Apple Inc.’s “Q1 was hardly a ‘bad’ quarter. Revenue rose 18% as reported, and when adjusted for weeks (last year had an extra week), revenue was up 27%, about in line with the last few quarters. Gross margins dipped to 38.6%, well below Apple’s 40%+ numbers for the past 3 years. This should be little surprise – Apple’s markets have grown quite crowded, with many competing devices being sold at cost. So maintaining a decent normalized growth in profits isn’t too bad. And let’s not forget Apple’s absurd $137 billion in cash and debt-free balance sheet, because a lot of “investors” ignore it,” MagicDiligence writes for Seeking Alpha.
“All that said, I was disappointed in the quarter. And not for the reasons being popularized in the media,” MagicDiligence writes. “I believe Apple shot itself in the foot by refreshing virtually its entire product line right before the holidays… Tim Cook made his bones as a highly renowned operations manager. This is what he’s supposed to be good at. But we’re getting some concerning red flags here. The hiring and subsequent firing of former retail head John Browett was an embarrassment (retail same store sales were up only 2% in the quarter, another concern). Cook still hasn’t hired a replacement. Firing Scott Forstall was another big risk, but we’ll see how that goes. And now some poor planning and execution on new product launches.”
MagicDiligence writes, “All this said, Apple’s valuation right now is comical. Its EBIT/EV earnings yield is 18.1%, which is far higher than stagnant, declining competitors like Hewlett-Packard (HPQ) (16%) or Dell (DELL) (12%). That’s just funny.”
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MacDailyNews Take: As we wrote yesterday, in part:
If you wish Apple simply had their iMacs ready when they were supposed to be ready and not two months late, thereby missing out on approx. 1+ million holiday quarter Mac unit sales (which would have just so happened to contribute more than enough to beat the Street soundly), you’re probably long AAPL… If you know anything at all about Apple product supply/demand, you know that Apple customers have proven they will wait. Therefore, you understand that sales of iMac, iPad mini, and iPhone 5 (all of which were constrained during the last quarter) will be pushed into this quarter, with its drastically lowered expectations, which means you’re thinking ahead.
