Apple Q3 preview: analysts place bets ahead of earnings

[AppleInsider]

Apple is set to report earnings for its fiscal third quarter after the close of regular hours trading this afternoon. Analysts polled by Thomson Financial expect the company to post earnings of $1.08 on $7.37 billion in revenue, fueled by sales of 2.2 million Macs, 10 million iPods and about 700,000 iPhones.

Despite the general bearish feel going around on Wall Street, the “whisper numbers” have rose as high as $1.11 on $7.45 billion in revenue. In mid-June, I published my initial earnings forecast for Apple’s fiscal third quarter, but have made some revisions to those estimates in light of recently released data on Macintosh sales by the Gartner Group.

I am now looking for Apple to record approximately $1.20 in EPS on $7.720 billion in revenue. I expect Apple to sell 2.54 million Macs, 10.5 million iPods and about 700,000 iPhones. I expect gross margins to rise to 34%, operating expenses to rise to $1.225 billion, and OI&E to rise to $165 million. I expect Apple to post net income of $1.08 billion after taxes of $485 million.

In terms of the revenue breakdown from Apple’s primary operations, I am looking for Apple to produce $3.725 billion in revenue from Mac sales (2.54 million Macs at $1,466.43 ASP), $1.785 billion in iPod sales (10.5 million iPods at $170 ASP), and a total of about $2.2 billion derived from its other primary operations (this includes revenue Apple recognizes through its other music related products and services, iPhone and related products & services, peripherals & other hardware, and software, service and other sales). The table below compares my overall estimates to Apple’s guidance.



Segment Information & Product Summary

Macintosh Sales: $3.725 billion
iPods: $1.785 billion
Other Music Related Products & Services: $810 million
iPhone: $400 million
Peripherals: $420 million
Software: $580 million
Total Revenue: $7.72 billion

Below are my third quarter estimates compared to the latest estimates on file from several of the more prominent Wall Street analysts covering Apple.



My Estimates Compared to Analyst Estimates Last Quarter (Q2 2008)

The table below compares my earnings forecast with some of the top analyst forecasts from last quarter.* The numbers highlighted in “blue” designate the closest estimate to Apple’s actual report whereas the numbers highlighted in “red” designate the estimate which was furthest from Apple’s actual report.*



Katy Huberty of Morgan Stanley missed on four out of the six major areas of prediction last quarter, shorting revenue by almost a cool billion ($815 million).

Alternatively, Mike Abramsky of RBC Capital is really starting to make a name for himself as one of the better analysts covering Apple. He was the closest out of Wall Street analyst in predicting revenue, iPods and Mac sales last quarter. He also recently made the excellent prediction that Apple would sell about 1 million 3G iPhones on opening weekend.

Andy Zaky is an AppleInsider contributor and the founder and author of Bullish Cross, an online publication that provides in-depth analysis of Apple's financial health.

Disclosure: Andy owns long term 2009 and 2010 call options in Apple. The information contained in this post is not to be taken as either an investment or trading recommendation, and serious traders or investors should consult with their own professional financial advisors before acting on any thoughts expressed in this publication.

[ View this article at AppleInsider.com ]

[skucera]

I'm just wondering if the author was aware that Apple is not including the iPhone in this quarter's report.

[nvidia2008]

Originally Posted by skucera

I'm just wondering if the author was aware that Apple is not including the iPhone in this quarter's report.

It's the quarter's revenue for the iPhones they've sold previously (subscription 24 month thingy)... But I get your point.

[NukemHill]

Originally Posted by skucera

I'm just wondering if the author was aware that Apple is not including the iPhone in this quarter's report.

This is correct. According to the CC in April, because of the announcement (March 6th) of iPhone 2.0, Apple decided to not report revenue from any new iPhones sold between the announcement and the release of 2.0. The expectation was by the end of June, but we know now that it didn't happen until July 11th. Therefore, no revenue from any iPhone sold between March 6 and June 30 will be reported on last quarter's income.

[NukemHill]

It's the quarter's revenue for the iPhones they've sold previously (subscription 24 month thingy)...

Yes, but that is different from the implications of the claim that Apple will have sold 700k iPhones last quarter. The revenue from those phones will not be recognized until this quarter.

