Why I'm Shorting Apple Ahead of Earnings
I will preface this report by stating that I am not bearish on Apple (AAPL) long-term, and while I consider myself (in Graham’s terms) much more of an investor than a speculator, I am willing to make a significant bet that on a short-term basis, Apple’s share price will deteriorate.
Since the market's slight recovery in May and sequential downturn through June, the S&P has given up 15% while Apple has significantly outperformed the market. shedding less than 8%. During these past months, multiple analysts have upped price targets, most citing 3G iPhone sales, and expectations have become overly optimistic in today’s slow-growth environment.
What follows is a comprehensive analysis of Apple's Fiscal 3Q ending on June 30, 2008 due to be released July 21st. The three main factors I expect to contribute to a short-term drop in AAPL shares are:
- Perceived disappointing numbers in iPod, iPhone, and Mac revenue,
- Disappointing gross margin and Net Profit Margin, consistent with decline seen in Q2 (see conference call transcript), and
- Apple’s emotional impact on its investors.
Rev Streams
iPod
Where I see the greatest weakness in Apple’s current quarter and future is related to their heavy reliance on iPod sales. In Q3, I expect iPod revenue to represent around 25% of total revenue, a percentage that will become exponentially smaller as iPhone revenue grows and iPod sales decline.
The iPod is quickly becoming a nonessential product as more and more phones come with mp3 capabilities. Granted, these competing products pale in comparison to the user friendliness of the iPod, but consumers will continue to look for multi-use devices as apposed to purchasing two separate devices. While this consumer shift dampens the future of the iPod, it also brightens the future of the iPhone.
What I expect to see in the future, but most importantly what I believe will already be evident in this quarter, is heavy cannibalization of iPod sales from the iPhone. I still expect iPod shuffles to sell well because of their extremely low price mark and their clear distinction as a workout device, but shuffle margins are much lower than Apple’s other products and the heavier distribution of shuffle sales will weigh on gross margins. I expect iPod classic sales to slump this quarter and more severely in the future with iPod nano sales decreasing at a slower rate.
While I realize the iPod touch is a distinctly different product, I foresee a similarly disappoint quarter and future as more user friendly phones are introduced with capabilities similar to the iPhone. With what I believe will be disappointing unit sales at a lower ASP (due to high shuffle sales) I am expecting $1.72 billion in revenue from iPod sales (10.1 mil units at $170).
iPhone
The iPhone revenue is by far the easiest to predict. Although it is easy to estimate, some analysts will get it wrong because they simply don’t recognize or understand Apple’s smoothing revenue recognition strategy and the delayed recognition from sales made from March 6th through the end of the quarter. In Q2 Apple reported $378 million in iPhone revenue. I expect $380 million in revenue from the iPhone for Q3 due to the delayed start of recognition. Although the minimal growth in nominal revenue from the iPhone is expected, some analysts/investors will misunderstand the $380 million as disappointing.
Mac
The greatest strength of Apple lies in Mac sales and market share growth. While I foresee an extremely strong future for Mac computers, I expect Q3 numbers to slightly disappoint analysts. As noted by Apple COO Cook in the Q2 call, Q3 is a big K-12 quarter. This reliance on state and local government spending will hurt Mac sales as states look to cut spending as they deal with increased food and gas prices (remember busing?). Already over 20% of states have cut K-12 budgets and even more have reduced spending on replacing Mac computers that still perform adequately.
I also believe that we will finally begin to see economic headwinds affect Mac sales in Q3. Based on NPD data, Mac currently owns 66% of the over $1,000 computer market. While consumers will continue to buy computers, Mac computers are treading the line between necessary and discretionary spending and consumers’ discretionary cash has been cut significantly with the downturn in the economy.
Finally, with Apple due to release new lines of redesigned MacBooks, MacBook Pros and more MacBook Airs, I believe more consumers will delay purchases until the fourth quarter of 2008 when back to school spending really heats up. Based on these factors, I am expecting $3.6 billion in revenue on 2.4 million Macs.
