Apple shares tumbled in after hours trading ($156.16,-10.13, -6.09%) as the company offered guidance of $1.00 EPS on $7.8 billion in revenue. First Call analysts’ consensus estimates are for $1.24 EPS on $8.32 Billion in revenue.
Apple is notorious for providing conservative guidance.
Apple today posted Q308 revenue of $7.46 billion and net quarterly profit of $1.07 billion, or $1.19 per diluted share versus analysts’ consensus expectations of $1.08 a share on revenue of $7.4 billion. These results compare to revenue of $5.41 billion and net quarterly profit of $818 million, or $.92 per diluted share, in the year-ago quarter.
As usual on these occasions, my advice is:
“buying opportunity”.
shen???
In case you’re COMPLETELY out of touch with reality, the DEMOCRATS control the HOUSE and the SENATE.
You DO know that the HOUSE and the SENATE are what comprises Congress, don’t you?
Are you really THAT stupid???
Never mind, your ignorance is astounding to the point of amusement, so hate on.
And one more thing:
How is that that these godforsaken Banks get a boost for “LOSING” less money than expected, and Apple gets hammered for blowing through YTD numbers… Wall St., Apple, they really are “all in on it.”
Guidance was “ABOUT one dollar”. Emphasis on “ABOUT”. They did not say exactly one dollar, or anything like it.
Given that revenue is 5% higher, and given that margins should not be much different, then the actual guidance, would be around $1.18 in my opinion.
Apple is deliberately VAGUE, not conservative. Am I the only one who took science in college, where the topic of significant figures were explained?
If the corrupt bastards at Apple do this every single quarter, why exactly would insiders need a “wink” to know they were going to do it again?
@Sixvodkas
Shen is off to his normal anti-Republican rants. As usual, he demonstrates a total lack of knowledge, no command of facts, and bizarre pretzel logic that is not really so surprising considering how devoid of comprehension of the real world he is. I blame our schools.
@The Muffin Man
its dropping because of one health comment about jobs
Steve Jobs needs to get off his ass and make one big announcement to the community that he is in good health and has nothing wrong with him. It will take Steve, not some random dude from apple, to announce he is ok. Then maybe we can see people stop panicking and buy some more stock. I just transfered money over. Probably buying more shares in the morning, though might need to hold out. It might drop again.
SixVodkas,
shen reported he/she has children. We can only hope that they are:
1. adopted, and/or
2. from his spouses former marriage
If they are shen’s progeny, we have another generation of ignorant twits to deal with.
KenC,
You should realize that the stock market is as much human judgement and intuition as it is rigorous financial analysis.
There, there, kitten. It will be alright.
Here’s how this will play out. The stock will get hammered tonight, and more so as the short-sellers have their little orgasm.
The stock will dribble down further for the next week or two. Then, quietly, as the overreaction subsides, buyers will see that it was Wall Street being silly all over again, and see that the company is a good buying opportunity. And the stock will climb again.
Remember (and I will repeat this below): a stock’s price will eventually track the company’s earnings. Read Peter Lynch’s excellent book,”Beating the Street” to understand why.
So be patient. There’s no need to overreact, unless you absolutely have to sell today or tomorrow. Smart investors don’t panic on conservative projections. Smart investors choose companies that are well managed and profitable, and will continue to grow. And they hold on to the stock as it appreciates over time. As others have said, if Apple had announced that it missed its sales and especially earnings targets, this would have been cause for alarm. But that did not happen. So look past the conservative guidance.
Over the next two months, the stock should rebound nicely, especially as news comes in that worldwide, iPhone sales are going through the roof. And a couple of months from now, I am willing to bet that Apple will announce deals in China and Russia, and that the company’s Mac sales will continue to increase market share. That will change the sentiment of the market dramatically.
Oh, and Botvinnik: regarding your post above, it’s actually EARNINGS, not sales, that matter. Stocks eventually track and match what a company’s earnings do. You can have a gazillion dollars of sales, but if your costs are out of control, you can still lose money. Read anything by Warren Buffett or Peter Lynch, and they will tell you: it’s all about earnings.
