Apple shares tumble in after-hours on disappointing outlook
Shares of Apple Inc. were further battered and bruised on Tuesday evening, shedding over 11 percent of their value after the company guided considerably below Wall Street's expectations for its fiscal second quarter of the year.
The Cupertino-based Mac maker said it expects to earn $0.94 per share on sales of approximately $6.8 billion for the three-month period ending March, compared to Street consensus estimates of about $1.09 per share on nearly $7 billion in revenues.
The guidance sent shares tumbling to their lowest point in over four months -- down $17.35 or some 11.15 percent to $138.29 -- as investors feared that even a company with Apple's momentum may have trouble weathering a possible recession and sluggish global economy.
Shares had already closed down $5.72 or 3.54 percent to $155.64 earlier in the day.
During a conference call with analysts and members of the media, Apple chief executive Peter Oppenheimer defended his second-quarter estimates, calling it "very strong" guidance. "We are very confident we will achieve it," he said.
Also weighing on investor sentiment was word that iPod sales remained relatively flat in the US on a yearly basis, suggesting that the digital media player market -- which accounts for more than 40 percent of the company's revenues -- is quickly approaching its saturation point.
Apple executives immediately discounted the notion, however, noting that iPod revenues grew 17 percent year-over-year, a figure they maintain is "uncharacteristic of a saturated market."
Company officials further countered concerns by explaining that Apple hopes to transition the iPod touch -- the primary driver behind the iPod's 17 percent revenue growth -- beyond an advanced music player and into the first "mainstream Wi-Fi mobile platform" capable of running "all kinds of mobile applications."
Though executives failed to expand on this vision, the company is known to be working at least two initiatives that will help set it is handheld business apart from the pack even further. The first, due to arrive next month, is a software developers kit (SDK) that will enabled third parties to author a plethora of new applications for both the iPhone and iPod touch.
The second, as AppleInsider reported in September, is a slightly larger and much enhanced iPod touch-like device mostly reminiscent of a modern day incarnation of a Newton MessagePad -- the Apple handheld device that gave birth to the PDA market back in the 90's.
The Cupertino-based Mac maker said it expects to earn $0.94 per share on sales of approximately $6.8 billion for the three-month period ending March, compared to Street consensus estimates of about $1.09 per share on nearly $7 billion in revenues.
The guidance sent shares tumbling to their lowest point in over four months -- down $17.35 or some 11.15 percent to $138.29 -- as investors feared that even a company with Apple's momentum may have trouble weathering a possible recession and sluggish global economy.
Shares had already closed down $5.72 or 3.54 percent to $155.64 earlier in the day.
During a conference call with analysts and members of the media, Apple chief executive Peter Oppenheimer defended his second-quarter estimates, calling it "very strong" guidance. "We are very confident we will achieve it," he said.
Also weighing on investor sentiment was word that iPod sales remained relatively flat in the US on a yearly basis, suggesting that the digital media player market -- which accounts for more than 40 percent of the company's revenues -- is quickly approaching its saturation point.
Apple executives immediately discounted the notion, however, noting that iPod revenues grew 17 percent year-over-year, a figure they maintain is "uncharacteristic of a saturated market."
Company officials further countered concerns by explaining that Apple hopes to transition the iPod touch -- the primary driver behind the iPod's 17 percent revenue growth -- beyond an advanced music player and into the first "mainstream Wi-Fi mobile platform" capable of running "all kinds of mobile applications."
Though executives failed to expand on this vision, the company is known to be working at least two initiatives that will help set it is handheld business apart from the pack even further. The first, due to arrive next month, is a software developers kit (SDK) that will enabled third parties to author a plethora of new applications for both the iPhone and iPod touch.
The second, as AppleInsider reported in September, is a slightly larger and much enhanced iPod touch-like device mostly reminiscent of a modern day incarnation of a Newton MessagePad -- the Apple handheld device that gave birth to the PDA market back in the 90's.
Comments
Saturation would mean everyone who wants one already has one (and is not ready to replace it). It would mean sales slowdown, not maintaining the same high sales.
C'mon Steve-o... 3G iPhone, STAT!!!. And some more aggressive notebook pricing.
The 'Wi-Fi platform' talk for the iPod Touch is encouraging, however. And at least they're doing a 'Take 2' on AppleTV, instead of just throwing a fit and killing it, as has sometimes been Steve's way when things don't sell.