Based on these numbers and when combining them with general analyst estimates for iTunes, Software, and Peripheral revenue, I am expecting Apple to report $7.51 billion in Revenue, beating their $7.2 billion estimate by 4.3% the lowest percentage amount in over six quarters.
Margin Compression
Gross margin was by far the biggest surprise from Apple in Q2 earnings. Although the company beat GM guidance for the quarter by 90 bps by reporting 32.9%, the number was significantly lower than what the street expected.
Based on the conditions seen during Q2 related to lower commodity and NAND flash memory prices, distribution of higher margin product sales, and Apple’s tendency to beat guidance by 300 – 500 bps, most analysts had projected 36% GM and an upside surprise in EPS. Obviously we didn’t see this GM beat and this led to the smallest EPS beat in 6 quarters. Realize the importance of GM for bottom line earnings, approximately every 1% of additional GM in Q2 would have added 7.3 cents to the bottom line EPS.
So, the question that is on most analysts' minds now, is whether this was an aberration or if GM pressure will continue into Q3. I believe that Q3 will show similarly disappointing GM and an even more disappointing Net Profit Margin. For reasons listed above, especially those related to Apple’s continual movement away from the higher margin traditional iPod to the cheap, lower margin, $50 iPod shuffle, iPod unit growth will slowly plot along as GM takes the hit. Lower than expected unit sales at lower than expected gross margin per unit can only result in a significant hit on GM similar to that seen in Q2.
Unfortunately for Apple, the problem with margin contraction does not stop there. With the continual growth of revenue derived from iTunes, a business arm that Apple says they run at break-even, GM are sure to be under further pressure. Also, additional expenses incurred and recognized immediately related to the launch of the 3G iPhone will show up in Q3 Operating Expenses. Apple guided for $1.185 billion in Q3 OpEx expenses, but OpEx is a number that Apple consistently underestimates by $30 million and I expect this aggressive trend to be amplified as Apple overspends in preparation for the 3G launch.
Based on this trend and in light of Apple’s $39 million underestimate in 07’s Q3 iPhone launch, I’m modeling in 1.235 in OpEx. I don’t expect to see any major differences in tax rates which have stayed constant around 31-32% or in Other Income and Expenses which Apple has guided at $115 million.
Based on these estimates, the following is a pro forma income statement of Apple’s Q3 with GM variation shown in GM which I believe will be somewhere between 33-34.5%.
You can see the importance of GM in the chart above. Based on these estimates, I estimate Apple will report GM of 33.7% and EPS of 1.08.
Emotions
Every investment book that I have ever read tells investors over and over again not to invest based on emotions but rather on pure valuation. I, on the other hand, encourage anyone I talk to to invest based on emotions; it gives me the opportunity to make more money. In fact, I love it when investors make decisions based on emotions; it is why I bought Apple over a year ago after investors had emotionally sold off and it is why I doubled my stake in February when investors beat down the stock on “bad earnings” and Steve Job’s lacking keynote. I have rarely come across a stock that trades with such volatile characteristics on relatively stable, be it impressive, growth.
Based on Apple investors’ characteristics, the current market sentiment, and my EPS projections I expect a significant selloff of AAPL on the 21st. Although Apple has continued to beat estimates, they have done it at a declining rate going from a 55.4% beat in Q4, to 23.9%, to 23.4% last quarter. The two most recent quarters I believe have signified a new trend in slightly more aggressive guidance from Apple, guidance that will be a bit more difficult to destroy in this tough economy. Rest assured, Apple will beat their $1.00 in EPS and they just might beat my 1.08 EPS but the stock will get beaten down based on the specifics of their earnings, the non-rational emotional high that a lot of Apple investors are on with the 3G iPhone, and guidance that, while a bit more aggressive than in the past, is still considerably lower than the street.
Don’t buy Apple, it will get cheap...remember, when investing its not about lowering your standards for stocks, it’s about increasing your patience.
