Apple needs to deliver now

“A couple of weeks ago, I applauded Apple (AAPL) for doing the right thing by using its buyback to cushion a fall in its shares after the latest earnings report. When Apple’s fiscal Q2 guidance did not impress, shares slid from $550 (and a high of $575) to under $495,” Bill Maurer writes for Seeking Alpha. “The news of Apple’s buyback inspired some confidence in the short-term, and shares quickly bounced back to $551. The rally didn’t last long, as a couple of analyst downgrades knocked down the stock, and Apple closed Tuesday at $522.”

“The fear about guidance was valid because current analyst estimates call for a small decline in Apple’s fiscal Q2 revenues over the prior year period. Investors have become concerned about Apple’s growth, and flat or declining revenues are a big issue,” Maurer writes. “The stock will have a hard time rallying and keeping a decent valuation without growth. In today’s market, names like Google (GOOG), Facebook (FB), and Tesla Motors (TSLA) keep rallying to new highs, because they have growth potential.”

“That’s why it is so important for Apple to deliver now. The company needs to come out with something new, and rather soon. Even if it is just a new iPad or larger screen iPhone, Apple cannot wait until September or October to start launching products. Yes, the China Mobile (CHL) deal will help, but it may not be enough,” Maurer writes. “Apple protected its stock when shares fell post-earnings by buying back $14 billion worth of stock. Now it is time for Apple to launch some new products and get the growth story back on track. Apple may need a launch in the next few months to meet current Q3 estimates. If not, Apple’s guidance will probably be weak again in April, and regardless of the Q2 numbers, the stock will drop again. If Apple can launch some new versions of current products, and maybe some completely new products as well, growth will return. That should get the stock moving again…”

Much more in the full article here.

37 Comments

    1. This “style” of management, where your primary focus is the current quarter, “making/beating the numbers” and basically doing anything to pump up the stock price, has ruined more companies than it has benefited. It is ONLY good for….short-term investors.

      I am so glad Apple doesn’t do this.

  1. Every time Apple announced new products AAPL tanked. Last Quarter Apple beat estimates top and bottom numbers AAPL also tanked, further more AAPL tanks again today and yesterday. Damn if you do, damn if you don’t.
    Over all Wall Street hates AAPL. 🙁

    1. That is the best time to buy stock. New products from Apple are typically not received well until people play around with them and understand what they do and how they work. Think iPad. When first announced no one believed the battery performance, etc. Further, most people were like “eh its a big iPhone, whats the point”. Well big iPhone or not, it turned into HUGE sales after people got hands on it.

      1. I feel the time to buy APPL is when the price is in the low $400 level. Not only will more people be able to buy but their chances of losing on their investment will be drastically reduced. It would also enable Apple to Buyback and retire more stock. Win win for all.

  2. “In today’s market, names like Google (GOOG), Facebook (FB), and Tesla Motors (TSLA) keep rallying to new highs, because they have growth potential.”

    Facebook doesn’t have growth potential. It isn’t even THE social platform of choice in many circles anymore. And Google? Evil Google? I’ll keep my money with Apple, thank you very much.

    1. Old investing advice went something like: “Look to the companies that make the products teenagers are excited about.”

      I asked my 14 year-old if she saw my post on Facebook and she responded, “Since I have their Messages app, I don’t really look at Facebook.” Instead, she uses a wide variety of services that keep her instantly in touch with her friends. It’s more like THE social platform is her iOS device (in her rather large circle of friends, one (1) has an Android device).

      1. I also have a teenage daughter and she hasn’t used Facebook either, just the messaging app. Twitter and snapchat are her goto.

        Out of interest I asked several of her friends and all said Facebook is boring. All of these girls are moving to Viber for their messaging.

        I know that asking a group of 15 year old girls is hardly statistically valid, but they all said they dropped Facebook because their parents are there (Not me !).

  3. TECH NEWS FROM THE 25th CENTURY…….

    In tech news today the construction of the second colony on Saturn’s moon Titan remains ahead of schedule. In other news Apple stock take a beating and the company remains in serious trouble over its failure to release an iHolodeck Mini.

    Because some memes will never die.

  4. Tim Cook will do nothing to help shareholders. This has been going on for years now yet no new products or acquisitions where investors can see profit and revenue growth. Jobs put in place a supply chain expert who has no vision and keeps talking about making the best products but not the most products. That just doesn’t cut it with investors.

    1. @Peter – Apple’s priority lies with the end user, and thus the unmatched profitability and customer satisfaction. Investors looking for more than dividends should look elsewhere and not mess with the superior offerings from the most productive company of our time.

      1. Good advice.. Also if anyone actually takes it to heart, be sure there are others that will at least buy those shares lest there be more supply than demand on shares and a lower price yet..

  5. Here the author Bill Maurer responded to readers in Seeking Alpha:
    Author’s reply » Patience doesn’t work when it comes to Apple. The company announced the largest tech revenue quarter in US history and the stock tanked. What does that tell you?.

    1. The article was a bit long, but the back-and-forth of readers in the comment section was interesting.

      I decided after reading all the comments (and the author’s replies) that Apple needs to end AAPL. Owners of “Apple” want great products that just work. Owners of “AAPL” want higher stock prices. The two, at least in the case of Apple Inc., are incompatible.

      At the height of AAPL there were almost a billion “owners” — there have never been close to that many owners of Apple devices. And owners of AAPL are numerically more vocal about their expectations of the company than are owners of Apple products.

      Every publicly-traded company sells stock, but only Apple makes Apple products. I hope Apple retires AAPL so this division and distraction can be eliminated.

      1. Unless you expect to believe that the average AAPL investor owned 1-2 shares of stock I highly doubt a number even remotely reaching a billion.. Looking at AAPL and using GOOG to compare, AAPL has about 2x the number of outstanding shares that are trading 5x more than GOOG.. Higher trade volume equals higher volatility.. I suspect some investors sell at product announcements thinking “this is the highest point. get out now” and just buy shares back a few days later when they think it has hit a bottom they’re comfortable with. Apple being secretive doesn’t really help things either investor relation wise.. Just causes anxiety for short to mid-term investors.. 😛

        1. Agreed (and thank you for your polite and thoughtful addition to the discussion).

          Steve said, “To focus means to say ‘No.'” To remain focused on products amidst all the headlines and Icahn tweets has to be tough.

          With a bank balance at 1/4 market cap, and some rather well-off very close supporters, the board could move to return the company to a private venture, free from endless headlines of the “Apple misses again” variety.

          My point was really that whatever and however Apple can reconfigure the conversation away from “Apple needs to do XYZ to increase shareholder value” to a more valid “Apple continues it’s push into ….” the better off the public’s perception of Apple will be.

  6. There is absolutely no point in pandering to Wall Street’s games, Tim Cook knows that.

    Buying back shares does support AAPL to a certain extent, but the shares dropped again afterwards for no logical reason, meanwhile billions of dollars was spent on those shares. However I don’t believe that Apple was primarily concerned with propping up AAPL when they bought back shares. The advantage to Apple is that the cost of bowing money to buy back those shares is less than the dividends that would have been paid on those shares. Supporting AAPL is a beneficial side effect.

    Apple always acts logically, Wall Street acts anything but logically. Therefore Apple will not be drawn into dancing to Wall Street’s tune, Apple could never win that game and could lose a great deal.

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