[andyzaky]

Originally Posted by skucera

I'm just wondering if the author was aware that Apple is not including the iPhone in this quarter's report.

I'm fully aware of all iPhone related recognition issues. Apple will recognize past quarters' revenue from the iPhone which amounts to about $400 million. It will not recognize any revenue from the 700,000 it sold this past quarter.

See here:

http://www.appleinsider.com/articles...es_iphone.html


Yet, that doesn't mean one shouldn't include unit sales in his/her estimates which is different than revenue estimates.

[gkriser]

Originally Posted by AppleInsider

Apple is set to report earnings for its fiscal third quarter after the close of regular hours trading this afternoon. Analysts polled by Thomson Financial expect the company to post earnings of $1.08 on $7.37 billion in revenue, fueled by sales of 2.2 million Macs, 10 million iPods and about 700,000 iPhones.

Despite the general bearish feel going around on Wall Street, the “whisper numbers” have rose as high as $1.11 on $7.45 billion in revenue. In mid-June, I published my initial earnings forecast for Apple’s fiscal third quarter, but have made some revisions to those estimates in light of recently released data on Macintosh sales by the Gartner Group.

I am now looking for Apple to record approximately $1.20 in EPS on $7.720 billion in revenue. I expect Apple to sell 2.54 million Macs, 10.5 million iPods and about 700,000 iPhones. I expect gross margins to rise to 34%, operating expenses to rise to $1.225 billion, and OI&E to rise to $165 million. I expect Apple to post net income of $1.08 billion after taxes of $485 million.

In terms of the revenue breakdown from Apple’s primary operations, I am looking for Apple to produce $3.725 billion in revenue from Mac sales (2.54 million Macs at $1,466.43 ASP), $1.785 billion in iPod sales (10.5 million iPods at $170 ASP), and a total of about $2.2 billion derived from its other primary operations (this includes revenue Apple recognizes through its other music related products and services, iPhone and related products & services, peripherals & other hardware, and software, service and other sales). The table below compares my overall estimates to Apple’s guidance.



Segment Information & Product Summary

Macintosh Sales: $3.725 billion
iPods: $1.785 billion
Other Music Related Products & Services: $810 million
iPhone: $400 million
Peripherals: $420 million
Software: $580 million
Total Revenue: $7.72 billion

Below are my third quarter estimates compared to the latest estimates on file from several of the more prominent Wall Street analysts covering Apple.



My Estimates Compared to Analyst Estimates Last Quarter (Q2 2008)

The table below compares my earnings forecast with some of the top analyst forecasts from last quarter.* The numbers highlighted in “blue” designate the closest estimate to Apple’s actual report whereas the numbers highlighted in “red” designate the estimate which was furthest from Apple’s actual report.*



Katy Huberty of Morgan Stanley missed on four out of the six major areas of prediction last quarter, shorting revenue by almost a cool billion ($815 million).

Alternatively, Mike Abramsky of RBC Capital is really starting to make a name for himself as one of the better analysts covering Apple. He was the closest out of Wall Street analyst in predicting revenue, iPods and Mac sales last quarter. He also recently made the excellent prediction that Apple would sell about 1 million 3G iPhones on opening weekend.

Andy Zaky is an AppleInsider contributor and the founder and author of Bullish Cross, an online publication that provides in-depth analysis of Apple's financial health.

Disclosure: Andy owns long term 2009 and 2010 call options in Apple. The information contained in this post is not to be taken as either an investment or trading recommendation, and serious traders or investors should consult with their own professional financial advisors before acting on any thoughts expressed in this publication.

[ View this article at AppleInsider.com ]

Why do you think the stock is being punished harshly today down to $161.xx?
I own a private hedge fund and it looks like all the financial shorts are now shorting tech big time regardless of whether Apple blows out the numbers or not. It seems that for each iPhone that is sold, Apple sells 3 to 4 Macs. My family owns 5. I think the shorts should be taken out and shot on this one. What do you think?

