Tyler Durden reports for Zero Hedge on Goldman Sach’s new opinion of Apple Inc. following yesterday’s across-the-board earnings miss:
Tough quarter; removing from Conviction List, maintain Buy rating
We are disappointed by Apple’s quarter and guidance, as it reflects a much weaker iPhone 6s product cycle than we had anticipated, with most of the negative surprise vs. our expectations coming from China. As such, we expect the shares to be weak in the near term, until the market gets comfortable around improving trends with the iPhone 7 product cycle. That said, we do not view the quarter as thesis-changing longer term, and maintain our Buy rating. In particular, we are encouraged by (1) Apple’s new disclosure that its iPhone installed base is up 80% vs. 2 years ago, coupled with evidence in our US survey of significant pent-up demand for the iPhone 7, and (2) the acceleration in reported services growth to 20% yoy, with gross services up 27% – evidence of increasing monetization of Apple’s platform. We now estimate 41mn iPhone units in F3Q, compared to prior GS/consensus at 47mn/44mn, with about a 2mn impact from the channel inventory reduction. We lower our FY16-18 sales estimates by 8%-9% on lower units/ASPs, and our EPS estimates by 11%- 14% to $8.40/$10.53/$11.42 on the additional impact of lower margins. We lower our 12-month price target to $136 from $155, based on 12.5X CY17 EPS (previously 15X on CY16E EPS), reflecting lower growth. Risks include product cycle execution, end demand, competition, and a slower pace of innovation.
Much more in the full article here.
MacDailyNews Take: We must first progress beyond the initial stage of irrational pessimism before any semblance of actual reality can be seen by some.
While initial reports are always pessimistic, I think there is some level of saturation now.. The big screen fever has been quelled, the smaller screen crowd is mostly happy.. So unless Apple can pull a rabbit out of its hat for iPhone 7, its not going to be record quarters any more..
The Mac is languishing, it needs speed boosts, significantly better graphic processors, maybe even upgradable one’s. and heaven forbid, some lower price points.
The Mac Pro 2012 form factor needs to come back too, With reasonably priced graphic card options, SLI, etc, PCI SSD, and more.. give the build a PC crowd a run for the money…
I agree with what you are saying .
I would just like to add:
1) T.C seems to have plenty of time going around doing social stuff — recently he just joined the Board of the Kennedy Foundation –so I wish he would spend some time with Apple users, go visit some high end graphics studios , scientists in labs, businesses etc using Macs, visit Mac user groups, visit retailers (the Apple section in my local Walmart is horrible and seems not have been updated since Jobs) etc. I don’t see any news of him doing any of this (only a few instances where he visits Apple’s own stores). I wonder how he gets the ‘pulse’ of his customers?
2) apple needs to do Mac marketing. The last serious Mac Ad campaign was Mac PC Guy (‘Get a Mac’) : 66 ads in 4 years, one new ad a month. Last ad was in 2009. In the last few years I’ve never seen an iMac, Mac Mini ad, not even cheap web ads.
This last quarter Macs made more revenue than iPads, iPads get ads, Macs should too.
As I said before Apple not pushing Macs during Win 8 Fiasco years was a BIG misstep (like i said there were hardly ANY mac marketing at all during those YEARS) . I bet they will study this misstep in business school in the future.
(Flamers note: supporting Macs does not mean Apple doesn’t do OTHER products. R&D to do a Mac tower will cost them near nothing as Hackintosh people can build machines more powerful than current Mac Pros in their basements).
If Apple had pushed Macs all those years perhaps with the cumulative gain they might been earning a few billion more a quarter. In which case they might have hit analysts targets and avoided today’s stock crash.
Yeah!
Of course, it would also be helpful if they would keep 3.5mm headphone jack in the iPhone instead of jettisoning it for extra “thinness”.
The Mac Pro 2012? I’m sorry, but Jony Ive doesn’t like rectangular boxes because they’re beneath his styling skills. If you want rectangular desktop cases you’ll have to look for them at some other company.
While you may indeed be correct, at some point Jony needs to put substance over style,
While I think its possible to create a stylish computer that can be easily upgradable, unfortunately that’s never been the way Apple has done things, and perhaps its time for that to change too.
I also however, do not have any problem with dumping old ways for new, the headphone jack can retire and I might never miss it if what replaces it sounds good, and if all i need is an included adapter to use ancient headphones, works for me.
Is someone making a tower that looks good? Even Mac users complained about the look of the former Mac Pros.
