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

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  • Reply 41 of 57
    quinneyquinney Posts: 2,525member
    Quote:
    Originally Posted by e1618978 View Post


    Based on cash flow being so much larger than earnings(and larger than non-GAAP earnings also) , I would say lump sum. They have $5.6 billion in deferred revenue on their cash flow statement, and I think that it has to show up in their bank account before they can put it on the cash flow statement.



    http://yahoo.brand.edgar-online.com/...3125-08-213642



    Also, AT&T seems to be accounting for the subsidies as a lump sum at the time of sale,

    based upon their statements regarding their recently released earnings. As an earlier poster

    pointed out, it would seem that AT&T would benefit (smoother earnings) from using the

    subscription method for their iPhone subsidies. Also note that if AT&T subscribers bail

    out of their contracts, they incur a termination fee, which ostensibly compensates AT&T

    for the subsidy they already paid Apple.
  • Reply 42 of 57
    sflocalsflocal Posts: 4,652member
    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.



    Nah, I didn't do the math but even with current prices, the amount of money it would take to buy Apple is too high a price tag for most companies to swallow. Perhaps Microsoft can use its own cash hoard??
  • Reply 43 of 57
    e1618978e1618978 Posts: 6,074member
    Quote:
    Originally Posted by sflocal View Post


    Nah, I didn't do the math but even with current prices, the amount of money it would take to buy Apple is too high a price tag for most companies to swallow. Perhaps Microsoft can use its own cash hoard??



    The Saudi sovereign wealth fund has over $1 trillion, and I imagine that they are tired of investing in banks that fall off a cliff, and tired of treasuries that return near 0%. But you are right, probably not many buyers right now.
  • Reply 44 of 57
    Think about it...



    With slowing consumer spending, this is actually a good thing for Apple to be able to spread its earnings out over that period of time. Sure it sucks in the short term, but buy up some stock.



    (And yes, I am long...and in fact I have options that expire in the short term that are being hurt by this accounting method...but in general for the company and the shareholder, this will help Apple weather the consumer downturn if it is affected by it)
  • Reply 45 of 57
    Quote:
    Originally Posted by e1618978 View Post


    The Saudi sovereign wealth fund has over $1 trillion, and I imagine that they are tired of investing in banks that fall off a cliff, and tired of treasuries that return near 0%. But you are right, probably not many buyers right now.



    Would be a very silly mistake for ANYONE to attempt to buy Apple, the moment anyone did, the company would be worth considerably less overnight.
  • Reply 46 of 57
    mj webmj web Posts: 918member
    I applaud your research and subsequent article but another underlying cause of AAPL's sharp recent decline has been the orchestrated gossip campaign by the shorts and hedge funds reporting Steve Jobs' imminent death!
  • Reply 47 of 57
    Quote:
    Originally Posted by MJ Web View Post


    I applaud your research and subsequent article but another underlying cause of AAPL's sharp recent decline has been the orchestrated gossip campaign by the shorts and hedge funds reporting Steve Jobs' imminent death!



    I realize that the volatility is troubling for a lot of investors, but as many have observed: (i) If you're in it for the long haul, the current volatility is irrelevant; (ii) If you're in it for the long haul, the current price levels for many stocks are quite attractive; (iii) If you're not in it for the long haul, you probably shouldn't be in the stock market.



    As far as I am concerned, these hedge funds -- if that's who is causing the volatility -- are handing me a nice long-term gift. As Warren Buffett recently observed, 'be fearful when others are greedy, and greedy when others are fearful.'
  • Reply 48 of 57
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by Kibitzer View Post


    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?



    I don't know if you were just being rhetorical or really wondering, but I think it's pretty clear from the fact that Apple reported such crazy positive cash flow that they get the full price up front, and only for the books do they amortize it.
  • Reply 49 of 57
    mj webmj web Posts: 918member
    Quote:
    Originally Posted by anantksundaram View Post


    I realize that the volatility is troubling for a lot of investors, but as many have observed: (i) If you're in it for the long haul, the current volatility is irrelevant; (ii) If you're in it for the long haul, the current price levels for many stocks are quite attractive; (iii) If you're not in it for the long haul, you probably shouldn't be in the stock market.



    As far as I am concerned, these hedge funds -- if that's who is causing the volatility -- are handing me a nice long-term gift. As Warren Buffett recently observed, 'be fearful when others are greedy, and greedy when others are fearful.'



    Well said. I'm long AAPL.
  • Reply 50 of 57
    samabsamab Posts: 1,953member
    Quote:
    Originally Posted by MJ Web View Post


    I applaud your research and subsequent article but another underlying cause of AAPL's sharp recent decline has been the orchestrated gossip campaign by the shorts and hedge funds reporting Steve Jobs' imminent death!



    If it's pump and dump --- then all the upside is garbage as well. It goes both ways.



