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Apple Inc. Message Board

  • tkell31 tkell31 Jan 27, 2013 11:07 AM Flag

    The real issue - guidance and what it means

    Margins down 20% from 47% to 38%, YoY growth down to 7%, nothing to indicate that will not become the new normal.

    You can talk about new products, cheaper phones, iTV, buybacks, dividends, cash on hand, whatever you want, but the reality is Apple just forecasted, absent change, it is no longer a growth company and some contraction in the EPS is coming. 38% margins are still great compared to the industry which unfortunately means they have room to fall further.

    To put this in perspective to make the same net profit when going from 47% margins to 38% margins revenue needs to increase from 40 billion to 50 billion. If the margins drop to 30% that expands to 62 billion. Margins certainly arent going to drop further tomorrow, but it's something to consider because if the revenue growth stays as low as 7% it will take YEARS to make up for the drop in EPS. For example, using next quarter it would take 3.3 years to get EPS back to 12.3 from where it will drop if margins stay at 38% and revenue increases 7% yoy. This isn't my opinion, it's just math. Should the margins drop further during that time then the time frame to get back to where they were expand with it.

    Now it does seem odd that revenue would grow 18% last quarter and drop to 7% next quarter, but then again the iPhone5 was already offered to every country they are going to offer it in and by the end of the quarter they had excess phones in the pipeline indicating demand dropped quickly.

    I cant make it any simpler or clearer than what I just did. Make no mistake this is not a temporary issue. A cheaper phone could help with revenue while putting further pressure on margins. A new product would certainly help to the extent it didnt hurt sales of other products.

    I think there is a tendency to think "Hey, it' Apple, they will figure it out" and they might, but NOTHING makes up for declining margins other than increased sales/revenue and right now they are saying that increase isn't going to be there.

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    • Guidance is a key issue. The CFO made poor judgement by giving the bears some food if the used their brains or clubs to beat longs senseless if they didn't want to think. Go listen to last 4 mins of conference call.

      CFO chose to drop some 2B from guidance numbers and thought explaining that thou roughly would get WS to wise up, he was of course wrong. Using last years standards guidance would have been 43-45b inline with expectations. CFO screwed longs by being defiant of the assault on appe. No reason to drop any my numbers lower due to a new calculation method while everything is being turned negative against the company.

    • I can not make it simpler than to say you are an idiot.

      Wrong at the first sentence and pretty much every single point -- that is a really funny "accomplishment."

      When you are talking about real topics vs simply moronic bashing, get the facts straight or prepare to have folks point out how stupid your comments are.

      • 2 Replies to squeezetracker
      • Still waiting nit wit.

      • Hey Squeeze, you sound like you are much smarter than me so mind pointing out why I'm an idiot and how I'm wrong in the first sentence? Those are Apple's own numbers, but I'm sure I messed it up somehow, so please explain.

        Tell you what if you can do that I will never post again...and I'm not talking 19.5% v 20% I mean how the first sentence is wrong. By all means if there is public information that indicates revenue in the third quarter and beyond will increase faster please do so. So there you have it back up what you claim you mental midget and I will never be seen or heard again.

    • Please buy FB.
      Your rationale and misrepresentations will be met with full acceptance there.
      Let's see who is still around in 5 years, AAPL or FB.

    • The margins they forecasted for this coming quarter were down to 37% from about 38.5%, not down to 20%. 20% you may be talking the forward growth. And last quarter despite supply shortages of IPHONE5 and IPHONE4 much of the quarter, overall Apple grew its sales by over 25%. Including 29% increase in IPHONEs and 49% increase in IPADs sold.

      • 1 Reply to aiwal1
      • God people are stupid. The margins were 47 percent second quarter last year, this year they are projecting 38 percent. The percentage drop form 47 to 38 is roughly 20 percent i.e. 38 is about 80% of 47. So my IQ challenged friend, when you compare second quarter 2013 to second quarter 2012 you have to use the numbers from the respective quarters not the one that just passed.

        Why do I assume yahoo poster can do third grade math?

    • My take on this is that in the short term, there is likely to be margin compression both in percent and probably in dollars. Longer term, I think APPL has the resources to increase gross margin dollars to offset the decline in margin percentage. New products, expanded lower end product lines on existing products and pursuing relatively untapped markets for these products is where the additional margin dollars come from. If they also buy back shares of stock, that would help also.

      • 1 Reply to bobdicks123
      • Sorry, just so I understand are you saying increased revenue will make up for the decline in margins? I'm not sure what

        "I think APPL has the resources to increase gross margin dollars to offset the decline in margin percentage."

        would mean otherwise. Expanding revenue would be one way to tackle it, but with revenue projected to grow 7% next quarter that would take some time which is my immediate concern with the stock. The big question then is will revenue growth accelerate in future quarters.

        I'm hopeful they will release new products to capture the lower end market while maintaining market share in the upper end, but that is going to be a juggling act. As some have pointed out it does appear the Mini iPad ate into the full size iPad sales in addition to reaching additional consumers. Expecting a completely new product to save the day seems extremely unrealistic.

        Yes, share buybacks would help, but realistically I dont see them spending much more than already allocated unless the price significantly drops from here. Even doubling the allocation wouldnt be enough to buy back much more than 1% of the stock. Personally I would rather see a larger dividend hike to get 3%.

        Initially I thought this would have a bounce, now I'm not so sure now. The numbers for second quarter really dont warrant much enthusiasm. I think this is a 390-400 stock at this point since the market never seems to care about cash on hand like shareholders think it should.

    • Microsoft YOY earnings down 3%; didn't meet analyst rev estimates: Microsoft stock price is UP.
      Just give Apple Microsoft's pe of 15+: Apple stock now $675. your argument doesn't hold. Apple crashing due voodoo forces - not for financial technical reasons. The stock market is in a major BULL market - solars in $billions in debt & losing money every day have double in stock price due to bull market.

    • 27% yoy growth reported and in the financial records. Do you just make up numbers?

      Sentiment: Strong Buy

    • Oh, and a reasonable price target with the known facts - $390-$400. That's a PE of 10 based on the probable EPS for 2013 of $39-$40.

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