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The Cupertino-based Mac maker said it expects to earn $0.94 per share on sales of approximately $6.8 billion for the three-month period ending March, compared to Street consensus estimates of about $1.09 per share on nearly $7 billion in revenues.
This $0.94 per share is an increase of 29% over same time last year. Here's the fun part. The average of what Wall Streets analyst were guessing was $1.09 per share.
So Apple says that they are going to do 29% better than last year yet they get slammed because it doesn't match what so called "analysts" were guessing. This is guessing about the future I might add.
This just fundamentally proves that the stock market is legalized gambling and not investing. How this form of gambling became a hallmark of our nation's financial health is a travesty!
edit: I propose new Federal legislation. Market Analysts must advertise themselves as "Handicappers" and Stock Brokers must advertise themselves as "Bookies"!
Too bad we didn't get the new Newton Pad rather than the MacBook Elite at MacWorld- maybe a broader appealing device would have given more confidence.
Customer reaction to the MacBook Air has been great, with "very strong orders" so far.
This just fundamentally proves that the stock market is legalized gambling and not investing. How this form of gambling became a hallmark of our nation's financial health is a travesty!
The stock market was started by men who were essentially robber barons. So I suppose you can say its nothing new.
Customer reaction to the MacBook Air has been great, with "very strong orders" so far.
Isn't that true of pretty much any new Apple product these days (Euro iPhone aside)? Steve could announce his laundry list and it'd sell well... at launch, anyway.
The real test isn't initial orders to the hardcore Apple faithful, but how well sales hold up long-term. But I am rooting for the MBAir, even though it isn't a true subnotebook. Its just so durn 'sexay'.
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Call me in 18 mos.
So Apple says that they are going to do 29% better than last year yet they get slammed because it doesn't match what so called "analysts" were guessing.
Most analysts don't guess, they predict based on a wide range of sources, like meteorologists (who have gotten things wrong in the past). Of course there are some good analysts and bad analysts but for the most part, across the market, what you call "guesses" aren't that far off.
The market had of course factored in the analyst's estimates into the stock price, so it is only logical that we see a drop based on Apple being unlikely to meet those estimates, after all if we didn't then the market value would be "wrong" and the stock overvalued (of course it might still be overvalued or undervalued in what is an inefficient market). Bear in mind that if we look at the P/E ratio AAPL is a growth stock, so movement is not going to be based on the company merely doing better year on year.
So, what you're saying is that because for the most part the value of a stock is based on what the market considers to be the most likely future for the company which determines the supply and demand for the shares, investing in the market is merely gambling? Now, I'm not going to disagree with that but you have to draw a line between what is gambling and what isn't, after all which investments don't carry risk? Even putting money in a bank could be considered gambling.
But most importantly, your reasoning for it being gambling seems to be that because the analysts were "guessing" it's down to luck? That would of course deny the reality that there are a large number of consistently successful players in the market, showing that in this zero sum game it is possible to be more adept than the competition.
The real test isn't initial orders to the hardcore Apple faithful, but how well sales hold up long-term. But I am rooting for the MBAir, even though it isn't a true subnotebook. Its just so durn 'sexay'
I've never really seen Apple call it a subnotebook. Steve billed it as the worlds thinnest.
The Air is not at all a replacement for any other computer. Its more a lightweight companion to your workhorse. It won't sell as much as the MB or MBP. But it will sell.
I've never really seen Apple call it a subnotebook. Steve billed it as the worlds thinnest.
The Air is not at all a replacement for any other computer. Its more a lightweight companion to your workhorse. It won't sell as much as the MB or MBP. But it will sell.
Agreed. It's not a subnotebook or ultraportable (since the footprint's no smaller than a regular MacBook), rather, its a sexy, lightweight, ultrathin MB. Period.
Will that lead to great sales, at $1800? Initially, sure. Long-term, maybe not so much. I see it as being more of a 'solid' seller than a big hit. But we'll see.
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Anyone see the Forbes article about Apple's quarter? I think they might have hit a new low.
I stopped taking them seriously when they bashed Tyco years ago when it was a single digit stock. Good thing I didn't listen and rode the recovery on that stock. Here's my favorite quote from their article on Apple:
"The company blamed the weak economy for its lowered guidance".