Greg

[drjjones]

Originally Posted by gkriser

Why do you think the stock is being punished harshly today down to $161.xx?
I own a private hedge fund and it looks like all the financial shorts are now shorting tech big time regardless of whether Apple blows out the numbers or not. It seems that for each iPhone that is sold, Apple sells 3 to 4 Macs. My family owns 5. I think the shorts should be taken out and shot on this one. What do you think?

Greg

I think they are just doing their job. They will be hurt severely tomorrow when they reap the harvest of what they have sown . Lot of short sell covering comin' I predict. Champagne is gonna be iced at 3pm. Everybody is invited .

[VinitaBoy]

The truth is, Greg, that the "fix" is in for AAPL today. No matter WHAT earnings Oppenheimer reports this afternoon--no matter WHAT--the stock will be in the low 150's overnight. The manipulators are out in force on this equity (primarily because they KNOW it is undervalued and will certainly bounce back), so be prepared for something of a bloodbath until mid-October, when the full impact of the iPhone's release is felt.

[Booga]

Originally Posted by gkriser

Why do you think the stock is being punished harshly today down to $161.xx?
I own a private hedge fund and it looks like all the financial shorts are now shorting tech big time regardless of whether Apple blows out the numbers or not. It seems that for each iPhone that is sold, Apple sells 3 to 4 Macs. My family owns 5. I think the shorts should be taken out and shot on this one. What do you think?

Greg

I think that Apple is valued as a growth stock, not based on current revenue. Thus the relatively high P/E ratio compared to other stocks. And if you look at the stock outlook over the next few quarters, there might be a couple bumps in the road (and a slight stalling of top-line growth). The slow activation of iPhone 3G's probably pushed Apple's revenue-per-hour severely downward in all their retail stores-- both in terms of iPhones and Macs that people didn't buy because they didn't want to go anywhere near an Apple Store and/or couldn't get the heck inside.

Since iPhones are ammortized over an extended period of time ("subscription" valuation), but Macs are accounted for in whole the quarter they're sold, I see risk for the current quarter's numbers and a likelihood that Apple is going to guide unusually conservatively due to the possibility that Apple is focusing on iPhones instead of Macs right now.

And, in the end, I think most investors probably just fast forward to the guidance bit of the conference call and ignore the past quarter's numbers when looking at a buy/sell decision after announcements.

[NukemHill]

Originally Posted by andyzaky

Yet, that doesn't mean one shouldn't include unit sales in his/her estimates which is different than revenue estimates.

Yes, but the implication in your original story is that the iPhone sales will be counted as a part of the revenue stream for the quarter. It's sloppy writing, at least.

It's not just you. Every analyst I've read over the last few weeks has made the same, or worse, implication. It's setting AAPL up for a fall. Great for buyers like me. Bad for the less educated stock holders.

It's just sloppy, really. Shaw Wu is a particularly egregious example.

[quinney]

Originally Posted by gkriser

Why do you think the stock is being punished harshly today down to $161.xx?
I own a private hedge fund and it looks like all the financial shorts are now shorting tech big time regardless of whether Apple blows out the numbers or not. It seems that for each iPhone that is sold, Apple sells 3 to 4 Macs. My family owns 5. I think the shorts should be taken out and shot on this one. What do you think?

Greg

You own a hedge fund and you are asking an internet forum what to do?
(I wonder what your clients would think of that.)

Make a call and put your money where your mouth is.

[andyzaky]

Originally Posted by NukemHill

Yes, but the implication in your original story is that the iPhone sales will be counted as a part of the revenue stream for the quarter. It's sloppy writing, at least.

It's not just you. Every analyst I've read over the last few weeks has made the same, or worse, implication. It's setting AAPL up for a fall. Great for buyers like me. Bad for the less educated stock holders.

It's just sloppy, really. Shaw Wu is a particularly egregious example.

Umm. No. Tell me where the writing implicates that Apple will record any revenue from the 700,000 iPhones recorded. Everyone knows Apple is not recording revenue this quarter. As a matter of fact, no one even cares about iPhone sales in this report. We all know that Apple discontinued the EDGE iPhone for most of the quarter.

The article doesn't imply anything with regards to revenue recognition. Do you want every analyst to state that Apple won't be recording revenue from iPhones sold between early March and July 11? I've already said that numerous times. Here's one of those times:

http://www.appleinsider.com/articles...es_iphone.html

Don't be so worried about iPhone sales or iPHone revenue. No one cares about these numbers this quarter. The focus will be on iPod sales, Mac sales and Gross margins. And hopefully, to a lesser degree, guidance.