    Hedge funds need money to pay for their losses --- so they are selling Apple shares. Nothing to do with pump and dump.
  • Reply 51 of 57
    Quote:
    Originally Posted by Kibitzer View Post




    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.



    Is Apple still getting monthly $$ from ATT, or did that end when ATT began subsidizing the initial price?



    I thought it ended but Apple continued to use subscription accounting because they may provide software updates in the future at no cost to the customer, so they needed to report income incrementally along with the cost. Is this not correct?
  • Reply 52 of 57
    Quote:
    Originally Posted by sflocal View Post


    Nah, I didn't do the math but even with current prices, the amount of money it would take to buy Apple is too high a price tag for most companies to swallow. Perhaps Microsoft can use its own cash hoard??



    Take over...who's going to run it better than Steve and company. I think they are safe.
  • Reply 53 of 57
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by lolick View Post


    Is Apple still getting monthly $$ from ATT, or did that end when ATT began subsidizing the initial price?



    I thought it ended but Apple continued to use subscription accounting because they may provide software updates in the future at no cost to the customer, so they needed to report income incrementally along with the cost. Is this not correct?



    No real way to know. If nothing changed, then yes, Apple is still getting payments. But there could easily be legal agreements that changed that. First of all, the vast majority of iPhone 2G buyers probably bought a 3G, so that may have ended the monthly payments. Secondly, ATT and Apple could have agreed to end the payments with the start of the 3G subsidies. No way to know what actually happened though.
  • Reply 54 of 57
    kibitzerkibitzer Posts: 1,113member
    Quote:
    Originally Posted by cameronj View Post


    I don't know if you were just being rhetorical or really wondering, but I think it's pretty clear from the fact that Apple reported such crazy positive cash flow that they get the full price up front, and only for the books do they amortize it.



    Agreed. See the extensive discussion of why GAAP and subscription accounting is employed with respect to iPhones and Apple TV in the quarterly results news release text at this link:



    http://sec.gov/Archives/edgar/data/3...642/dex991.htm



    See the table at the very end for the unaudited comparison of GAAP vs. non-GAAP results. Given the extremely wide range of analyst estimates for AAPL's target price, I wonder whether some of them have correctly reckoned the effect of deferred revenue and COGS recognition.
  • Reply 55 of 57
    Quote:
    Originally Posted by Kibitzer View Post


    Given the extremely wide range of analyst estimates for AAPL's target price, I wonder whether some of them have correctly reckoned the effect of deferred revenue and COGS recognition.



    Heh heh..... good point. If someone hasn't, they should be fired on the spot.
  • Reply 56 of 57
    samabsamab Posts: 1,953member
    Quote:
    Originally Posted by Kibitzer View Post


    Given the extremely wide range of analyst estimates for AAPL's target price, I wonder whether some of them have correctly reckoned the effect of deferred revenue and COGS recognition.



    They have all correctly reckoned those things.



    The real difference between the analysts is all the "unknown" factors that they put in the fine print.



    Munster estimated 45 million iphones sold at the end of next year. His mathematical model includes all kinds of things that may not happen --- like an iphone nano. So his price target is $250.



    Aside from a brief rumor from taiwan about the iphone nano months before the 3G iphone was announced --- no other rumor about an iphone nano has since surfaced.



    All the other analysts don't think the iphone nano rumor was creditable at all --- so they don't include it in their analysis. Therefore the price target is like $125.
  • Reply 57 of 57
    Quote:
    Originally Posted by AppleInsider View Post


    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 did some quick spreadsheet math that makes me come to the conclusion that the Q4 iPhone sales are worth about .21/share per quarter for 7 additional quarters. So if Apple sells 7M iPhones each quarter that is an average of .21/share for each quarter added to EPS. So in this quarter .42/share for Iphones.. Q109 (calendar) .63/share and so on. If Apple sells 28M iPhones in 2009 the EPS for calendar 09 should be about 3.00/share just for phones...Now assume all other business is flat...they should then post 4.40 in non iPhone related EPS... $7.40 seems like a very conservative number for calendar 2009.



    Ok, lets now assume another year gets added and they continue to sell only 28M iPhones per year. That is another $3.00 added to the earnings in 2010. So just for iPhone alone they could be over 6.00/share EPS in 2010 on a GAAP basis. At this point earnings growth will plateau (without handset growth) since they will start losing the subscription revenue accounting from phones sold two years prior. This is where they will need iPhone unit growth to increase revenue/EPS for iPhone.



    So with some modest growth of Mac, iTunes, iPod EPS 2010 EPS could be well above $12/share.



    Assume a multiple of 18 in 2010 and AAPL could be trading at $216.



    Has anyone else come up with similar conclusions about Apple's potential...I'd like other opinions if my thinking is flawed in any way.



    Disclosure: Long Apple 2011 calls.
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