Disclosure: Author is short AAPL and long NOK, TWM
This article has 98 comments:
As for cannibalization, you are probably right to a degree. However, many people are locked into phone contracts or, frankly, use a Blackberry smart-phone for work and may not want to invest in another phone.
I don't have any statistics to back this up, by my hunch is the Blackberry users still use iPods. And that trend will continue.
Moreover, you seem to be looking at this as solely an American phenomenon. I don't see too much cannibalization of iPod sales overseas even if that might be true in the U.S.
ninja
historically apple inc. has fell after earnings. just look at all the earnings dates and do your research. you are definitely correct about evaluation and with AAPL at a peg of 1.21 + 3rd leader in computer market share and people in lines waiting out their door to buy the iPhone. this shows apple continual success. i agree and love it also when people sell off and make my money off puts and my calls.
-fn
financeninja.wordpress...
Classic analysis such as yours rarely works out in practice simply because of over simplistic assumptions.
We shall see?
hatTheyAreTl
kinabout
Really?
I hope it's not your mortgage money on the line.
seekingalpha.com/artic...
Go back a bit further than May, and the picture changes:
Jan 2008: $202.00
So, where is the stock right now?
Current Analyst's consensus: $218.00
Currently: $172.81
How exactly has the stock not suffered the slings and arrows of the downturn?
Guess you see what you want to see.
Selective vision?
Blinders?
Strong possibility.
Estimates: $218.00
Currently: $172.81
I'd say undervalued.
You all are invited back here after earnings.
Appreciate your willingness to go against the grain and take the heat from all the pro apple posters and readers out there. I know that must be hard since so many people immediately and sometimes irrationally come to the defense of Apple no matter what.
I think you do, however, that if Apple does go down, it will either be because of general market bearishness or irrational emotionality that will correct quickly. On the other hand, if the market is bullish on the day they release and they have predictably stellar guidance, wouldn't the short hurt a bit? Just seems risky given that you have no idea what kind of guidance they will be giving.
Much fate on Gartner uh ?
These are the same people, in 2006
"Gartner: Apple should quit hardware business"
news.zdnet.co.uk/emerg...
HH
Well, live as you can.
And I say again, come back here after earnings, in any case.
engels
i habe no position in aapl
It's good to see intelligent, timely, market sensitive analysis we can read, consider, & draw our own conclusions abt.
Well appreciated. Keep it up!
We'll be praying for you, and for ourselves...
Wait, a minute, I haven't got a say in the matter; my broker does.
This is why Shorting Should be Banned!
(confession: I am a long-term AAPL long, and I fully expect a post-earnings buying opportunity)
What is different this time id that the price has not spiked with all the positive news. If this was last years market we would be looking at Apple in the $225 range. Then I agree that it would sell off.
My belief is that Apple will beat earnings (like they always do and are expected to do) at a smaller % than in prior quarters due to somewhat disappointing numbers in iPod, iPhone, Mac sales, and Gross Margin. Guidance will once again be below the street and the stock will fall, creating a BUYING OPPORTUNITY.
The mass of responses is great and it only further proves my point about the emotional attachment of Apple investors. Do the research and maybe you will or maybe you won't stumble upon similar numbers that I have; but either way, most of you are the type of investors that will buy Apple with a PEG of 2.5 and in six months wonder why you just lost half your money.
Wow, Mr. Big Balls. I've made more money than you. I'll bet whatever you want. Shove it Mr. PhD.
The challenge in gambling (yes I said gambling) on earnings is not only do you need to accurately predict the earnings number and guidance, but more importantly, you need to predict the market's reaction to those numbers. That is impossible.
Also, a market rally won't start until the last of the mohicans, AAPL, is somewhat taken to the woodshed. I expect that to occur Mon/Tues. So PhD, take all your money and hope it to the wind.
Good luck
Grime
Perhaps he's just going to pick up a few dollars in earnings after he sells higher and buys back lower.
Could turn out to be a buying opportunity indeed. Historically, he's right about the stock price dropping after earnings reports.
10k should be enough to pay for service on the emblem you drive that shows you are centrally challenged?