[anantksundaram]

Originally Posted by quinney

You own a hedge fund and you are asking an internet forum what to do?
(I wonder what your clients would think of that.)

Make a call and put your money where your mouth is.

Touche.

[andyzaky]

Originally Posted by NukemHill

Yes, but that is different from the implications of the claim that Apple will have sold 700k iPhones last quarter. The revenue from those phones will not be recognized until this quarter.

Oh I see your concern. You're worried about the first line of the article? Ya. One could misconstrue that as implying that revenue is derived from those 700,000 iPhones. The line is suppose to be informative of expectations. Yet, like I said. No one cares about iPhone sales or revenue this quarter.

[gkriser]

I have no clients! FYI, the Shorts go from one sector to another. They left Financials and went into Tech after GOOG and MSFT earnings! Have a nice day and be nice to people. It works better for you in the long run!

[nvidia2008]

Originally Posted by andyzaky

...No one cares about iPhone sales or revenue this quarter...

Hi Andy, welcome to AI Forums... Appreciate your articles and insight, but statements like that, well, the forum people here are pretty touchy.

[nvidia2008]

Originally Posted by andyzaky

Oh I see your concern. You're worried about the first line of the article? Ya. One could misconstrue that as implying that revenue is derived from those 700,000 iPhones. The line is suppose to be informative of expectations. Yet, like I said. No one cares about iPhone sales or revenue this quarter.

No offense to anyone, but if I had half a brain (maybe that's the problem already), as an investor or someone interested in Apple, the big question I would have is,

Given that AAPL and Apple,Inc. is poised as a major growth company/ stock/ etc. Given that the iPhone 3G is ludicrously popular, how is Apple going to sustain such growth? From a financial, leadership, operations perspective?

If Apple is at such a phenomenal place right now, and people are not able to access their products and services, due to the entire company being under major strain as a result of its own success... How will Apple sustainably manage this situation and prevent the large pool of potential customers salivating at the gates from being turned off?

I would make the big call and say, for every 2 iPhone 3G enquiries that a customer experiences as "out of stock", one of those customers is going to pop next door and buy a Nokia.

Finally, from a global perspective, anyone that seriously thinks of AAPL reaching $300 by end of next year will have to see a strong, sustainable, successful rollout of the iPhone 3G in cumulatively over 70 countries in the world.

One more thing. If we take as a whole, data (most likely available), of how Apple performs in terms of customer and product satisfaction, now that the iPhone 3G, Apple's major product, is sold in large volumes by telecom companies and other mobile phone operations... is there a high risk of brand dilution, customer dissatisfaction and opportunistic exploitation of Apple products and services?

You see any focus on Apple should logically be along the lines of the "three legs" of Apple in Steve's vision. At the end of the day, the question is, as it has been for the iPod, how does hype translate into sustained growth and expansion of the company through those three legs. The iTunes Store, particularly the App Store, what with movies and so on, is a phenomenal success for Apple. Imagine if Apple opened up legal music downloads in a lot of Asia. They could potentially double their revenue stream from the iTunes Store alone. It's a daunting task but anyone that has studied Asian media piracy would know that there are ways to tackle the problem. Here's a hint: offer great Karaoke-ready tracks. And a hell of a lot of Indian and Chinese-speaking artists.

If Apple and AAPL is going to survive the harrowing state the US economy is in right now, these are the kinds of questions US business leaders, employees, shareholders and voters must start to ask.

More than ever, survival now could hinge on Thinking Different.

[quinney]

Originally Posted by gkriser

I have no clients! FYI, the Shorts go from one sector to another. They left Financials and went into Tech after GOOG and MSFT earnings! Have a nice day and be nice to people. It works better for you in the long run!

Oh I see. You don't own a hedge fund, rather you have made an investment in a hedge fund.
My mistake. If you are going to give your money to other people to invest for you, it is
important to find someone you can trust enough that you do not have to obsess over
things like whether short sellers are hitting AAPL. If you can't relax, you might as well
handle your own investment decisions. That was the nicest tip I could think of to give you.
With regard to niceness in general, you may have a point, except when it comes to
areas where there is competition (like investing). There Leo Durocher had it right, in my
opinion.

