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Apple's "real" earnings grew a staggering 124.6% in Q4

post #1 of 58
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In its recently reported fiscal fourth quarter, Apple's adjusted net income grew approximately 124.6% from $1.085 billion in Q4 2007 to $2.437 billion in Q4 2008 -- an extraordinary number when fully accounting for iPhone sales in both periods.

Just as impressive is Apple's 75.1% grow rate in sales. Apple's adjusted revenue grew from $6.673 billion in Q4 2007 to a whopping $11.682 billion in Q4 of 2008. Earnings per share grew 123.0% from $1.21 in Q4 2007 to $2.69 in Q4 2008. This begs the question? Where the hell are the analysts and why aren't they quick to point this out? Only on Wall Street can a company grow earnings 124.6%, sustain bouts of analyst downgrades and see its shares decline 55% (while boasting a 14 forward P/E on a GAAP-basis).

I was both shocked and very disappointed to see no analyst comment on the fact that Apple's business grew an astounding 124.6% on an adjusted (real) basis. What's even more troubling is that no one seems to emphasis the significance of the fact that Apple grew its cash hoard from approximately $21 billion in Q3 to $25 billion in Q4. That's a $5.00 increase in total cash per share from $23.45 in Q3 to $28.22 in Q4. At this pace, and assuming Apple makes no big acquisitions, Apple could very well have nearly $48 per share in cash and cash equivalents by the time we hit November 1, 2009.

The Obvious but Rarely Mentioned Problems with GAAP Accounting Measures

In many ways, the idea of GAAP accounting fails miserably at its intended purpose -- to give a "fairly stated" picture (as my accounting professor would often say) of a company's earnings results. Yet, under GAAP accounting measures, Apple is forced to use what is called the subscription method of accounting for sales of the iPhone by amortizing the revenue received from the device over a 730-day period (2 years). When Apple reports its GAAP earnings results, it only accounts for an infinitesimal portion of the revenue it actually receives from sales of the device in any given quarter. This is particularly troubling for Apple and its investors due to the fact that Apple draws nearly 44% of its revenue and an unbelievable 63% of its net income from iPhone sales! What is more realistic and fairly stated: an accounting measure that requires a company to leave out 63% of its net income or an accounting measure that forces a company to be transparent by including what it has actually earned in the quarter?

This should infuriate the informed investor because it means that Apple is quite literally trading on P/E ratios that do not reflect more than half of its business. When one compares Apple to Google, Research in Motion, Amazon and others similarly situated in the tech sector, one should notice that they all have very similar P/E ratios. All of their P/Es have contracted significantly as a result of the markets overblown fears of the United States entering the second great depression. Yet, Apple's stock has obviously been the hardest hit in this contraction because if one accounts for the 63% in EPS that Apple isn't reporting as a result of GAAP accounting measures, Apple's trailing P/E is probably closer to 11 and its forward P/E is closer to 7 (under the conservative assumption that Apple will earn $12 in adjusted EPS in 2009).

Moreover, such an accounting measure opens the door for bearish news reporters such as Eric Savitz at Barrons to continuously publish bearish analyst opinions by the likes of Kathryn Huberty, Travis McCourt, Toni Sacconaghi and Mike Abramsky who only tend to focus on less than half of Apple's business. Yesterday, Abramsky cut both his earnings outlook and price target on Apple despite the fact that Apple beat his EPS estimate by $0.11. I have yet to see one analyst or even one news reporter mention the fact that Apple is trading at a mere 3.4 times its cash position -- significantly lower than its counterparts: Google is trading at 7.8 times its cash, Microsoft is trading at 9.29 times its cash, Research in Motion at 17.8 times, Amazon at about 12 times, Cisco at about 4 times cash and IBM at about 11.5 times cash. Most of these companies have significant debt and thus net cash per share could be significantly lower.

