Wednesday, January 6, 2010, 10:36PM ET - U.S. Markets Closed.
Apple shares tumbled Tuesday in the wake of its disappointing guidance. But this is one of those times where you need to separate the stock from the company, which appears primed for stellar long-term growth and market-share gains.
First, the numbers: The company's fiscal fourth-quarter guidance of $1.00 in EPS and revenue of $7.8 billion were well below expectations of $1.24 and $8.32 billion. Apple also forecast margins would fall to 31.5% in the fourth quarter vs. 34.8% in the third and would continue to fall toward 30% in fiscal 2009.
Declining margins are poison to Wall Street, especially short-term, to momentum traders who had previously been big believers in Apple's growth story. That crowd is bailing out -- as they are wont to do -- in reaction to Apple's strategy, which appears to be a willingness to sacrifice short-term margins in order to gain market share.
As Apple CFO Peter Oppenheimer said on the conference call, Apple plans to "deliver great value to our customers while making a reasonable margin, but not a margin so high as to leave an umbrella for our competitors."
As Henry and I discuss in the accompanying video, this is smart thinking on Apple's part from a long-term perspective, and poses a direct threat to PC makers, notably H-P and Dell.
"This would have been unthinkable just a few years ago, but now it seems like a great time to make a real run against Windows-running rivals," writes AlleyInsider's Dan Frommer. "Microsoft's Vista has a tiny fan club, PC manufacturers continue to churn out uninspiring machines, and as more software moves to the Web, companies (and individuals) have fewer reasons not to buy a Mac."
I agree, but, again, company fundamentals and its stock price often can (and do) diverge. That's especially true during a change in the makeup of its shareholders from short-term momentum traders to long-term investors, as is now underway.
speaking from a pure consumer perspective; the new iPhone is going to dominate the smart phone arena. I have been compareing other products against the iPhone in the similar price ranges and there are nothing out there that can compare with the iPhone's design, chic and benefits. apple has been conservative in their outlooks in the past and they will continue to be conservative.
apple stock is used to pay apple executives, not profits to shareholder investors. not uncommon in the tech industry, but not obvious to the lay investor and mutual fund owner.
why is this guy on the left mimicking Cramer? I can't take him seriously.
I like apples. But omlY the crunchy thems. Good job to sell. Will make lots of dollars.
Apple is gaining BIG market share. I'm a traditional PC guy, but work at a large university, have seen MANY more MACS in the hands of students and Faculty/Staff. The iMac is way ahead of any PC maker, and the Apple advantage now (which used to be a disadvantage) is that they are propietary and can tailor the O.S. to their hardware. Part of Microsoft's problem is they have to make XP, Vista, work with MILLIONS of pieces of hardware and software packages which causes problems. Not to mention that whoever has the greatest market share is the biggest target for hackers and ne'er do wells. If the iPod stays hip and they keep making slick all-in-one's like the iMac at competetive prices Apple will gain BIG market share in the next 3-5 years.
For the first time ever, I agree with MOST of you.... BUYER BEWARE
All I can say is that I have owned Microsoft IBM capatible PC's for many years, but with Microsofts blunder with Vista that may change my ownership. At least Apple still remains compatible with older software on older operating systems. Their virus protection record compared to Microsoft is also an eye awakening point. My next computer soon will be an Apple brand because Microsoft has gotten too big and greedy for the common good.
Anyone who dogs Apple over stocks and prices should note that Google is very high to own and is popular like Apple. Many stockholders of Google would like to see a split but that does not deter the company from producing a innovative business. Have you seen the article that explained why its a dream to work for them. Back to the Apple comments. Apple will eventually conquer the giants and be at its best soon. Vista unless its corrected will be Microsogft downfall. Its cheap stock but it has remained flat for years. Price does not always measure a companies success with the consumer.
I have made tons of money with Apple over the last couple of years. I fully expect that trend to continue for the next five. Longer horizons than a quarter or two are what it's all about anyway. Buy and hold used to mean two or three years. Nowadays it's six to nine months. While increasing market share may scare off the short term momentum guys, it is actually a cold calculated strategy that will make Apple grow at a phenomenal rate six months to a year from now. The stock price will only begin to reflect that then. Apple, YOU ROCK!
I think this is a smart move by Apple. The PC users are older. The young people love Apple & all the toys that are compatiable. Now Apple is cutting price and margin for market share. So share price will go down temporarily but the whole market is down. Watch this stock when the market turns up.
Hmmm..I remember all the predictions that Apple would hit $200 by June. Did it? Then, there was the analyst who predicted just a couple of weeks ago that it would hit $245...let's see....
Successful company with profit grow like Apple would cause a huge stock price fall like hell. Unsuccessful company like Freddie Mac and Fannie Mae will make stock price jump 30% and 20% in three days. What kind of investment philosophy?
Last night on one of these commentaries I noted that the severe drop after the bell smelled suspiciously like orchestrated short selling. I predicted the signs of a classic short squeeze today, and it appears that I was correct. The fundamentals of the stock have not changed. It was good at $200. It was good at $180. It's been great from 120 to 160. I predict over the next few days that the upward pressure will dominate any fear-mongering and that the stock will reflect this by returning to between 180 and 185, mainly because the saner heads out there will realize that the potential for the company with its prudent, conservative policies and logical strategies that build upon its in creasing market momentum is almost unlimited. So if you have some funds on the sidelines, you will (depending on when you read this) immediately take advantage of the long-term outlook and purchase as many shares as you can reasonably absorb and sit on them. You will be extremely glad that you did!
@ashfordochs "I've owned AAPL since the late 80's--one split (thank you), no dividends, and wild ups and downs. It takes true devotion to hold on to this stock!" Apple split 2-1 June 87, June 00, Feb 05. And paid a dividend from June 87 to Dec. 95. You need to apply some of that "true devotion" to keeping better records.
WHAT IS THIS AFTER HOURS TRADING AND WHAT WAS THE READ ON THE NUMBER OF SHARES THAT WENT THROUGH TO BRING THE APPLE PRICE DOWN SO FAR . IT BLEW MY MIND AFTER WORRING OVER WHAT WAS GOING ON ALL DAY THAT DAY AND THEN ....BOOOM... BUT THEN IT SEEMS TO HAVE COME BACK PRETTY NICELY..WHAT HAPPENED?
I've been a Mac user and investor for years. For the long term, the product and the company can't be beat. I look at the stock and try to figure out where to get more money to buy with. I'm a believer in the company and in Steve.
Apple is a great company for the long haul. Be patient and hold long. As far as the comment from ashfordochs, not sure what you mean since Apple has split 3 times since 1987. More recently in 2000 and 2005, both 2/1 splits.
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foodie - Tuesday July 22, 2008 03:02PM EDT
ok apple give me that 10% margin 500 dollar macbook.