[zinfella]

Originally Posted by nvidia2008

Hi Andy, welcome to AI Forums... Appreciate your articles and insight, but statements like that, well, the forum people here are pretty touchy.

What, you think that the folks here need protection from remarks that they might not like? I find that attitude highly condescending, do you see yourself as a mother figure?

[andyzaky]

Originally Posted by nvidia2008

No offense to anyone, but if I had half a brain (maybe that's the problem already), as an investor or someone interested in Apple, the big question I would have is,

Given that AAPL and Apple,Inc. is poised as a major growth company/ stock/ etc. Given that the iPhone 3G is ludicrously popular, how is Apple going to sustain such growth? From a financial, leadership, operations perspective?

If Apple is at such a phenomenal place right now, and people are not able to access their products and services, due to the entire company being under major strain as a result of its own success... How will Apple sustainably manage this situation and prevent the large pool of potential customers salivating at the gates from being turned off?

I would make the big call and say, for every 2 iPhone 3G enquiries that a customer experiences as "out of stock", one of those customers is going to pop next door and buy a Nokia.

Finally, from a global perspective, anyone that seriously thinks of AAPL reaching $300 by end of next year will have to see a strong, sustainable, successful rollout of the iPhone 3G in cumulatively over 70 countries in the world.

One more thing. If we take as a whole, data (most likely available), of how Apple performs in terms of customer and product satisfaction, now that the iPhone 3G, Apple's major product, is sold in large volumes by telecom companies and other mobile phone operations... is there a high risk of brand dilution, customer dissatisfaction and opportunistic exploitation of Apple products and services?

Read this excerpt from an article I wrote in June. It talks about managing earnings growth:

With the exception of Q1 and Q2, Apple has historically beaten its EPS guidance by a margin of 50% each quarter. Yet, this trend has likely changed quite significantly due in large part to Apple's shift in managing expectations and guiding more aggressively on the gross margin front. In Q1 and Q2, Apple beat its EPS guidance by a margin of 23.9% and 23.4% respectively. Yet, before these past two quarter, Apple would regularly beat its EPS guidance by a staggering average of 52.2%.

Yet, I think the past two quarters reflects a shift in Apple's earnings strategy from offering ultra-conservative guidance to offering just conservative guidance. This is likely due to the fact that Apple's EPS growth rate is slowing somewhat modestly thus necessitating a practice of both managing expectations and solidifying an income smoothing plan. By using the subscription method of accounting with the iPhone and Apple TV, Apple's management is effectively "smoothing" its income growth rate so as to show consistent solid-growth rather than short-term explosive growth. In other words, Apple's management moderates its income with smoothing tactics while managing expectations by offering more aggressive guidance. In my opinion, by using these tools to effectively manage earnings expectations, Apple's management demonstrates its astute ability to act in the best interest of the shareholders in the long term. This new guidance trend suggests that Apple should earn about $1.24 in EPS which is directly consistent with my EPS forecast. The table below exhibits the trend of Apple's shift in guidance strategy with regards to EPS

http://bullcross.blogspot.com/2008/0...ut-of-way.html

Look up the terms "income smoothing." It should help answer your question about shifting from explosive growth to regular growth. Good managers are able to make the transition smoothly. Allowing the stock to change its character over time.

[nvidia2008]

Originally Posted by zinfella

What, you think that the folks here need protection from remarks that they might not like? I find that attitude highly condescending, do you see yourself as a mother figure?

No, I don't mean to be condescending, I just see you guys ripping Andy a new a**hole. ...I guess I was trying to "protect", or at least, warn, Andy himself, not you all. I wasn't worried about him offending you all so much as Andy saying "You're all F***tards! I'm never writing another article for you ever again!!".

[nvidia2008]

Originally Posted by andyzaky

..."income smoothing." It should help answer your question about shifting from explosive growth to regular growth. Good managers are able to make the transition smoothly. Allowing the stock to change its character over time...