This general sense of unjustified bearish surrounding Apple over the past 6 months is a directly result of GAAP accounting. If Apple were able to fully account for sales of the iPhone, almost no analyst would have any ammunition to justifiably downgrade the stock as they have over the past two months. While analysts were busy downgrading Apple in September, Apple was busy growing at 124%. Yet, due to the backwards accounting measures in place today, Apple could only boast a 23% growth rate in GAAP earnings. The table below compares Q4 2007 adjusted earnings to Q4 2008 adjusted earnings. Notice that Apple grew its operating income at a pace of 149.2%. This is a direct result of the revenue growth rate and gross margin percentage growth rate significantly outpacing the growth rate of operating expenses.



Method for Arriving at Non-GAAP based Adjusted Earnings for Q4 2007

Since Apple didn't start releasing adjusted earnings results until this past Tuesday, I had to reconstruct Apple's fiscal Q4 2007 to account for iPhone sales in order to be able to more accurately compare Q4 2008 with Q4 of 2007. The two most difficult adjustments to determine were gross margins and total revenue. Both of these numbers required a small degree of guess work and so I was conservative in the guessing. It's quite likely that Apple would have reported a lower adjusted earnings number in Q4 2007 which suggests a larger growth in 2008 than indicated in the table above. Yet, the revenue number can at least be stated with a relatively high degree of precision.

Revenue Adjustments

In order to account for the full revenue Apple received from sales of the iPhone and Apple TV, one must reverse the current period's amortization of deferred revenue derived from the devices. At the end of Q3 2007, total deferred revenue (current and non-current) derived from sales of the iPhone and Apple TV was $180 million. Total deferred revenue derived from sales of the iPhone and Apple TV at the end of Q4 2007 was $636 million. In order to reverse Q4 2007's amortization of deferred revenue derived from the devices, one need only subtract Q3's total deferred iPhone and Apple TV revenue from Q4 2008. The difference between these numbers is what Apple actually added to the quarter's deferred revenue pile and is what Apple would have reported in adjusted earnings.


Notice, to get a full and accurate picture of revenue, one would also have to subtract any contribution of the previous quarter's deferred revenue that Apple added in its Q4 2007 GAAP-based results. This number is both quite small, likely $23 million, and quite difficult to determine with full accuracy. Thus, for the sake of conservatism, I simply left in the contribution which makes the growth rate in 2008 slightly better than stated in the table above. The offset between deferred revenue at the end of Q3 and at the end of Q4 results in a $456 million adjustment to Non-GAAP revenue. Thus, Apple would have earned about $456 million more in fiscal Q4 if it didn't employ the subscription method of accounting or if it provided adjusted revenue.

Gross Margins, COGS

Determining adjusted gross margins is a slightly subjective inquiry. Since there is no way to determine what the iPhone and Apple TV's gross margins were in fiscal Q4, and since we know they were better than overall gross margins, I bumped overall gross margin up 139 basis points. This more than adequately accounts for the better than overall gross margins enjoyed by the iPhone. Even if the gross margin percentage estimate is off by a 50 basis points, it would only account for a plus or minus one to two pennies in EPS. The 125% growth rate as stated above is a very realistic depiction of Apple's actual growth rate.

Operating Expenses & Operating Income

No adjustments are necessary for operating expenses as Apple fully recognizes any and all operating expenses when incurred without regard to any of its deferred revenue mechanism. If one takes a look at Apple's published adjusted earnings for Q4 2008, no adjustment is made to operating expenses in arriving at adjusted earnings. Since no adjustments needs to be made to operating expenses, operating income is simply the difference of subtracting operating expenses from gross margin.

OI&E


No adjustments are necessary for OI&E as Apple fully recognizes any and all OI&E without regard to any of its deferred revenue mechanism. See Apple Q4 2008 adjusted earnings results for example.

Tax Rate

No adjustments need to be made to the tax rate as a uniform rate is determined on a quarter by quarter basis. The effective tax rate in Q4 was approximately 26.5%. See Apple's Q4 2008 adjusted earnings for example.

