Time to take advantage of Apple’s Q2 guidance misdirection?

“No analyst is including [Apple’s] tsunami of revenue sharing due from iPhone sales and partnerships, which is accruing at a monster rate (currently $1.2 Billion) the earnings from which are amortised out over a period of 24 months on a subscription account scheme,” Julian Ivan-Alexander writes for Seeking Alpha.

“Apple has the equivalent of an additional 25c earnings in free cash flow, which had it been taken into account would have resulted in Q1 earnings of $2.01 instead of $1.76,” Ivan-Alexander writes.

“So for Q2 – for which Apple guided for 94c, they should be able to deliver $1.42,” Ivan-Alexander writes.

“Apple did a typically über-conservative guidance for Q2, and the stock was train-wrecked by the lynch mob as a result. Apple will earn between $6 – $6.50 this year rather than $5, and approximately $9 in FY09 again the $6.42 expected,” Ivan-Alexander writes. “That’s why its dirt cheap here… Had Apple guided realistically instead, the stock would have been closer to $200 today instead of hitting a low of $126.”

Ivan-Alexander writes, “AAPL is cheaper at $126 relative to its growth than at almost anytime in the last 5 years. Now’s the time to buy.”

Full article here.

[Thanks to MacDailyNews Reader “Macaday” for the heads up.]

22 Comments

  1. so I wonder why Apple does this? they don’t do ANYTHING without a strategy behind it. in other words, they knew there was a very good chance that by guiding low they would incur a mass selloff.

    hmmm…

  2. I say crap. If Apple guided too high then they would be massacred too. Better understate than miss guidance due to the economic climate.

    A few things freaked the market:
    1. Flat iPod numbers (the market ignored 2M iPhones sold and higher unit revenue).
    2. Lower Mac sales (not 2.5M as rumored).
    3. General concerns for luxury spending (market forgets the wealthy usually always have money)
    4. Brokers FUD to drop the market for their own benefit.

    Apple guided correctly IMHO. The media, brokers etc hype and bite to create movement.

    Apple’s revenue and profit are great. It will be interesting how many units they move in the next 6 months.

  3. The truth that I’m beginning to see is that Apple HAS TO CURB expectations.

    If it didn’t I believe expectations would rise even more astronomically, leading to far worse scenarios.

    After all, the share price doesn’t affect operations and its ability to deliver because it is cash rich, but the people who suffer are those long investors that have had no choice but to offload at this moment, even then limit the sympathy because of the growth over the last years.

    Short term traders? Well, they are just gambling after all…

  4. You’re right Cubert! But I don’t retire for another 15 years or so!

    Wonder what they will be then..hazard a guess?? Depending on the longevity of MDN, we may be able to find the question and answer in 2023!

  5. Yeah, Market mania. Apple stock prepping for take off. More and more writers are pointing out that Apple is cash rich, and raking in the money on advancing sales.

    PS. I fully expect iPod sales to STOP increasing!!! You heard it here first. Now, I do expect them to start a flat (based upon quarter) rate. This means that there is a replacement rate plus a slow to middle growth in new users. (remember that the iPod works for years and years and does not have to be trashed every year.)

    3…
    2……
    1…..

  6. I understand why AAPL went down, but why has AAPL kept going down while most others have jumped back up?

    Are the iPod and iPhones plateauing in growth since there are only so many rich geeks out there?

    Now would seem a good time to introduce ‘mini’ versions of the iPhone and iMac with more limited function (RAM, graphics, ports, etc), but a price tag that everyday users can grasp.

    For example:
    • a 2GB iPhone with no camera and pay-as-you-go SIM for $199
    • a 1 Ghz, 512M, VGA-only Mac Mini for $399
    • a 1.6 Ghz 15″ iMac with integrated graphics for $899

    There is a whole world out there who would love an Apple product, but cannot afford any of their models.

  7. @British Mac Head. You can buy as many or as few as you want, but watch out for commission. AAPL is traded on NASDAQ not LSE, so you have to pay extra, but shouldn’t be more than 17.50 for the trade. Try opening an account with http://www.fool.co.uk (actually Halifax). It will take a week or so to open, though. Then you trade online. Open in an ISA if possible.

  8. If you have APPL, hold it and ride out the storm.

    If you don’t, don’t buy any until it hits bottom.

    Where is bottom? (Right between the buns. ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

    When the US recession is looking like it about to end and the market/economy is about to grow again, which it will from the increase of population that unfortunately always occurs.

  9. Time to take advantage of Apple’s Q2 guidance misdirection?

    Purposeful misdirection if you ask me.

    Steve Jobs is a old smoothy, he knows the US economy (his major market) is headed for a post real estate bubble recession.

    His job is to make Apple stock appear as great as possible, lessen the effects of a recession on his stock value, why?

    Because Steve Jobs only took $1 in salary every year since he’s been back at Apple. He instead holds a lot of Apple stock, which some of it he has manipulated to get better earnings, was the subject of a SEC investigation.

    Steve Jobs also refused for a long time to provide Apple Care in certain US states because it required disclosing certain details of Apple with these state agencies to correlate with their respective tax departments.

    So we KNOW Steve Jobs will “fudge” things and this “misdirection” is one of them. The media is his lap dog and facilitator in this great scheme to prop his stock and take investors for their money.

    My advice is to wait out the recession, then buy on a long term basis. Don’t buy into the scam.

    We all want Apple to succeed, but Steve is willing to fudge things a bit which hurts Apple to get ahead.

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