That's actually a good point. Do you see this rarely in Nasdaq companies? Why is Apple different, what drives them to resist the temptation of raking in the big bucks during explosive growth?

You suggest the stock is changing character perhaps... Does this mean it is moving away from a purely growth-driven stock? Is the market coming to terms with this?

[andyzaky]

Originally Posted by nvidia2008

Hi Andy, welcome to AI Forums... Appreciate your articles and insight, but statements like that, well, the forum people here are pretty touchy.

Let me qualify this. What I'm saying here is that analysts, investors and any major players in Apple don't care about iPhone sales and revenue this quarter. It's not the focus of this earnings statement. This is in response to someone mentioning that Apple is going to tank due to analysts misstating that 700K iPhone sales results in revenue recognition this quarter.

[nvidia2008]

Originally Posted by gkriser

Why do you think the stock is being punished harshly today down to $161.xx?
I own a private hedge fund and it looks like all the financial shorts are now shorting tech big time regardless of whether Apple blows out the numbers or not. It seems that for each iPhone that is sold, Apple sells 3 to 4 Macs. My family owns 5. I think the shorts should be taken out and shot on this one. What do you think?
Greg

Greg, let's consider what Andy is saying and what I have suggested now. Why is everyone shorting Apple so much? There are two questions.

A. Does Apple operate in a way (eg, income smoothing) that is counter to a lot of other Tech stocks? I mean, they're going to be selling over 20 million phones this year, from just a few million last year, and they're *deferring a huge chunk of that revenue*...

B. Does the market even know what the hell Apple is about? In this day and age, what the way they go about things is actually, pretty strange. Financials show a certain side of the story. But anyone that knows the company, will know how enigmatic it is. Does the market have any understanding of this? If not, well, then people will just treat it using whatever formula or estimate they use for most "Tech stocks".

[andyzaky]

Originally Posted by nvidia2008

That's actually a good point. Do you see this rarely in Nasdaq companies? Why is Apple different, what drives them to resist the temptation of raking in the big bucks during explosive growth?

You suggest the stock is changing character perhaps... Does this mean it is moving away from a purely growth-driven stock? Is the market coming to terms with this?

Its just smoothing its growth to be consistent rather than explosive. People may or may not know this, but Apple grew its earnings 47% last year. When adding Q2, Q1, Q3 and Q4 revenue, its 47% higher than last year. Apple can't continue that type of explosive growth. Thus, what they will do is try to smoothen that income to a more consistent 30% growth rate.

Notice there is no real reason why Apple needs to do the subscription method of accounting for the iPhone. They chose to do so for income smoothing purposes. Its very obvious. I can't believe that Apple really expects us to believe that they decided to use this complicated method of revenue recognition that most people cannot fully grasp just to avoid charging people $10.00 for iPhone 2.0 upgrade? That doesn't make any sense at all. But it does when thinking about income smoothing.

The market won't have to come to terms with it because Apple will probably do a good job at managing expectations while bringing it growth rate down nice and easy.

[nvidia2008]

Originally Posted by andyzaky

Let me qualify this. What I'm saying here is that analysts, investors and any major players in Apple don't care about iPhone sales and revenue this quarter. It's not the focus of this earnings statement. This is in response to someone mentioning that Apple is going to tank due to analysts misstating that 700K iPhone sales results in revenue recognition this quarter.

The interesting thing is I wonder if the market will understand the subtleties regarding Apple very recently selling out 1 million phones in just a few days, when it just did 700,000 in an entire quarter. While Apple may be trying to smooth their income, their public's perception definitely is experiencing explosive growth. (Zing! I should be a writer... )

[nvidia2008]

Originally Posted by andyzaky

Its just smoothing its growth to be consistent rather than explosive. People may or may not know this, but Apple grew its earnings 47% last year. When adding Q2, Q1, Q3 and Q4 revenue, its 47% higher than last year. Apple can't continue that type of explosive growth. Thus, what they will do is try to smoothen that income to a more consistent 30% growth rate.

Notice there is no real reason why Apple needs to do the subscription method of accounting for the iPhone. They chose to do so for income smoothing purposes. Its very obvious. I can't believe that Apple really expects us to believe that they decided to use this complicated method of revenue recognition that most people cannot fully grasp just to avoid charging people $10.00 for iPhone 2.0 upgrade? That doesn't make any sense at all. But it does when thinking about income smoothing...