EPS


As a result of the $181 million addition to net income based on the adjustments noted above, exactly $0.20 is added to EPS based on the published diluted share calculation of 895,666,000 shares. The table below is an unaudited reconciliation of Non-GAAP to GAAP results of operations for Apple's fiscal fourth quarter for the fiscal year ended in 2008.



Disclosure: Long Apple. The information contained in this blog 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.
post #2 of 58
I don't see why this should be of any importance. Investors know about the model, and they take it into account when they think of how much they are ready to pay for the shares.

Fact is that even though I am convinced that Apple will do very well in the future, the next two quarters might well see a decline in revenue because of the economic situation, plus macbooks are rather expensive plus Apple sells a lot of iphones but having only one product is still very risky and they might see a decline in a not too distant future if they don't offer more choice. Also, one new iPhone a year wont be enough.

At the moment, there is nothing really exciting which could drive the business and there are a lot of risks. Even though a share for under 80 will look like a bargain in one or two years, it might still look expensive in two months.
post #3 of 58
Thank you for your hard work in coming up with the numbers. Yes, for some unknown reason investors have been unusually hard on AAPL.
just waiting to be included in one of Apple's target markets.
Don't get me wrong, I like the flat panel iMac, actually own an iMac, and I like the Mac mini, but...........
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just waiting to be included in one of Apple's target markets.
Don't get me wrong, I like the flat panel iMac, actually own an iMac, and I like the Mac mini, but...........
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post #4 of 58
Quote:
Originally Posted by paulsix View Post

Fact is that even though I am convinced that Apple will do very well in the future, the next two quarters might well see a decline in revenue because of the economic situation, plus macbooks are rather expensive plus Apple sells a lot of iphones but having only one product is still very risky and they might see a decline in a not too distant future if they don't offer more choice. Also, one new iPhone a year wont be enough.

says who? Seems to be working a treat right now. Apple achieved world domination of the Mp3 player market with only a few product variations. Part of Apples appeal is that there is NOT a huge variety of products. Otherwise the 'experience' gets messy. Though I'm sure Apple will branch out when the time is right (with the iphone).

Quote:
Originally Posted by paulsix View Post

At the moment, there is nothing really exciting which could drive the business and there are a lot of risks. Even though a share for under 80 will look like a bargain in one or two years, it might still look expensive in two months.

I absolutely guarantee this quarter will be staggering. "nothing really exciting" ? other than possibly the most exciting and innovative product lineups ever.
Apple has only just lit the fuse on numerous fronts, and Jan will bring even more new toys no doubt.
post #5 of 58
Quote:
Originally Posted by paulsix View Post

I don't see why this should be of any importance. Investors know about the model, and they take it into account when they think of how much they are ready to pay for the shares.

Except that they aren't taking it into account - which is obvious by the stock price. Apple is currently priced like it isn't experiencing any earnings growth at all.

I think that the worse the recession, the better it is for Apple. A recession will hurt Dell, HP and other competitors which don't have the cash horde, cash flow or margins. Apple can survive four years with *ZERO REVENUE, NO LAYOFFS and NO NEW DEBT* while their competitors can't do any such thing.

The credit markets are screwed, and Apple has no need to use their credit markets while competitors do (and have to pay through the nose or risk bankruptcy if they can't roll over debt that expires). Apple has high morale because Steve told the employees no layoffs during the recession, while the others will be laying off left and right if the recession is severe (and I have lived through that, very little R&D gets done while you are commiserating over the water cooler, Apple will be kicking ass with new products over all that time).

The cash horde can be used to buy out nice small companies at good prices during the recession.

The deferred earnings are dragging things down now, but they will be artificially inflating earnings this time next year.

etc. etc. I am 100% in Apple stock and April '09 Apple calls. I just don't see any other investment with this combination of safety and potential. Everything is a risk, I even lost money in a money market fund that went bust just last month, and cash will get eaten away by inflation - Apple is by far the best investment I can find anywhere.
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post #6 of 58
Quote:
Originally Posted by monstrosity View Post

I absolutely guarantee this quarter will be staggering. "nothing really exciting" ? other than possibly the most exciting and innovative product lineups ever.
Apple has only just lit the fuse on numerous fronts, and Jan will bring new toys no doubt.

