. The iPhone 6s didn't immediately become insecure. The MacBook hasn't stopped flying off the shelves. Customers haven't stopped subscribing to Apple Music and other services. "Apple Music’s 13M Subscribers Take Away a Little of Q2’s Sting."

Nevertheless, a convenient conceit, all too prevalent, is to claim that because Apple's stock is down for a time that this is an indictment of Apple of as a corporation and all its products. This simply isn't the case. If a few quarters of global economic headwinds were the end of Apple, they'd soon be out of business. As Apple CEO Tim Cook said, during the Q2 earnings report, "This too shall pass."

One can be a fan of Apple products as well as be an investor, but understanding the different dynamics and not confusing the two is always helpful in public discussion.

Final Words

Apple has hundreds of millions of customers who really like the company, its products and what it stands for. They're keen to know about Apple's health and welfare. To alarm them with stories about Apple's short-term challenges is simple exploitation, even clickbait.

The drama is over. It's time to get back to work. Nothing much has really changed.

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Hasn’t their guidance almost always been lower than their performance, though? That seems to set them up for disappointment when they “only” meet their guidance.


Very much agreed, it’s utter silliness. Remember the good old days when it was enough for a company to be solvent, and CEOs didn’t have to simultaneously run companies, be celebrities, and cure cancer? raspberry


Historically, Apple’s guidance was too low to be of much investment value. Several years ago the company started to provide guidance that was closer to real prospects. The problem for Apple with investors is not that their results are closer to their guidance. The problem is that Apple is forecasting quarters with negative growth.

This is the second such forecast and there likely will be two or three more. Investors will see that as a trend. So next year Apple’s guidance will compare to this year’s and will look better. However, I would expect analysts will not be swayed unless those numbers come up to previous highs or better them. This will result in two, three or more years of this type of coverage.

What could change that dynamic for investors? A new blockbuster product, an “I’ve got to have” upgraded product, huge growth in other parts of Apple’s business like services are things that could send the stock up. Missing one of these lower guided quarters would bring it down. If you are investing in Apple those are the types of things you must consider. If you just enjoy using their products these things are of little short term impact.


skipaq: You’re right, but this is only part of the problem. Apple IS now providing better guidance, with ranges, and meeting them.

But the herd of self-styled “analysts” polls the supply chain, examines tea leaves and crystal balls to come up with its own, separate set of numbers. And Apple is pounded hard if it fails to meet this alternate version of “reality”.


vpndev: In some ways Apple is paying for all the years of low ball guidance numbers. The Analysts and investors came to put more weight on analysts consensus numbers. In addition, the fact that Apple hit their guidance doesn’t take away from the negative growth. A small investor should use such information to grow their holdings or move on to something else.


The headlines say it all. “Apple Reports First Quarterly Sales Drop Since 2003.” The problem with 13 years of quarterly revenue increases without an interruption is that you will eventually reach a quarter where it goes down. The undefeated basketball team eventually loses a game. The roulette table that has hit red a dozen times will eventually hit black. But hey the stock price hit isn’t too bad, as Apple was lower than that a few months ago. iPhone 7 is going to be great, Watch 2 is going to be great, Apple Music is awesome, Apple Pay continues to grow, but I do agree with skipaq that a new blockbuster product is needed, or some must have upgrade to keep AAPL increasing.


That’s never the case when it comes to Apple. If something isn’t perfect for the market it is considered Apple’s doom and the world as we know it will end. Even though everyone knows Apple still made a huge profit which only other companies can only dream of. They actually met there own guidance so I don’t know why the market is so stupid. But even when Apple makes record earnings the market always has an excuse to drop Apple’s stock price. So it goes I’m sure the stock will tank to $60 a share then hopefully go back up by the end of the year. It sucks being a normal person owning Apple stock because we are the ones being punished for absolutely nothing.


Totally agree that there is no urgent emergency and the sky is not falling. However, all of Apple’s product lines are currently not so hot.  Apple is loosing its halo and its halo is fundamental to its existence as the “it” company and its high margins.  iCloud is still buggy. iTunes is a mess. Windows has largely caught up to the Mac in usability and has some advantages.  Many product elements from spell checkers to Mac email are simply out of date and under performing technically. 

While pundits see the increase in R&D as a good thing, I am not so sure.  When companies start to spend lavishly on R&D it often means senior executives don’t know where to focus for the next major project. Unless things turn around, I expect a decade long flat period.  I could be wrong!  If the Apple car is fundamentally superior to Tesla’s offerings in ways that I have suggested, Apple could be fantastic, but based on recent offerings, that seems unlikely.  The Watch is eh.  They are not going up against old line industries this time. They are going up against Elon Musk, a man who is a legitimate peer of Henry Ford and Steve Jobs.

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