That's actually some pretty good insight, that really *no other analyst* seems to be offering. Maybe I've just been reading at all the wrong places.

Instead of pushing Apple to be on a massive growth path (as people may interpret from a lot of the other analysts), you're actually saying that Apple is in and of itself acknowledging that they are in a great position, but it's not sustainable.

Wow. This is new, from an analyst. Really, I'm not being facetious.

Because if some people are pushing for Apple to have say 20% of PC market share by the end of 2010, these same people don't realise that because of the size of the PC market in 2010 itself, this is not practical due to the amount of explosive growth required to attain such market share...

Originally Posted by andyzaky

The market won't have to come to terms with it because Apple will probably do a good job at managing expectations while bringing it growth rate down nice and easy...

Ah, this makes sense in some way, due to the assumptions that people make about Apple simply because "its Tech". Given these assumptions, the jitters about the US and world economy, the looming election and Apple managing expectations, these are strong factors that limit huge gains (whatever that may imply, I'm not an investor) in AAPL stock prices over the next year or so. They could push $200 or so by the end of the year but there would still be a lot of shorting(?) over the next few months.

[iVlad]

I think these numbers are outstanding. Apple always grew in large chunks of increases, I don't understand Wall St. As a shareholder (even small) I think Apple is a great investment. I don't see any other computer company investing in. Anyone?

[cameronj]

Originally Posted by quinney

You own a hedge fund and you are asking an internet forum what to do?
(I wonder what your clients would think of that.)

Make a call and put your money where your mouth is.

I think most of us immediately saw through that lie

[gkriser]

Andy is the only one here that deals with the numbers and not off the top of the head opinions. At least his analysis has merit whereas others have various agendas. Sophisticated investors know the difference and respect it. People who have run public companies know that.

[GQB]

Originally Posted by cameronj

I think most of us immediately saw through that lie

Oh lighten up and cut the guy some slack.
When you say "I own AAPL", no one thinks you mean you own the whole company. He owns stock in a hedge fund.

[cameronj]

Originally Posted by GQB

Oh lighten up and cut the guy some slack.
When you say "I own AAPL", no one thinks you mean you own the whole company. He owns stock in a hedge fund.

So you're saying I should lighten up because of the comment I made before he clarified his position? He said "I own a private hedge fund" - that is an unequivocal statement. Sure, he turned out to have used the wrong words, but how am I supposed to know that?

When you say I own AAPL, no one thinks you own the entire company. When you say "I own a private hedge fund", everyone thinks you are saying you own the entire thing, because that's what that means.

[anantksundaram]

Originally Posted by andyzaky

...... shifting from explosive growth to regular growth. Good managers are able to make the transition smoothly. Allowing the stock to change its character over time.

Wow, that's one heck of a sweeping generalization. Can you provide some examples of well-known companies that managed this 'gentle landing' process without their PEs falling or going sideways subsequently?

[cameronj]

Originally Posted by anantksundaram

Wow, that's one heck of a sweeping generalization. Can you provide some examples of well-known companies that managed this 'gentle landing' process without their PEs falling or going sideways subsequently?

Doesn't happen. The fact is if you go from high growth to lower, your PE will fall and the stock will either drop quickly or go sideways for a while. You can't fight the laws of math.

[dreamraj]

Earnings out. Exceeds all expectations. But the USUAL LOW GUIDANCE!! Dammit!!!!
Stock at $159.

[cameronj]

Originally Posted by dreamraj

Earnings out. Exceeds all expectations. But the USUAL LOW GUIDANCE!! Dammit!!!!
Stock at $159.

What are you complaining about? Were you hoping to sell this week? If not, I assume that you own and like the stock. So it's now on sale, buy more. The only people who should be upset are those who think it is not going to get back to 170 in the next month, and were hoping to sell.

[anantksundaram]

Originally Posted by cameronj

Doesn't happen. The fact is if you go from high growth to lower, your PE will fall and the stock will either drop quickly or go sideways for a while. You can't fight the laws of math.

That's what I would say too.....