Why Apple stock is weak after stellar earnings

“Apple reported FQ2 2015 earnings and they were a monster, beating earnings and revenue expectations by a good deal,” Paulo Santos writes for Seeking Alpha. “Those earnings also prompted a slight increase in EPS estimates going forward, with FQ3 2015 EPS consensus moving from $1.66 per share to $1.74 per share, and even FY2015 and FY2016 as a whole seeing increases as well.”

“So, in this context, why has the stock been so weak? Right before earnings Apple traded for $132.65 per share, and today it’s barely holding $124,” Santos writes. “There is a reason.”

Santos writes, “The weakness in Apple stock can be explained both by the iPhone’s total domination turning Apple into a one product story, and the seemingly impending large deceleration that the iPhone 6 is starting to experience.”

Read more in the full article here.

MacDailyNews Take: A “surprise” skipping of the iPhone “S” models this year and going all-out with a new “iPhone 7” lineup might be just what the doctor ordered for investors worried about Apple being able to even meet, much less exceed the blockbuster results driven by pent-up demand for properly sized iPhones. We also maintain that analysts aren’t fully anticipating the potential of the IBM MobileFirst for iOS partnership, a potential larger iPad for corporate and education, Apple Pay, Apple Watch, “iTunes Music” subscriptions, Apple TV, etc.

On June 8th, WWDC 2015 is going to be “the epicenter of change” where much will be revealed and a lot of questions will be answered. We can’t wait!

35 Comments

  1. Gee, Exxon must be suffering then by the same logic: they are a one product company and are totally reliant on it. Their stock should plummet then, right?

    1. The reality is you’ll never be able to appease these doomsday anal-cyst idiots. They’ll always be able to make up their own convoluted logic that flies in the face of history, facts and an understanding of Apple. And of course their own manipulative stock agenda.

      It’s doubtful we will ever hear this escape from their lips “Ohhhh, Apple!, the hit products will keep coming? – yeah, we get it now.”

      1. Ever since the late ’90s, when Apple announces a good financial quarter the stock dips. Go figure. Makes not sense, but it is a long lasting pattern.

    2. the confluence of evolving technologies that propel the iPhone creates an unconventional product life.

      rather than a conventional product with a conventional arc, the iPhone is more like a constellation of products that continuously renews itself, like what you’d see on a SAMN curve, adjusted +-BUN, with multiple PLUM coefficients.

    3. Keep in mind the short-sightedness of analysts: they focus on weeks and quarters. Intelligent investors ignore short-term thinking, and focus on years and decades ahead. If you are an investor in Apple or any other company, be sure to read the thoughts of Warren Buffett, Charles Munger and Peter Lynch. The reason these men are legendary is that they ignore the day-to-day noise from Wall Street, and focus on where a company is headed over the long term.

      To base projections on Apple based on “fear of seemingly impending deceleration” (never mind the fact that no data supports that) and assumptions about iPhone 6 sales ignores the impact of other products and services now entering the market, and those soon to come. Focusing on the bark of one tree ignores the size of the forest.

      It’s frustrating for an investor to be held captive by analysts in the short-term. The way to escape that stupidity is to focus on the long term and on the fundamentals of any company in which you invest. Peter Lynch correctly pointed out in his books that a stock’s price EVENTUALLY will track its earnings growth. Viewed that way, I have nothing but confidence that my investment in Apple will reward me. The rest that you read is nothing but noise uttered by fools.

  2. In our English translation of Scripture, we read several deviations of what was commonly referred to as animal excrement in Paul’s day. The NIV translation says “garbage,” the ESV says “rubbish,” and The Message translation says “dog dung.”
    Of all places, Urban Dictionary actually gives some helpful insight into the use of this word in this passage. The word that Paul uses was a Greek term called “skubala.” —-

    You know … the term for this hack article. Short … So Very Sighted.

    1. This week’s Moron Meme is that Apple is a ‘one product company’. I’m not even going to bother fighting that bullshit. The meme will be dead next month, replaced by some August Effect In June lazy nonsense in the TechTard press.

        1. It seems like a few years back all the geniuses on Wall Street were saying that Apple should take on debt. Now it’s gone from no debt to too much debt in a couple of year’s time. No matter what Apple does there will always be the critics swearing they know how to run Apple better.