Didn't want to offend anybody, I think the Macbook/Pros are breathtakingly cool (even though they clearly lack some software to take advantage of the GPUs). But Apples stock price is based on incredible growth, which they could deliver for a long time now and they will be able to do it again.

Just now, for the next quarters, I am not so sure.

Also, for the iphone: Let's not fool ourselves. Others are playing catchup and there are some potentially potent competitors. The iPhone is still the real deal, but this might change...

I just understand everybody who is prudent at the moment, and EPS of 15 don't look so cool anymore if the E gets cut by a third, which just could happen, even though I really hope it won't.
post #7 of 58
I am so glad you came forward and wrote such a nice and detailed report.
Thank you very much
post #8 of 58
is it just me or is there a significant trend taking place with the market for Apple:

iPhone out sells RIM this past Qtr
Apple continues to innovate (as Jobs said was THE key way forward after the dot.com bust)
Dell is selling mfg plants
Vista is, well, enough said
Large numbers (sorry - recent AI article this week) of Apple retail stores are to people converting to Macs from PC
Apple has 0 debt and $25B in cash

anyone else see a pattern here?

Believe the stock price is more reflective of increased global risk in fin markets and that it will bounce back well once the craziness settles down. Way to go Jobs and Co. for living up to your promise to out-innovate the competition. Believe they (RIM, PC makers) are still wondering what hit them.
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post #9 of 58
Quote:
Originally Posted by paulsix View Post

Let's not fool ourselves. Others are playing catchup and there are some potentially potent competitors. The iPhone is still the real deal, but this might change...

Highly doubtful, an OS of OSX proportions , + developers + userbase is not something that grows overnight. (It's taken apple 20 or so years!)
At least the next 4 years is apples for the taking on all fronts.

I'm sure android and others way well have a decent stab, they may even overtake in sheer numbers one day, but apple will take the cream, and thats where the profit is. Same position apple is in today with computers, except for phones(which are really computers, just small ).
post #10 of 58
I don't understand it all, but nice article Andy M. Zaky.

Quote:
Originally Posted by paulsix View Post

Fact is that even though I am convinced that Apple will do very well in the future, the next two quarters might well see a decline in revenue because of the economic situation

The last month have been unusually rough, but we've been in recession or a decline for at least the past year or so. Remember when Apple's stock was at $200 in December 2007 to $120 in February 2008. It mad it back up to $175 and is now at $95, yet throughout it all, Apple sales are still beating estimates. I see no reason why this holiday will be any different for Apple.
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post #11 of 58
This is the FIRST article I have read that focuses on this issue. When I read those numbers when they were issued I thought they would be highlighted by every man and his dog. How wrong I was!

I believe people are really quite frightened to speak too highly of Apple simply because they are likely to be chastised for creating 'yet more Apple hype' or 'being a fanboy' and under some spell from Uncle Steve.

All I know is that APPL at sub-100 (27 of that is cash) is the investment opportunity of the century. But then I said that when I bought over two years ago!
post #12 of 58
RIMM is at a 20% discount relative to AAPL on GAAP P/E numbers. AAPL has $0.34 EPS for the next quarter in the bank already, on earnings expectations in the order of $1.50. They released updates to their laptops to address significantly pent-up demand in the US, unfortunately the new exchange rates unfavorably impact the price change abroad which may impact demand on Macs. (iPhones will be hurt by exchange rate impact to margins, not sales abroad.)

All told, AAPL is likely 10-15% lower than it should be right now given the broader economic picture.

But here is my real curiosity: Why is it that AAPL earns revenue over 24 months, but T takes the subsidy in one quarter rather than amortizing it into the contract?
post #13 of 58
Quote:
Originally Posted by e1618978 View Post

Except that they aren't taking it into account - which is obvious by the stock price. Apple is currently priced like it isn't experiencing any earnings growth at all.