Have a good evening, children. Sleep tight. And don’t let the Wall Street speculators, short-sellers and hedge funds bite. (They were primed to do this today anyway, no matter what Apple announced.)
It just generates a buying opportunity, it always climbs back up.
But it does yam me off that despite record-setting numbers it still drops.
Bite me, pops.
Ah, so this is what it feels like to be beaten mercilessly… I always wondered.
A few comments in reply to some of the comments made above.
Chaplin asks: “Why can’t people simply look at how a company is performing in the present!”
Because the equity markets are not retrospective. Nor do they reflect a snapshot of current reality. Rather, they are forward-looking, typically about six months ahead. This is by design. Expectations, and expectations management is key.
Several commenters complain about AAPL’s conservative guidance. While this practice by AAPL execs is well known to analysts and investors, the issue is that Q4’s guidance is a more conservative than usual. AAPL CFO Peter Oppenheimer attributed the lower Q4 guidance to (a) back to school promotion, (b) product transition costs, and (c) stock-related compensation expenses.
KenC wrote: “Given that revenue is 5% higher, and given that margins should not be much different, then the actual guidance, would be around $1.18 in my opinion.”
No, this is wrong. AAPL CFO Peter Oppenheimer guided Q4 gross margin as 31.7%, which is significantly *lower* than Q3’s gross margin of 34.8%. And his EPS guidance for Q4 was “about one dollar”, which no matter how you slice it is substantially less (and even more conservative than usual) than the market expectation of $1.24 (First Call consensus).
Although the more-conservative-than-usual guidance did hurt the stock in after hours, the real reason the stock got hammered in after hours, as well as in the weeks leading up to the earnings, is the failure of AAPL to publish any kind of credible succession plan for Steve Jobs.
Want proof? Bring up a chart of AAPL today and examine the price action in AAPL at 17:27 ET today. That is precisely when the analyst asked about SJ’s health, and AAPL execs declined to answer.
Lastly, the references to “corrupt” Apple executives conspiring to drive down AAPL stock each quarter is just, well, preposterous, since there is no evidence for any such allegations.
As of 18:29 ET, AAPL is trading at $147.65.
Hey,
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Its the market, where people go to screw each other. Each is mad when they are the ones “machined into a twisted form”.
Me, I like Apple. It will get there, eventually. LoL
en
For those in the dark, here is how the market works: The price of a stock has NOTHING to do with the value of the business, speaking in exact terms. It has EVERYTHING to do with only one thing: This question: “How interested are people out there in buying this stock in the next day to week?”
AAPL is falling because there’s nothing in what was said to suggest that anyone out there is going to rush to buy AAPL tomorrow or Wednesday or Friday or early next week either. Without upward pressure the stock is at a short-term high. Perfect time to sell.
On the other hand, when Apple-fever is running rampant there is every incentive for people out there to really want to buy AAPL tomorrow and next week. So the stock is likely to rise. So buy now.
This stock isn’t done dropping. It’ll drop until the price itself is a reason for people to say, “Hey, people are going to buy this stock soon. This is a serious deal.” Then you’ve got upward pressure.
So don’t show your naiveté by saying, “Hey, last quarter was AWESOME! Why is the stock falling?!” Last quarter is about last quarter. AAPL share price is about today, tomorrow and maybe next week and what other people are inclined to do in that time frame. And the answer to that question is that NO ONE is going to be inclined to buy soon at $163, or $153, even. So drop it will.
If you’re playing this stock, stop right now thinking, “what do I think?” Rather, ask, “Is everyone else right now feeling a) Compelled or b)Ambivalent?”
If “a”, buy. If “b” sell. When “b” becomes “a”, buy.
2.5 million Macs in one Quarter!!!
That is the news.
Nerd Beautiful is correct to state that “The price of a stock … has EVERYTHING to do with ‘How interested are people out there in buying this stock in the next day to week?'”