Why blame the short sellers, there would be nothing for them to take advantage of if there were no rumors. I'd rather have the SEC go after rumor mongers, like Cramer. Or at least have the reporter or blogger accountable for their posts.
I doubt it.
"Based on Apple investors’ characteristics, the current market sentiment, and my EPS projections I expect a significant selloff of AAPL on the 21st. "
Please quantify "significant sellof".
5%, 10%, 25% of the last closing price ?
Thank you.
You opened your yap. You've been put to the test and now it looks like you are walking away. You offered and I accepted.
PS - Looks like you are late to your service on your Lincoln Continental GT. I'm sure the service writer won't mind.
"Well, I'm off...got that appointment to keep"
Did you cancel that ?
Idiot indeed. With two screen names.
I don't like people who come onto message boards waving their D's around. By the looks of it, this guy has a little one.
Q1 earnings we saw Apple close on the 22nd @ 155.64 prior to earnings and fall to 139.07 after earnings on the 23rd (almost 11% drop).
Q2 we saw a 4% jump day after.
A lot of Apple's movement will depend on the general market mood for the day. If market is bad and earnings are as I have estimated, I would say we could see a 6-8% drop in the stock at which time we would see some GARP investors jump in and pick up AAPL at 33X earnings.
Enough with the pissing contest.
"I'm off...got that appointment to keep"
then you wrote
"I basically call the dealership and tell them I'm bringing the car in, they'll take it whenever I decide to get there."
Simply doesn't fit.
Try not to bend reality to your needs.
I rest my case.
So, you are not leaving. Sad enough. But you really have to continue to post ? You are the "I need to have the last word" type.
I knew it.
Ok, have your last word:
"idiot"
Thank you for your answer.
Yes a 10% drop is the max I'm expecting, considering the market and the fact the date is very near. I have a position but not too big, hope to have a possibility to add more lower.
About the pissing contest, I'm sorry to have put some dirt under your article, it wasn't exactly a pissing contest but some innocent fun, started by the fact the "*****" started to call names first in another thread. While reading and surfing I find amusing chat with his kind.
But as you can see, I have already told him he can have the last world, so you should expect only one more post from him (not quickly because he have to make that one look particularly good), and maybe another one congratulating himself using another alias.
Thank you for your time and I hope to see more articles from you in the future, I like a point of view bashing (with reasoning) my long positions.
Toni
Grow up....and get back on topic. Saying "you're going to lose money" without any facts and the author saying "I am shorting appl". At least the author gave some reasons. If you're going to bash him, state some facts or quantitative reasons why shorting is bad. Saying “apple is apple” isn’t good enough.
I have no position in Apple, but will purchase if it pulls back during earnings…
You state, "Apple will beat their $1.00 in EPS and they just might beat my 1.08 EPS but the stock will get beaten down based on the specifics of their earnings."
Sir, they will hit +$1.10 or more and will surpass guidance due to the iPhones.
Not sure what your projections are for iPhone revenue, bit if you read the article/listened to the conference call, Apple stated:
"Because we announced the specific new features to be included in the iPhone 2.0 release and plan to provide them to iPhone customers as a free upgrade in late June, we will delay the start of revenue recognition for all iPhones sold on or after our March 6th announcement date until the iPhone 2.0 software is delivered [italics added]."
In Q2 Apple reported $378 million in iPhone revenue, SO you would have to expect very similar Q3 revenue numbers from the iPhone than in Q2. I am expecting anywhere between $380 - 400 million.
Not sure what you are talking about in terms of 1 million sold; if you are referencing the 3G iPhone launch, that is all Q4 not Q3 - which is what I am writing on.
You may be right, they may beat $1.10, we will see, but I still expect the stock to fall post earnings. Good analysis Hardhead.
iPhone 3G is sold out in the market, and there seems to be a delay in restocking. The initial entusiasm may wane in this economy once the customer gets time to rethink. In this environment, sending customer back empty handed is not a good idea.