No, Apple is priced like it's a tech/consumer discretionary company in a recession that the market fears could turn into worse. It has nothing to do with analysts, and everything to do with the fear in the market. If you're right, then hopefully the economy will turn around in time for your calls to not expire worthless. When the market is full of fear, that's the best time to buy. Thank your lucky stars you're getting such an obvious sale, don't complain.
post #14 of 58
Quote:
Originally Posted by aaarrrgggh View Post

RIMM is at a 20% discount relative to AAPL on GAAP P/E numbers.

Assuming RIMM's market share is not gobbled up by Apple.
I dont see RIMM surviving long (unless heaven forbid MSFT buys the company, which IMO would be a great move for microsoft and would certainly prolong its demise)
I believe RIMM has always been overvalued due to investors basing the company on numbers alone and without any prophetic thinking.
post #15 of 58
Quote:
Originally Posted by cameronj View Post

No, Apple is priced like it's a tech/consumer discretionary company in a recession that the market fears could turn into worse. It has nothing to do with analysts, and everything to do with the fear in the market. If you're right, then hopefully the economy will turn around in time for your calls to not expire worthless. When the market is full of fear, that's the best time to buy. Thank your lucky stars you're getting such an obvious sale, don't complain.

Give an example of another company that was priced this cheaply when it was still growing like this, with this much cash per share and no debt.
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post #16 of 58
Quote:
Originally Posted by e1618978 View Post

Give an example of another company that was priced this cheaply when it was still growing like this, with this much cash per share and no debt.

There's no reason to give another company, what you're suggesting is that the very foundation for market is false - that the market does not assimilate all available information. It's you that must prove the outrageous claim.
post #17 of 58
Quote:
Originally Posted by cameronj View Post

There's no reason to give another company, what you're suggesting is that the very foundation for market is false - that the market does not assimilate all available information. It's you that must prove the outrageous claim.

The market has never understood apple, and never will. To truly understand apple takes much vision and knowledge which 95% of humans lack.

To be blunt! And thats being kind.
post #18 of 58
Quote:
Originally Posted by monstrosity View Post

The market has never understood apple, and never will. To truly understand apple takes much vision and knowledge which 95% of humans lack.

You can believe that if you want. Clearly a lot of people around here do. But it's hogwash - the market understands Apple just fine - other participants in the market simply don't agree with the extraordinarily bullish outlook that many here do. That's what makes a market - the tug of war between the bulls and the bears. As a bull, you should be glad that the bears currently have it.

How many people here were complaining that the market "didn't understand Apple" when it was at $200? Nobody. People are just bitter that Apple has fallen just as much as everyone else has in this ugly market. Live with it, get over it.
post #19 of 58
Quote:
Originally Posted by cameronj View Post

There's no reason to give another company, what you're suggesting is that the very foundation for market is false - that the market does not assimilate all available information. It's you that must prove the outrageous claim.

You said it is priced like a tech company going into a recession, give another example - you must have one or you would not have been able to make the original claim (that Apple was fairly priced, because other tech companies are priced like that - I say that there are no examples, because I have never seen a deal this good based on valuation).

The efficient market argument is a cop out, did you think think that Nortel was really worth $87/share during the telecom bubble? The market did, and that was pricing in "all available information", blah blah blah.

There are irrational moves way above and way below realistic values based on expected future cash flows. Apples discounted future is way better than the current stock price, just as Nortel's was way worse than $87. Nortel alone proves that efficient markets are a load of crap, there you go - I have "proved my outrageous claim"... Now what is your other example that shows Apple is fairly priced.
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post #20 of 58
Bravo, Appleinsider, for publishing an article that expands the very definition of your coverage of Apple! While this article may be difficult for some of us non-business types to completely understand, it's admirable that you published it.

If you ever need anyone to write an article about Apple from a medical standpoint, just give me a call! (Nothing on Steve-O's health though, please)

post #21 of 58
Oh, yeah. Go PHILLIES!!! One down and 3 to go!