The only observation I would add is that there are indeed market players whose time horizon is “next day” or next “week”. These are, however, typically momentum or swing traders, who are technically driven and tend to ignore fundamentals in favor of price trends, increases in volume, support and resistance levels, and the like.
There is also a class of market players who are properly called “investors”, who do care about the fundamentals of the business. Their time horizon is usually intermediate (~6 months) or long term (~1 year or more). These investors are willing to be patient in order to achieve the investment returns they are looking for.
Additional observations:
Although retail investors can have an impact on the market, it’s the institutions (both foreign and domestic) who really move stocks one way or the other.
Lastly, the fixed income (i.e. bonds) and foreign exchange (i.e. currency) markets are both vastly larger than the equity markets. As a result, the equity market’s performance can be significantly affected by whichever asset class the institutions are favoring at any given time.
Here’s what I don’t understand….There must be some Steve Jobs “sightings” since June. Is he hidden away like Dick Cheney after 9/11? Doesn’t he go to the office? Go out to eat? Emerge from his cave in the light of day? People must see him and how he looks, you would think. Why doesn’t anyone comment on this? Where’s a blog, or article, that says “Saw Steve yesterday and he looks much better.”? Someone with a camera staking out his usual haunts? Why not?
Mitch asks: “There must be some Steve Jobs “sightings” since June.”
The New York Post article earlier today specifically quoted:
“Multiple sources who have met with – and in some cases even dined with – Jobs in the weeks surrounding the introduction of the iPhone 3G on July 11, said they came away troubled by his thin appearance.”
These “multiple sources” are unnamed.
However, the real issue for investors is not so much Jobs’ health, but rather the lack of a published CEO succession plan.
I don’t like it either, but the fact is that the economys downturn may just be at the beginning. Apple knows that if gas goes up more, or if there were another Katrina or a terrorist attack, that yes, computer sales would be affected. Apple kept next quarter lean because they have to. Missing their numbers or a typhoon in Taiwan would cause their stock to fall much greater. They are also counting on investors to be smart enough and do their homework to know that Apple is and will continue to grow. It is not their fault that there are some absolutely brain-dead investors out there who only read headlines. Last year middle of October, Apple jumped up ten points in one day. Buying opportunity for anyone with a brain and some cash…shame some people take advice to sell from brokers who are using Apple to level the portfolios of every other companies tanking stock. Sit, buy, and wait. The numbers should keep the analysts predictions above 225, especially after true iPhone numbers are reported in three months. Love the desperation to report again that Steve Jobs is slowly rotting on conference call day. There should be an investigation and we will hear more like that…the competition is desparate.
It’s all a numbers game, people.
“True, and by now Apple should have learned how analysts and the market react to a conservative guidance..”
And by now investors and analysts should learn how Apple guides vs what they end up producing and take it with the amount of restraint that is necessary.
Do people even read or understand these reports or do they just jimp the gun… now I have to get busy and start up up stock at the new low proces…. Nice!
@ Muffinman
Would you rather Apple spent it’s considerable cash reserves, defending against class action suits when they don’t make their guidance? Apple is not the guilty party here. Blame the hedge fund and instutional investors that trade on rumors and manipulate the stock so they can rush in and buy from the suckers that followed their lead.
@ Momo Trader
Where is Dell’s, HP’s, IBM’s GM’s or RIM’s succession plan. How can any logical trader forsake completely fundamental and technical trading and trade on an unsubstantiated rumor except for the purpose of stock manipulation. RIM gets rewarded earlier last week after several analyst downgraded them. Several bank stocks get a boost because they didn’t lose as much money as expected. I agree with the post of Father knows best. If you check Apple’s performance back to 2004 between the months of August of the current year and January of the following year the rising slope of Apple’s stock price has been increasing year over year. Typically Apple’s strongest quarters has been their 4th and 1st. The 4th because back to school and the first because of the holiday season.