Over the past decade, well over a thousand Wall Street analysts, money managers and institutional investors have joined thousands of savvy private investors in gaining key tech industry insights and intelligence from industry veteran and celebrated investor Paul McWilliams in his role as editor of Next Inning Technology Research.
In this exclusive interview, we asked McWilliams about his thoughts on Apple (AAPL) after its earnings report earlier this week. Readers can access McWilliams' detailed review of Apple's earnings, as well as his extensive investigation of Apple and 70 other companies in his new 167-page State of Tech Report, a must-read for technology analysts and investors, via a free, no-strings-attached trial.
Q: The market was very excited about Apple's year-over-year growth across a variety of metrics. Is this the best way to look at Apple's results?
A: The Apple bulls have been looking for an excuse to run, and given the 50,000-foot view of the data, that's what Apple gave them this week. However, there is a difference between an excuse and a reason, and I think when clearer heads have a chance to digest the data investors will make that distinction more clearly than we're seeing today.
Both fiscal Q3 2013 revenue and earnings were above muted expectations, and cash flow is again impressive. Apple's fiscal Q4 2013 revenue and earnings guidance were also ahead of consensus expectations. As the data shows, the headlines about the strong showing year-over-year growth in iPhone sales are correct. But I'm not sure why this euphoria has masked the poor sequential showing.
Q: Are there important aspects of the Apple story right now that the media and investors are missing?
A: One that I haven't seen much about is Apple's relationship with carriers in the U.S. and overseas. Tn the beginning Apple was in such a strong position with the then-revolutionary iPhone that it got the sun, moon and stars from AT&T (NYSE:T), and the sun and moon from Verizon Communications (VZ) when it came on as the second U.S. carrier. From what I've been told, Apple got at least the sun when it signed on new carriers in Japan. In other words, Apple used its sway very effectively to insure it got the attention it wanted from the carriers and that its iPhones were sold in preference to competitive models.
The question now is whether Apple still has enough sway to do this going forward. Personally, I think with the plethora of impressive smartphones in the market today the negotiating leverage between Apple and the wireless carriers has moved back towards neutral.
Q: What's next for Apple?
A: Well, I go into extensive detail on this question in my review of Apple's earnings, including a number of detailed charts that break out the results in various interesting ways [Ed note: available via a free trial], but the bottom line here is that the results offered just enough of the optimism that investors were looking for. The big question, which I have some ideas about in this report, is what is coming this fall.
When I flipped to a bullish view of Apple a bit more than 10 years ago I thought the investment case was obvious and compelling. When I grew concerned and suggested that readers sell the majority of their Apple allocation in the spring of 2012 when it first pushed above $600, and then again in the fall at $700, I cited specific risks that have all since materialized. Back then I viewed Tim Cook as only a wildcard risk that could go either way. I've since taken a decidedly negative view of Cook - my hope is he proves me to be wrong this year.
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