If you listened to the conference call, there was no such thing. The CFO's comments were along the lines that we leave the prediction of where the economy goes to others, we are just concentrating on running the business. A totally blatant lie by Forbes.
I stopped taking them seriously when they bashed Tyco years ago when it was a single digit stock. Good thing I didn't listen and rode the recovery on that stock. Here's my favorite quote from their article on Apple:
"The company blamed the weak economy for its lowered guidance".
If you listened to the conference call, there was no such thing. The CFO's comments were along the lines that we leave the prediction of where the economy goes to others, we are just concentrating on running the business. A totally blatant lie by Forbes.
Excellent observation.
Unfortunately, this kind of shoddy/sloppy reporting is par for the course. Notice our own AI's headline above: "disappointing outlook," it says, as though Apple may have indicated "disappointment."
The accurate and fair headline would have been, "....outlook that the market - after-hours - interpreted as disappointing."
Agreed. It's not a subnotebook or ultraportable (since the footprint's no smaller than a regular MacBook), rather, its a sexy, lightweight, ultrathin MB. Period.
It definitely is competing in the ultraportable market. The balance though is a computer that is so small its difficult to use for work defeats the purpose of having the computer in the first place.
From Anand:
"The problem with my Picturebook and every other ultra-portable I've owned (including the sub-2lbs Sony X505) was that I'd get to a point where my productivity suffered too much and I'd switch to a larger, but more usable notebook. The keyboards were too small, the performance too low or the screen resolution insufficient; there would always be a reason and I'd end up abandoning my sexy little notebook for something more practical."
It definitely is competing in the ultraportable market.
Its not an ultraportable, but it is trying to woo people away from ultraportables. How well that'll work, remains to be seen.
It's just so very Steve. Let's not give people what they say they want, but rather something that I think is better. Sometimes it works, sometimes it doesn't. But you gotta give him props for the massive juevos.
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When I look at the trends they have set and the direction of other tech companies, I have to say there is no comparison. We are moving towards an Apple world. They are on fire. Screw the numbers, the analysts, and everyone else who is trying to squeeze a buck out of this company for a short term gain. Pay attention to what they are doing. They have moved from a computer company to being a LIFESTYLE company. We're talking about generations of people growing up with buying an iPod as quickly as buying a CD player back in the day. If you want music, you're getting an iPod, period. And let's not forget movie rentals, which not only will have higher profit margins than Netflix, but will also contribute significantly to less waste (no paper, DVD, or postage required).
I guess what I am saying is that in the same way Mac users really don't want to take the time to convince PC fanatics why Apple products and ideas are just better, a real investor in this company does not need to explain this to analysts or anyone else. The company is guiding conservatively and being punished for this. Ridiculous. Corporate greed is angry with the hippies at Apple - how dare Apple guide conservatively! These investors don't give a crap about Apple. They just want to make as much money as possible, as quickly as possible.
I believe in this company and have continued holding and buying on dips since 2003, beating out every other pick I've ever followed. Read the balance sheets, crunch the numbers, whatever - at the end of the day, you are investing in the future and the people shorting and yelling at Apple when they can't produce what they want will not live long into the future because they wind up dying of the stress trying to make a killing, instead of being a real investor.
Of course, we cannot just be blindly in love with Apple and kiss the butt of Mr. Jobs. We must also realize that Apple is not an island - what affects the broader market will always affect Apple. In a perfect world, all companies would be run as well as Apple, but they are not, and now the pathetic lots that lost a lot on other bets need to prostitute their shares of Apple.
What we can do is quit bitching and complaining about the stock every week. Look at the mindset - look at the things they have released and the patents they apply for. Look at how their products affect society and generations, not just bottom lines.
I do try to make predictions because at some point, you need to decide how long you want to stay in any company. The phone was certainly the easiest one - I'm sure lots of people figured they would go that route as soon as the iPod came out.
My next prediction is that in the not-to-distant future, they will be designing ways to help companies who require insane amounts of server streaming (youtube and facebook).
Perhaps it will be something with final cut pro and Mac servers, perhaps it will be new compression formats for video - whatever. The actual prediction is not as important as the fact that this is a company that inspires me and millions of other investors to brainstorm and try to predict what they will come up with next. No other company does that. We can't say for certain what the next ideas will be, which is part of the excitement of Apple, but I guarantee you, it will once again confound the minds of everyone stuck on their island, thinking about the present, instead of the future...