WOO-HOO!!!
post #22 of 58
"Apple is forced to use what is called the subscription method of accounting for sales of the iPhone"

Except that Apple chose to account for iPhone sales in this manner. Nobody forced them to do it. They still account for Mac and software sales in the normal manner, as they are sold. Most likely they decided to do this to smooth out the quarterly numbers. If they new that they'd have a huge boost in the summers of 2007 and 2008 because of iPhone sales, doing the accounting this way makes the quarter-to-quarter earnings look less volitile. Otherwise, we'd hear the analsysts scream "the sky is falling!" in the Fall quarter because of the huge drop in earnings. Then they'd scream again in the following quarter because of the seasonal drop after holiday sales.

I agree with the basic premise of the article the many analysts just don't get Apple. But I think there are pros and cons of each accounting method and I'm sure Apple did it's homework when they decided to account for iPhone sales in this manner.
post #23 of 58
Quote:
Originally Posted by cameronj View Post

As a bull, you should be glad that the bears currently have it.

Oh I am, and have taken advantage of it.

Quote:
Originally Posted by cameronj View Post

How many people here were complaining that the market "didn't understand Apple" when it was at $200? Nobody. People are just bitter that Apple has fallen just as much as everyone else has in this ugly market.

Just because it was @$200 did not mean the market understood Apple.Just as it is now, it was clueless people following whatever the clueless analysts told them like the sheep they all are.

The blind leading the blind. lol
post #24 of 58
Quote:
Originally Posted by Wiggin View Post

"Apple is forced to use what is called the subscription method of accounting for sales of the iPhone"

Except that Apple chose to account for iPhone sales in this manner. Nobody forced them to do it. They still account for Mac and software sales in the normal manner, as they are sold. Most likely they decided to do this to smooth out the quarterly numbers. If they new that they'd have a huge boost in the summers of 2007 and 2008 because of iPhone sales, doing the accounting this way makes the quarter-to-quarter earnings look less volitile. Otherwise, we'd hear the analsysts scream "the sky is falling!" in the Fall quarter because of the huge drop in earnings. Then they'd scream again in the following quarter because of the seasonal drop after holiday sales.

I agree with the basic premise of the article the many analysts just don't get Apple. But I think there are pros and cons of each accounting method and I'm sure Apple did it's homework when they decided to account for iPhone sales in this manner.

Yes, I thought the reason Apple went for this strange accounting method was to somehow disguise how well the iPhone was doing, and also disguise how much money they made from each phone
- when they first launched the iphone, they were very careful not to divulge how much of a kick-back they were getting from AT & T
- perhaps they're not worried about it any more, since the iphone is available subscription-free in several countries.

Also, as you say, they may have been worried about the potential volatility of sales for this new (for them) market.

Obviously now they're more concerned with their falling share price, and was to gee-up the market with some good news..

Anyway, whichever way you slice it, the iphone's doing phenominally well.
post #25 of 58
Quote:
Originally Posted by monstrosity View Post

Oh I am, and have taken advantage of it.



Just because it was @$200 did not mean the market understood Apple.Just as it is now, it was clueless people following whatever the clueless analysts told them like the sheep they all are.

The blind leading the blind. lol

You are so right on that one, but still there is a bunch of people (analyst) that insist to fit Apple business to others like MS, they don't understand the way Apple works, develop, manage their products. Its like they can't see another model to do business.

Dam funny
post #26 of 58
Low valuation, lots of cash in the bank, etc. Historically this configuration has been a huge risk of a hostile takeover. That would be good for stockholders, but bad for Apple customers.
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post #27 of 58
I love how I just looked at APPL on Yahoo! Finance...

The second or third story from the top is titled "Trade with Cramer: Don't buy Apple" Nowhere in the video does the woman say that people shouldn't buy Apple.

About two or three story lines down from that it reads "Cramer: Apple's Juicier than RIM" - In this video Cramer says that Apple is really an amazing company that can't be compared to other companies like RIM for predicting their earnings.

