Apple to report results on Tuesday amidst mounting economic concerns

“Investors are waiting to see just how much the global economic slowdown has hurt Apple Inc. when it reports quarterly results on Tuesday, as the company works to prove that it can sell high-end products even in lean times,” Gabriel Madway reports for Reuters.

“Apple’s once high-flying share price has fallen around 50 percent since the start of the year,” Madway reports.

MacDailyNews Take: Through no fault of their own. All that Apple’s done is establish a habit of setting new all-time earnings records:
Apple smashes Street; reports record third quarter results, all-time high Mac sales – July 21, 2008
Apple smashes Street, reports record second quarter results – April 23, 2008
Apple beats Street; reports best quarterly revenue and earnings in company history – January 22, 2008
Apple bulldozes the Street; reports revenue of $6.22 billion, record 2.2 million Macs shipped – October 22, 2007
Apple smashes Street; posts record Q3 revenue and profit – July 25, 2007
Apple reports second quarter results; most profitable Q2 quarter in Apple’s history – April 25, 2007
Apple smashes Street, posts revenue of $7.1 billion and record net quarterly profit of $1 billion – January 17, 2007

Madway continues, “Many wonder whether nervous consumers will continue laying out hard-earned cash on leisure items, especially during the holidays.”

MacDailyNews Take: Define “many.” Something tells us that those “wondering” the most are those who have a financial stake in seeing Apple’s share price decrease. While you’re thumbing through the dictionary, Gabe, you might want to look up “self-fulfilling prophecy,” too.

Madway continues, “Another question mark is the new iPhone which was launched in July. While almost everyone expects the device to rack up strong sales, will it be enough to drive growth, especially if Mac computer sales suffer?”

MacDailyNews Take: There’s no evidence that Mac sales are in any way, shape or form “suffering,” Gabe.

Madway continues, “Mac sales, which make up nearly half the company’s revenue, are premium products so some fear Apple is more vulnerable than competitors in a weak economy.”

MacDailyNews Take: Perhaps cash-conscious consumers will actually think before they buy (for once) and come to the logical conclusion that Apple’s Mac offers them access to the world’s largest software library, last longer, and have lower Total Cost of Ownership than Windows PCs and therefore will buy more Macs? Hey, as long as we’re just speculating and making up theories; there are two sides to that game. Also, don’t forget, Apple’s Mac customers are better educated and make more money than your average Wal-Mart WIndows PC shopper. They’ll be the last ones affected, if they’re affected. Better worry about Dell, HP and other schlockbox PC assemblers first, Gabe. If you think Mac users are going to downgrade to a Windows PC in order to “save” themselves a few dollars upfront, then you don’t understand Mac users at all.

Madway continues, “What may be of more interest than fourth-quarter results will be the company’s forecast for the December quarter. Although Apple is notoriously conservative in its outlook, many expect it to be even more cautious in the current environment.”

MacDailyNews Take: Apple ought to take advantage of the current uncertainty to provide an excuse to stop giving hard guidance. And then never resume the practice. Problem solved.

Madawy continues, “The company is expected to earn $1.11 a share in its fiscal fourth quarter, according to a poll of analysts by Reuters Estimates. Revenue is expected to come in at $8.04 billion, which would represent growth of nearly 30 percent… Apple generates a lot of cash and has no debt. Last quarter, the company reported more than $20 billion in cash and short-term investments.”

Full article here.

24 Comments

  1. AAPL should pull a GOOG and not give forward guidance. IBM this week pretty much did that too. – Another thought: “Gmail back after 30 hours down” You wonder why this headline was not smeared today by the MSFT cartel. If it was MobileMe, the shorts would have had a field day again.

  2. I’ve been using my Gmail account steadily for the past 3 days and haven’t seen any outage at all let alone 30 hours worth. When did this supposedly happen?? Was it a local outage?? What’s the scoop??

  3. What annoys me about reports like this is that they don’t really think things through. For example, they cite the risk that Apple is reliant on Mac sales, since, “Mac sales, which make up nearly half the company’s revenue, are premium products so some fear Apple is more vulnerable than competitors in a weak economy”

    And yet, they don’t realize that “nearly half the company’s revenue”, is based upon Apple deferring significant iPhone revs. If they didn’t do that, then Mac sales would NOT be “nearly half the company’s revenue”. Let’s look at this quarter, 3M Macs at an ASP of about $1400, would be about, $4.2B in Mac sales. If iPhone revs were fully recognized, and not deferred we’d see something like, 6M iPhones at an ASP of $400, or $2.4B in iPhone sales. But of course, Apple only recognizes 1/8th of that quarter’s sales, and defers the other 7/8ths. After a while, things should even out with 8 quarters worth of deferrals, but because Apple is in the big growth phase of iPhone sales, that growth won’t actually be seen for a few more quarters, when in fact, the explosive growth is really happening now.