Secondly, iPhone 3G seems to have reception and battery issues, according to various discussion forums including Apple's own. Pretty soon, analysts are reviewers are going to pound on this, if true. If true, I expect a wave of returns before the 30 day trial period ends.
Third, mobileme is a disaster, so is enterprise readiness. App store is a moderate success. Most of the apps are free, so the 10 million downloads in 3 days should be taken with a pinch of salt.
Lastly, Apple is getting into businesses they are not familiar with. Apple's success so far is having tight control over user experience. In cellphone business, they don't have much control over it. You can build the best phones, but ultimately, you need a quality network to deliver the promised user experience. Cellphone market is a different ballgame. Once, Apple ditched their original iPhone pricing model, they are forced to play on carrier's turf. The AT&Ts and Vodafones of the world are very good in arm twisting..we will see how they will corner Apple into lower prices.
ow
The question of the guidance for next quarter I think is key. Will Apple conservative approach cause a big stir? Will it be surprisingly strong, perhaps with knowledge of pending deals and iPhone success in so many countries? I'm on the sidelines, but ready to pounce on a decline.
www.pcworld.com/articl...
Educate yourself.
Toni
Apple is a great innovative company that all other major companies, like MSFT , RIMM or NOk seem to fear but follow it's tracks at the same time. Whatever they make others imitate. Observers seem to fall in one of two categories: Apple fans and Apple haters. Unfortunately that applies to analysts too, who are supposed unbiased in their opinions and hold no stock or interest in buying or selling Aapl stock. It seems that no matter how high the Q results will be, analyst will always have a reason for beating down Apple, to the point that their predictions will become a self fulfilling prophecy. The sell off after the Q results comes as a result of missing too high estimates by over zealous analysts who miscalculated their estimates or disappointment triggered by pessimists who lack the long term view of that companie' s potential or have interest in shorting the stock and buying back at a great profit. Such behavior is not only shameful but unethical. Even if Appl beats all predictions, analysts seem to purposely drag down the stock because a lower stock price gives them a chance to make more profit after shorting it.
A note on Apple's iPhone: no matter what the review are saying about battery life or other shortcomings, everyone seems to want one. Just try to go to an AT&T or Apple store and get one, if you can find one. But the real indicator of it's popularity, without juggling numbers and figures, is overseas. When ever I travel to some country where the iPhone didn't reach yet, the 1st thing people ask me for is to bring them an unlocked iPhone at any cost, not a Blackberry or Voyager or... Only time will tell in the next few months how successful the iPhone is, and remember there's still China!
Ben, only time will tell whether your analysis proves to be true or not, but you should keep up the hard work. It is important to have opinions contrary to the popular mass. Your commentary is definitely more valuable than anything some bonehead like Larry Kudlow, the guy from Trend Macro, or JW, PhD could ever dream of conjuring up.
At a time when there were no cars, selling someone a car for the first time was a much tougher sell than selling that person another car later on. Like cars, ipods are designed with a limited life. At least you can change the battery in a car.
I think most would agree that few ipod owners will elect to live without an ipod after theirs dies. If their next ipod happens to include a phone, Apple is an even bigger winner.
This author states “I foresee a similarly disappointing quarter and future as more user friendly phones are introduced with capabilities similar to the iPhone.” Many ipod wanna-be’s have come and gone, many iPhone imitators will come and go. No one (including MS and more so for conventional handset makers) can match the infrastructure Apple has created around the iPhone/iPod Touch, lessons learned from the ipod. Really, how many folks in the market for a smartphone would pass on the overwhelming apps available on the apps store for a slightly cheaper iPhone knock-off. Indeed, even those who were not in the market for a smartphone will be compelled to consider an iPhone.
Apple probably will go down short term, but for none of the reasons stated by the author. All ships rise with a rising tide and with a sinking market even a healthy Apple will decline somewhat. Simply that. IF AAPL’s P/E should go below 30, buy all you can afford.
Tiedeman
Not all iphone sales in Q2 (1.7 million) occurred in January- thus the 378 million dollar figure includes iphones (sold in Q2 (that only recognized 1 month or 2 months of revenue.