          It’s rather puzzling to see how Apple’s share price is as weak as it is considering good earnings, increased dividends and share buybacks while other companies share prices seem stronger and not even coming close to Apple in offerings. I can only mostly compare Apple to Microsoft as a very similar company and Microsoft still commands a much higher premium than Apple. I may be wrong but in the short term it seems like Apple shareholders are getting somewhat screwed owning Apple by that comparison. However, as a long-term Apple shareholder, I honestly should have no reason to complain at all.

          1. The primary concern for investors is return on investment (ROI). In that respect, investors in AAPL have absolutely annihilated investors in MSFT over the last 15 years.

            If you purchased AAPL very recently near its $135 high, then you have lost around 8%. Otherwise, you are likely doing pretty well.

            The “premium” or high P/E that you mention does not necessarily mean that an investor is somehow “getting more.” What it means is that a sufficient number of people believe that earnings per share are likely to grow faster than the overall market (P/E should loosely reflect growth rate). Everything ends up tying back to ROI. A high P/E also means that a stock price (P) will tend to be more volatile with respect to corporate performance (earnings or E). A rise in earnings per share (EPS) is likely to have a greater impact, but so is a drop in EPS.

            There is a lot to consider when investing. What I personally see in Apple (and AAPL) is a company that:

            Has established one of the preeminent brands
            Is dominant in the consumer electronics market
            Has created a broad, integrated online ecosystem
            Maintains a strong technological edge over its competitors
            Collects the lion’s share of the available profits
            Has a very reasonable P/E, especially in comparison to its historical growth rate

            No investment is without risk. Even the U.S. Government could theoretically default on its debt. But Apple has been a darn good investment over the past 15 years and the company is consistently bringing in many $B in profit each quarter.

        2. Of course, in a sane world, having the most profitable company on the planet, swimming in cash, take on debt it entirely INSANE. But if that’s what it takes to work around OTHER people’s insanity…

        3. Forbes, a once great business publication, is more like a dying star today. In its last gasps of life, a dying star emits erratic pulses in an almost frantic fashion. Forbes, in a desperate attempt to be relevant (something that stopped happening a long time ago) relies today more on sensational and poorly researched stories and click-bait headlines.

          It’s sad to think that a now unnecessary publication still gets its stories routed through the media, much like Business Insider, which was never relevant (or ethical) to begin with.

          I’m not a fan of a company taking on debt. But when debt is manageable, such as in the case where Apple’s growing horde of cash can easily cover it, and the debt is financed at extremely low interest rates, then employing financial leverage can make sense. But such details escape most journalists and pundits. That is why they are what they are, and not running companies.

          Those who can, do. Those who can’t become pundits. And those who can’t become pundits work at Best Buy.

      1. Boeing has pretty much been living off the Boeing 747 for nearly four decades. One good product doesn’t seem too bad as long as it pays the bills and returns profits. There is risk involved with slowing iPhone sales but won’t even come close to having wings falling off in flight due to an aging fleet.

        It simply makes little sense for analysts to keep running disaster stories about ‘one-product companies’ because there are so many of them that rely on one product for their majority cash flow. Truthfully, most companies would be pretty lucky to have one really good product that can carry an entire company. But then again, I’m not a financial genius so I could certainly be wrong.

        1. Of course! Look at the auto companies. Different models, same product. But that obviously is not Apple. They’ve been making Macs since 1984, and Mac sales are KICKING the ASS of Windows boxes, eating up more of their market share every quarter for years now. There’s a really olde Apple product that’s getting stronger, again, every day. To ignore the Mac is willful stupidity on the part of the TechTard journalists.

          As for tablets: iPad always ruled and rules. All the rest are wannabes, including the mixed purpose WinDoBots.

      2. The iOS ecosystem is the key. The iPhone is a major piece of this ecosystem and admittedly generates the lion’s share of revenue and profits. But it exists to access the iOS ecosystem (in addition to being a phone).

        It is funny that analysts seem more concerned about the sales and profits of a mega-powerhouse like Apple suddenly plummeting than it does about a high P/E, low or no-profit company failing. If Apple truly begins to decline, then the trend will become obvious fairly early to those who know Apple.