    These commentaries, look at balance sheets and income statements and just overlook the deferred income. Strangely, he mentions the strong cash flow, without really understanding what it truly means.

  4. Just a few comments about AAPL from this week.

    Oct.15th – Recommendation about AAPL from Gabelli
    Gabelli recommends purchase of the stock at current levels and reiterates a Buy rating.
    Oct.15th – Recommendation about AAPL from JMP Securities
    After Apple launched new portable computers, the firm maintained their Market Perform rating.
    Oct.15th – Apple-AAPL valuation remains compelling, says Citigroup
    Citigroup believes Apple’s new laptops are impressive and agrees with the company’s decision to hold pricing. The firm reiterates a Buy rating and $170 target.
    Oct.15th – Rec-Upgrade story about AAPL from JP Morgan
    JP Morgan believes AAPL is far more diverse than what existed a decade ago and that its staying power is underappreciated.
    Oct.14th – Apple-AAPL target raised to $125 from $110 at Goldman.
    Oct.14th – Wedbush believes Apple’s (AAPL) announcement and deployment of the MCP79 chipset is an incremental positive to shares of NVIDIA. The firm finds shares attractive and maintains a Buy rating.
    Oct.13th – Bernstein upgraded shares on valuation as they view the long-term risk/reward compelling at current levels. Target lowered to $135 from $175.
    Oct.12th – The Boy Genius Report sources say the iPhone (AAPL) may be coming to Walmart (WMT) in time for the holiday shopping start.
    Oct.10th – Oppenheimer is willing to invest in Apple based on their belief that the company can grow more quickly than the 3% growth rate that they think is implied by the stock’s current value. The firm maintained their Outperform rating, but slashed their target to $145 from $213.
    Oct.9th – BMO Capital – The firm said there is no indication that iPhone run rates have slowed, but decided to cut their 2009 iPhone forecasts. The firm rates shares Outperform. Target $120.

  5. …they forgot to use the word “beleaguered” in the article. Given that the media is tryng to cast as much gloom-and-doom as possible, you can’t have a good bummer article without the “B” word. Certainly no self-respecting hack drive-by journalist on the Microsoft payroll (C|net – are you listening?) would ever file an article without the following:

    – Security by obscurity
    – Apple Tax
    – Beleaguered
    – Apple is doomed

    So, based on the article above, we should do the following:

    – Sell everything
    – Grab your ankles
    – Give in to radical Islam
    – Draw a hot bath and open your wrists

    Face it: according to the media, there’s no hope. We’re doomed. Everything you know is wrong. I guess that should pretty much cover things. But let me know if I missed something…

  6. October 17, 2008
    OP-ED CONTRIBUTOR
    Buy American. I Am.

    By WARREN E. BUFFETT
    Omaha

    THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

    So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

    Why?

    A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

    Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

    A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

    Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

    You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

    Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

    Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

    I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

    Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.

  7. Warren Buffett’s op-ed reminds me of those spammers than pump stocks that are going to “explode.”

    Buffett’s already bought in big time (e.g. Goldman Sachs), so now it’s time to pump up the market so he can sell to suckers at a tidy profit.

  8. “Buffett’s already bought in big time (e.g. Goldman Sachs), so now it’s time to pump up the market so he can sell to suckers at a tidy profit.”

    At last, you’ve figured out the market. We are chum in Warren’s World – the secret is knowing which whale to grab hold of.

  9. You forgot the word liberal in the media. It’s the typical liberal view. Apple’s products are too nice and have too many nice things included with them. Not stripped down Windows junk. It’s not fair that the welfare addict on the street corner can’t buy one while the hard working people that drive the economy can. Acorn should get involved and start attacking Apple like they did the banks to get people that shouldn’t have a mortgage a mortgage. Liberals are destroying this country and the media is a huge part of it. It’s a total disgrace and disgusting. Barney Frank and Dodd need to be thrown in jail. Obama’s right with them and just as guilty.

  10. Sounds like CNN, MSNBC, ABC, CBS, NBC, NY Slimes, Washington Compost, etc., etc., etc. at least Fox covers both sides and in doing so the other side. Practically everything else is the liberal Obama Channel. Always Wrong is a commie.

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