However, in Q3, those phones sold on February and March (before cutoff) will add three months of revenue to Q3. Thus, iPhone revenue in Q3 will be well over 400, probably 430-440 million.
I appreciate your constructive response. I agree that there will be some additional revenue that will be recognized this quarter on the iPhone, but my point was that it will be immaterial when compared to Q2.
Apple doesn't recognize iPhone revenue on a monthly basis, it is rather a daily basis, spread across two years (730 days). Last quarter they sold roughly 1.7 million iPhones. In order for Apple to recognize around 440 million in revenue, a huge portion of those sales would have had to of been back loaded towards the end of the quarter.
I expect somewhere between 390 - 400 million. 440 or 430 is too high.
Great analysis. I'd be careful with the short. You could be 70% correct, but still lose your shorts if you don't fill it in time. Example: Tuesday: Apple opens down 5-7% on lower guidance and emotional reaction just as you predict, sometime in the afternoon gets a repeat upgrade to Conviction Buy at Goldman along with a few nice comments from other analysts, and rockets up $20 in two days on short covering. IMO, a very possible scenario.
1. I Phone revenue from China and India. I have personally seen the rise of disposable income in India and read about it in China, and observed the hunger for all things Apple in both countries. Guidance may include calculations of SOME I Phone revenue from economies that have a combined middle class of 700 million people (China 450 million + India 250 milion), WHEN the expected deals come through.
2. MAC sales China and India. Apple is just starting to open stores in China and India. Apple has created HUGE mystique in both countries. In these countries where Macs have not been widely available, the I Pod and I Phone halo effect has mostly just translated into an unsatiated hunger for all things Apple.
I'll admit that these points cover mostly LT revenue streams, and you are modeling conditions for a very ST sell off, but remember that a so-far undisclosed deal may well factor into guidance.
Look at AAPL intraday weakness. Look at how AAPL has already fallen 5% within the past 2.5 business days. In my experience, these are good conditions for takeoff tomorrow. Careful with the short. Would be sad if you LOST money for this fine piece of work.
Thanks for your input.
I agree that China and India are HUGE growth markets for Apple and the halo effect from the iPod/iPhone will start being seen especially in Mac sales in the future. It will be interesting just how much Apple includes this is their guidance for Q4.
With regards to the iPhone, I doubt Apple would guide for any iPhone revenue coming from China/India in Q4. In the past we have seen Apple guide conservative, ESPECIALLY in emerging markets (China, India, etc.) and I wouldn't expect them to deviate from that trend in such a dramatic fashion. If they do, I agree, it could be an upward surprise in guidance which would be a BIG boost for shares.
When I initiated my short opinion APPL was above 174 and currently it is trading below 163 (7% drop) while over that same time the S&P is up 1%. I didn't expect this extent of negative movement prior to earnings, especially with positive movement in the market, and at this point I think sentiment going into earnings is pretty negative. If you followed my advice in the short up to this point, I would slim down that position to lock in a portion of your gains. I still think my projections are good, they just looked better when Apple was trading at a higher multiple.
1. Agree with your position on Apple not including China and India I Phone revenue until deals are through. Additionally, due to supply problems there may not be very many I Phones sold in those two countries in Q3.
2. Maintain that conditions are ripe for a pop. Sentiment is bad.
3. We are at the 38% retracement of the gain from the post January crash to the May highs. Rough calculation: 190 - 115 = 75; 0.62 * 75= 46.5; 115+46.5=161.5.
here's my calculation:
spreadsheets.google.co...
July 17th: $174
July 21st: $163
$11 per share profit thus far.
Nice short, let's see how low it dips tomorrow.
Toni
Ben, I think what you're doing as an analyst is unethical. You can't own a stock and advise investors to buy or sell it. There's a conflict of interest here. Few years ago the SEC went after such analysts. Regardless of how accurate your analysis is, you should not mention Apple until you've sold all your stocks and have no interest in it. You're making money in a shameful way.
Shame on you.