        I suspect that many of the people on this forum are less worried than the professional analysts and investors about Apple’s future for two reasons:

        1) We understand Apple better than they do in some ways
        2) We invested in AAPL a long time ago. The stock could drop by 50% and most of us would still be well ahead of where we started.

  3. Google and Netflix are one-product companies by this definition. Yet their stock is doing fine.

    I don’t think there’s any rationality behind Apple’s stock price in the last 2 weeks. Just irrational fear. The big Wall Street investors were around in the ’90s and can’t get over it. They think Apple might still be a fad and is going to go out of business any day now.

  4. IOW: Once again it is a great time to buy AAPL. It is extremely suppressed at this point. If you think AAPL is not going to rocket at some point up to the value point where it belongs, you’re quite mistaken. WHEN that inevitably happens, beats me! It’s up to the manipulators, apparently.

  5. Rember Tim’swords at cc…
    More people have not upgraded to the newer phones than those who have. China exploding. Migrants from android are very active !
    Iphone has not topped off !

    Plus remember Tim and Luca repeating the following several times :
    ” we are very confident in our product line and the future.. And find our shares very undervalued.. Thats why we chose to buy them back rather than increase the dividents by a bigger percentage in our capital return program ! ”

    Lack of watch supply does not help tye historically slow months for apple either .
    Also remember its May ..sell and go away .. 😉
    Its just that time of the year.
    But watch out ..watch supply rampup on its way ! Also Wwdc is coming and next new product announcements starting september !

    1. This is one of those reports where everything positive is ignored and the spin is on how we can make things look bad.

      The author is ignoring/minimizing facts like 20%-30% ish growth yoy.. In favor of pushing sequention quarter growth nonsense !
      Pushing apple as one product company… by spinning the article in favor of stats that make it look bad… Example..” Oh q3 wont be good without the watch .. Lets take watch out of the equation.. There u see it does not look good….” .. ……Hello! watch is part of apple revenue ! Yoy is what counts .. Sequental q are subject to yearly cycles ! 20-30% yoy growth is awesome !
      . He tries hard to put negative spin .
      And seeking alpha often does that… they are by no means an objective reporting agency !, no where near .

  6. @Jooop
    There is a rationality to Wall Street. It is cold and calculating and manipulative. Apple is the worlds greatest disruptor. It solves problems, creates better products, and protects our privacy better than any other company. It therefore has many, many competitors that would like it to fail, and barring that, slow it down any way possible. They would like to harm the confidence of both the consumer and the investor and break the virtuous circle and halo effect that Apple inspires. Although maybe only one trick of many, why not gang up on the company in the financial markets at the same time pushing FUD into the media? In the end, I’m betting on Apple. You can’t keep a good man (or company) down forever. The truth has a way of popping up.

  7. Once you put on an Apple Watch, you know this is going to be huge. Apple Watch is yet another killer app for iPhone and will drive the next wave of iPhone sales.

  8. Here is a list of other one product companies whose stock is valued highly by WS thieves: Tesla (one model of a car), Google (advertising), Amazon (online retailing), GM, Ford, BMW et al (cars). This is just a lame excuse. The reason is stock shorting by big dogs. They are not going to sacrifice their profits. They don’t care about Apple.

  9. Can you imagine what Apple’s share price would be if they had one other product that added to earnings like the iPhone? How many companies manufacture a single product that sells like the iPhone does? With the ASP and margins of the iPhone? I can’t think of any. And it’s not enough for Wall Street that Apple has this asset along with all of the other products that contribute to and participate in the same ecosystem. As far as I can tell, the iPhone has a few good years of growth going forward before market saturation is actually achieved, what with China gobbling up the offering as they are. And then there’s the Apple Watch, with probably higher ASP and margins than the iPhone. Still the street thinks that if Apple has a blow-out quarter it’s an indication that it can’t possibly continue. You couldn’t invent this story.

    1. If Apple had two products with iPhone-like revenue, they would see that an even worse situation. Now if *either one* fails it’s a disaster. And three? With three forget about it. Apple would have no chance to survive.

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