It's amazing at how stupid these headlines are.

One headline says don't buy - but in the story they say APPL is great
another headline says how great Apple is -
post #28 of 58
I lost the link, but there is a website that tracks these analysts and gives their success rating. Cramer is 48% right, worse than a flip of a coin.

The people on TV that seem to know what they are talking about are Eric Bolling from Fox Business, and Karen Finerman from CNBC (except that Karen is a microsoft fan).
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post #29 of 58
As said above I think it right that Apple wanted to reduce volatility of results stemming from iPhone.

But I also think that they wanted to downplay the success of the numbers in the belief that there can be too much of a good thing. As it's turned out, the market has treated APPL just as any other stock out there and hence the need to accentuate the true numbers.

Either way, my humble belief is that a reasonable P/E for APPL is circa 25, not the current 8 to 15 depending on whose calculations you use.
post #30 of 58
Quote:
Originally Posted by e1618978 View Post

Low valuation, lots of cash in the bank, etc. Historically this configuration has been a huge risk of a hostile takeover. That would be good for stockholders, but bad for Apple customers.

Well, leveraged buy-out activity has completely ceased with the credit lock-up, so I don't think that is much of a risk. Given that once credit markets free up consumer spending should also jump, I'd say LBO of Apple would be nearly impossible.
post #31 of 58
While showing income from iphones over the two year period understates the current period, at some point in the future the reverse will also be true. When the growth curve levels off there will be periods when income is overstated because prior periods will be included.
post #32 of 58
Quote:
Originally Posted by Pachomius View Post

I love how I just looked at APPL on Yahoo! Finance...

The second or third story from the top is titled "Trade with Cramer: Don't buy Apple" Nowhere in the video does the woman say that people shouldn't buy Apple.

About two or three story lines down from that it reads "Cramer: Apple's Juicier than RIM" - In this video Cramer says that Apple is really an amazing company that can't be compared to other companies like RIM for predicting their earnings.

It's amazing at how stupid these headlines are.

One headline says don't buy - but in the story they say APPL is great
another headline says how great Apple is -

Hands-down, it looks to be a great time to buy AAPL. Cramer is big AAPL fan, although he sits in the closet some times. (His current investment strategy is much more focused on dividend-yielding safe-harbor companies though.)

Of course, the worst-case scenario is that Apple starts trading down to its cash position plus one year earnings

The nice benefit of the subscription based accounting is that any recession we see will be balanced nicely by steady or growing subscription revenues for at least another year. That will help make the stock more predictable and easier for armchair investors to value and therefore invest in.
post #33 of 58
I still find it somewhat amusing that the more money Apple makes, the less value the stock has. Maybe I should say less than amusing since I'm still waiting for Apple to be actually worth $200 a share in real world value and not just in some analyst's mind.
post #34 of 58
Quote:
Originally Posted by aaarrrgggh View Post

The nice benefit of the subscription based accounting is that any recession we see will be balanced nicely by steady or growing subscription revenues for at least another year.

I agree, it irons out the blips, and less for the spin doctors seize hold of.
post #35 of 58
Quote:
Originally Posted by monstrosity View Post

... I dont see RIMM surviving long (unless heaven forbid MSFT buys the company, which IMO would be a great move for microsoft and would certainly prolong its demise) ...

Spot on.

Anyone who owns RIMM stock would be wise to dump it if they haven't already. Every single one of their products and their supposed unique advantages is being replicated by other suppliers.

With all the talk around companies coming out with "iPhone killers" (imitators really), people are failing to notice that these same companies are all coming out with "Blackbery Killers" as well.

Flip-phones and sliders are a thing of the past, the market is solidifying around two form facotrs. The Blackberry-esque form with half keys and half screen, and the iPhone form with all screen. All smart-phones are also moving towards always on functionality and exchange or exchange-like email.