I’m disappointed that Goldman Sachs is still in business. Criminals.
That is what happens when government is for sale. It will not change until corporations and government fear their subjects once again. You know, the fear of death.
Maybe, just maybe shareholders will demand Apple’s directors to do their job – replace the current CEO with someone who can regain Wall Street’s confidence by focusing on restoring the company to the prominence it once had as an innovative company – something more than a drifting phone company – with focus on the excellence of its products instead of coasting on the past while advancing a social agenda in which investors have no real interest.
Perfectly said Jay !!
Replace the trolls
Yes, and let’s start with Troll #1: silverhawk1
Utter nonsense.
Not this shareholder Jay. I’m perfectly happy with Apple making gobs of money. You of course were absent once again when Tim Cook was demonstrating his excellent leadership defending Apple’s encryption against a nefarious organization. You can be they will be working hard at making their encryption even better.
There are times when a social agenda does not matter, and there are times when it does. These are times when it does.
But hey, keep on your single topic moanalong. It’s your free will.
JM, you might be trying hard to fool yourself, but don’t pawn it off as fact to others. Apple doesn’t need to ‘regain’ Wallstreets confidence. It NEVER had it, and it never mattered.
In the last 4-5 years, Apple has done everything WS dictated, took massive debt, started a massive stock buy back, gives dividends and keeps increasing them, but no Wallstreet love.
I miss the clarity of Jobs’ vision. If investors wanted dividends, go somewhere else. Wallstreet not happy? WHO CARES? Steve knew Apple made its money and owes everything to not following the brainless bleatings of things like WallStreet.
I don’t see any significant cause for pessimism over Apple. The results aligned pretty well with the guidance given last quarter and was also pretty well similar to what the analysts were predicting. There were no big surprises so the stock price should have reflected the circumstances that were spelt out during the conference call.
There’s always a sell off after any quarter’s results from Apple, but I think that this one is going to be short lived once people start understanding just how well Apple is preforming within these challenging conditions.
The increase in Apple’s services business should be very welcome to investors as it provides a steady income, rather than the intermittent income when customers buy a new iPhone every couple of years.
Typical analysts…never say anything that they can be held accountable for. “We were disappointed…lower our price target…maintain our buy rating!”
I’m not so concerned with iPhone sales since the success of the 6 was down to pent up demand. The SE is paving the way for cheaper phones as Apple starts to increase its product line variety.
We just got new 6Ses. Why now you ask? Primarily becuase this is mid cycle (so not waiting for phones due to backlog) and I signed up for the Apple upgrade program. We will probably pay $500 a year for a new phone every year. Therefore I will not be concerned about having to have the latest phone on the day of release. I used to hold onto phones for 3 years. Now 2 years and next year for just a year. I think a lot of people are going to be like this and Apple will be getting more revenue per customer on a yearly basis.
The Macs do trouble me. 4M units represents a significant drop and this is primarility becausse the models are not getting updated enough. This rMBP I am using is 4 years old but going great. It could last for another 4 years at this rate. Intel are letting the side down by not updating the chipsets fast enough. Either that or Apple have to quit waiting on Intel and update the models with better specs (SSD size, memory, USB C).
Services are obviously growing at a $1BB per quarter which is great but does not address the shortfall in hardware sales.
Apple still made more money than any other company but the sky is falling….. I would love the money they get just from services.. I like their future much more than Google or Facebook who don’t really sell anything. They still sell a shit ton of phones..
Wall Street doesn’t care about what other companies do. They have specific expectations for Apple and Apple will never meet those expectations. You say you like Apple’s future but it’s already been decided Apple doesn’t have a future. It’s been almost a year and a half and Apple’s share price has barely budged despite buybacks and dividends. With iPhone sales done for there’s no way Apple’s share price will climb. Apple has become a utility company in a much lower position than Microsoft.
I’m not concerned because I’ve been holding Apple a long time but I doubt any new investors will be interested in owning Apple when there are so many easier stocks to make wealth from. Even with Apple’s P/E being only a fraction of its peers, Apple got hit harder than than other major tech company this quarter and that’s the way it will always be.
Goldman Sachs just released an ‘Actionable Research note’, with more surely to follow from the other Wall Street firms. All that they care about is the churn (buy/sell), not the fundamental story …. that Apple Inc. own the mobile market globally (the mindset, profit, brand, consumer, corporate, security etc. etc…).
I reinvest my Apple dividend in AAPL.