Are you being serious, or are you joking? Don't act like my analysis is moving this $145 billion company's stock. If it is, I will proudly pat myself on the back...please remember this site is essentially a blog. It is not unethical, there is a disclosure which details my holdings, my bias, and anyone that reads this should know to take my analysis with a grain of salt, just like you should do with anyone's opinion.
Shame on me? Sorry Mom.
rd
I'm not sure what all the "shame on you", name calling, and other such shenanigans is all about. As an investor, be intelligent, and make your own informed decisions by taking in information (including this analysis) and putting it to use in forming your own opinion... without denouncing someone else's. We get to see how accurate Ben's predictions were in about 30 minutes... and I appreciate him putting forth the time and effort to voice an educated decision... whether I agree with him or not.
As one investor to another (well, Ben, you're actually more of a trader than I am) - I respect what you've presented and it's been thought-provoking.
EPS was great coming in at 1.19, but once again guidance kills the stock. 11 million iPod sales is very impressive to me, I'm guessing their ASP took a big hit with shuffles being a larger percentage of mix. Rev, Mac and iPhone in line with what I expected.
Lets all listen in to the call.
On Jul 21 12:32 PM Ben S. wrote:
> Win,
>
> Thanks for your input.
>
> I agree that China and India are HUGE growth markets for Apple and
> the halo effect from the iPod/iPhone will start being seen especially
> in Mac sales in the future. It will be interesting just how much
> Apple includes this is their guidance for Q4.
>
> With regards to the iPhone, I doubt Apple would guide for any iPhone
> revenue coming from China/India in Q4. In the past we have seen
> Apple guide conservative, ESPECIALLY in emerging markets (China,
> India, etc.) and I wouldn't expect them to deviate from that trend
> in such a dramatic fashion. If they do, I agree, it could be an
> upward surprise in guidance which would be a BIG boost for shares.
>
>
>
> When I initiated my short opinion APPL was above 174 and currently
> it is trading below 163 (7% drop) while over that same time the S&P
> is up 1%. I didn't expect this extent of negative movement prior
> to earnings, especially with positive movement in the market, and
> at this point I think sentiment going into earnings is pretty negative.
> If you followed my advice in the short up to this point, I would
> slim down that position to lock in a portion of your gains. I still
> think my projections are good, they just looked better when Apple
> was trading at a higher multiple.
But the most important, the mentality of the AAPL investors, that never fail. But I feel it will be short lived. I intend to take advantage of that.
Greetings and see you next time.
I believe this summarize my view quite well.
margin compression in the future will be a problem (good call), even if GM was quite good this time
P.O. said
"not looking for a margin so high that it creates an “umbrella” for competitors. Beyond September, expect GM about 30% in 2009."
Ouch.
(JW, go to bed, mum is calling, time to go back in fantasy world ... you'll have another bad day tomorrow, eh eh eh)
Nel frattempo succhiamelo.
EPS
1.19 vs 1.08 - realize that GM of 34.8 included a one time 70 bps contribution SO at GM of 34.1 (only 40 bps above projection) EPS would have been 1.14.
iPod
11 mil vs 10.1 - I'll admit unit sales were much higher than I expected but ASP declined significantly enough for iPod rev to fall 8% year over year.
Mac
25 mil vs 24 mil - Pretty much in line with my prediction.
Rev
7.46 vs 7.51 - Will be tough to find anyone closer than this.
Emotions
Well a lot of you have sealed this for me.
My summarizing statement was:
"Apple will beat their $1.00 in EPS and they just might beat my 1.08 EPS but the stock will get beaten down based on the specifics of their earnings, the non-rational emotional high that a lot of Apple investors are on with the 3G iPhone, and guidance that, while a bit more aggressive than in the past, is still considerably lower than the street."
I'd say it was pretty on par.
No need to call anyone out, we all get it wrong sometimes, I really appreciate those who gave constructive criticism and helped guide my estimates, to those who didn't, I'd advise it in the future.
Thanks
I look forward to reading your posts in the future.