Blackberry is trying to stay in the game with an iPhone imitator, but if every company is going to have phones in these two forms, there is really no reason to pick Blackberry over any other. They are already history, they just don't know it yet.
In Windows, a window can be a document, it can be an application, or it can be a window that contains other documents or applications. Theres just no consistency. Its just a big grab bag of monkey...
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In Windows, a window can be a document, it can be an application, or it can be a window that contains other documents or applications. Theres just no consistency. Its just a big grab bag of monkey...
Reply
post #36 of 58
What about the fake earnings!? How much they *they* grow in Q4?
post #37 of 58
EDITED: had to remove this post as my paranoia got the better of me!
post #38 of 58
Quote:
Originally Posted by Constable Odo View Post

I still find it somewhat amusing that the more money Apple makes, the less value the stock has. Maybe I should say less than amusing since I'm still waiting for Apple to be actually worth $200 a share in real world value and not just in some analyst's mind.

as far as I can tell the ENTIRE reason for that (besides the economy in general) is that most analysts are perpetually expecting Apple's "next" quarter to be crap. Apple always blows them away - but then they find some reason for Apple's next quarter to be crap - so the stock goes down.

Oh! You beat EPS by a dime? That's great for last quarter, but.... this quarter RIM looks is going doing bad, so we're selling.

Oh! You beat estimates of iPod sales by half a million? That's great, but we think the market is over-saturated with those things, so there won't be any sales growth for the next year, so we're downgrading you.

I'm guessing that the shortfall on Mac sales for Q4 was because of people like me. My personal notebook died about 3 months ago and I had my desktop to keep me tied over until the new MacBooks came out. I was expecting them to come out in September, so I waited and waited. I was expecting something special, new and priced below $1000. It didn't happen exactly the way I wanted, but I'm very very happy with my new MacBook.

I went to the mall the other day and spent 30 mins on a monday at 5pm watching my local Apple retail store.

1) it was the fullest store in the mall (minus Nordstroms, Macey's, etc)
2) In 30 minutes I saw 4 people walk out with new MacBooks/Pro's
3) Nearly half the 40 or so people that I counted walking in/out of the store had purchased something
4) Several people were in the process of purchasing an iPhone
5) EVERYONE who walked by the store (150 people maybe?) looked at the store. This is important to me because people were only casually walking by all the other stores without looking, but people were noticing (wishing for something that Apple sells?) Apple.

Anyway...
post #39 of 58
There's nothing nothing wrong with the GAAP standard - just questions regarding how it's being applied to Apple versus AT&T. AT&T is subject first-hand to any interruption on its monthly income stream over the life of a two-year contract. The question to ask is whether the subsidized revenue that Apple is presently receiving from 3G sales is subject to contingent risk.

What's the catch? The only way that 3Gs can come to market at $199 and $299 is through a significant cash subsidy paid to Apple by AT&T for being the exclusive service provider in the U.S. Similar deals must apply to arrangements between Apple and other wireless carriers in other countries. Does Apple receive these subsidies monthly from the carriers over the life of the service contract, or does it receive a lump sum?

So - what happens if the recession gets really bad and hundreds of thousands of subscribers bail out on their service? Do monthly subsidies from the phone companies stop, or is Apple required to refund any portion of a lump-sum subsidy that the carrier already paid? That's the risk that GAAP is intended to recognize and expose to investors. It's a risk that both Apple and AT&T shareholders need to know about. It matters a lot to me because I own shares in both.

GAAP is there for a good reason. In hindsight, if we'd had better GAAP guidance in place for credit default swaps, perhaps a few years back we would have recognized the awful risk of excessive sub-prime lending and have forestalled the present global credit freeze and collapse in financial confidence.

I admit to being a Fanatical Moderate. I Disdain the Inane. Vyizderzominymororzizazizdenderizorziz?

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I admit to being a Fanatical Moderate. I Disdain the Inane. Vyizderzominymororzizazizdenderizorziz?

Reply
post #40 of 58
i'm guessing Mr. Zaky bought AAPL @ $180/share.
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