Apple a victim of its own success
The company's quarterly results were not good enough for Wall Street, and its shares took a beating Thursday.
Apple (AAPL) has the toughest act for any company to follow -- itself.
The company, which has routinely smashed Wall Street earnings expectations for years, saw shares tumble more than 12% Thursday to close at $450.50 after quarterly results that seemed to confirm investors' worst fears about slowing growth. Hope is fading that the situation will improve soon.
The iPad, iPhone and MacBook producer earned $13.08 billion, or $13.81 per share, in the latest quarter -- little changed from $13.06 billion, or $13.87 per share, a year earlier. That was the weakest quarterly profit performance since 2003. Revenue rose 18% to $54.5 billion, the slowest rate since 2009.
But there was brighter news in the quarter. Apple sold a record 47.8 million iPhones and a record 22.9 million iPads. Apple also generated record cash flow from operations of more than $23 billion. Sales of Macs and iPods, however, fell, underscoring investor worries about the lack of a new blockbuster product.
About 18 brokerages have slashed price targets on Apple shares in the wake of the earnings report, according to the Associated Press. Others, such as Jefferies & Co., cut their ratings to "hold" from "buy." This represents a sea change from last year, when it was tough to find any analyst who wasn't incredibly bullish on the stock.
"We don't think the Apple growth story is over, but shares will likely languish until confidence is restored," writes Stern Agee analyst Shaw Wu in a note to clients quoted by the Wall Street Journal.
One bright spot was China, which had previously concerned some investors following media reports that consumers were indifferent to the launch of the newest iPad. Revenue in the world's most populous country rose 67%.
Apple's stock is being punished harshly by Wall Street in part because it changed its approach to earnings guidance. In the past, the company gave conservative figures that were so low that Apple would regularly blow away its own estimates along with those of Wall Street. Under Apple's old approach, its results beat Wall Street expectations by an average of 26% for years, according to Bloomberg News. Apple now expects to give more accurate earnings guidance.
That new policy is already disappointing analysts. Apple forecast revenue in the current quarter of between $41 billion and $43 billion, below the $45.5 billion analysts had expected.
Wall Street is hardly throwing the towel in on Apple, however. The average 52-week price target on the stock is $713.32, more than 50% higher than where it currently trades. Apple, though, faces a long road ahead to get to that lofty theoretical valuation.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
More in moneyNOW
- Abandoned no more: Schools become housing
- White Castle woos Valentine's Day diners
- Netflix shares soar on solid quarter
To put it plain and simple, I like peaches better than apples.
On a much more important subject, I believe Sam Snead was and always will be the best and greatest golfer ever. Sam won over 140 touraments world wide, about twice what the next closest golfer won.
And, you may not believe this, but, Sam's lifetine winnings for all those touraments was less than 1/2 million, yes, for all thiose first place winnings including his 2nd, 3rd and etc.,was less than half million dollars. And, recently one single first place winnings was almost 12 million, yes, almost twelve million dollars for one single tourament first place win.
And, we wonder what is wrong with the economy, we wonder why the country is broke. Sad, very sad, but true.
It was only a matter of time when Apple would peak. But I do find it amusing that even the business media can't resist kicking a great company when it's down. FBN, WSJ, CNN, CNBC etc... are all on the band wagon in beating the company down. I always knew that our mainstream and sports media were on board with the statists but business media? Holy crap.
The Obama regime will not tolerate any praise of good capitalism and successful companies. Simply won't be tolerated.
"Show well thank twice 'bout listinin' to that little brunette midget on the FBN every mornin'. Think she works with that old fool of a cowboy.
Sorry if my english isn't perfect, I learn english
That Apple stock would 'tank' has been on my web page for approximately six months, before Steve Jobs died. The writing is and has been on the wall for financial economists to see. The public at large is getting a glimpse currently. The situation is political at the highest levels of federal government in the USA. The reduction in value of Apple stock evolves around the desire for our federal government to pull another Government Motors move, is a significant PART (only) of my analysis.
I've said it once and I'll say it again, things come full circle. All those middle class parents/people who lost their jobs cannot afford to keep up with the 'Apples' any longer. Plus, of the 7.4 million jobs lost, the bulk at 'middle class' salary, are now replaced with 3.2 million jobs of which fully 70% are LOW PAYING (under 30,000 per year) including the ones 'Stevie' has generated. We all love technology but between outsourcing of services and technology replacing millions of jobs, how many can afford the latest Apple product? With only 30% making enough to purchase the 'latest and greatest' Apple product, are they enough to sustain the profits? Nope, nope, nope. This is where the rubber meets the road and without decent wages for 70% of the population to CONSUME and keep things moving, the standstill will continue.
What really grips me is Apple using our American Justice System to promote Patent Lawsuits when their Patents are held in the Cayman Islands and Apple offshores the profits for their 'I' products to these shell companies and then takes hundreds of millions in Tax Refunds every year.
Market Saturation ...
The age-old paradigm of "everybody has to have one" has now been met ... in spades. Let's face it, the stagnation in Apple's stock, and their stock-in-trade, the venerable iPhone, have hit the wall. The product line has literally saturated the world wide market to the point that almost everyone who wanted an "i-product" now has one... and the cost of upgrading to a new, (but largely unchanged phone or tablet) has become a very cost-conscious decison. Market saturation, and the dynamics of continously expecting ever-newer innovation have now come home to roost, and the branch is bending. Look for the stock to flatline until they launch something incredibly new like the recently intimated wrist-worn product with 'flexible screen' technology incorporating LED TV, or something similar.
Peace to all ~
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market finished an upbeat week on a mixed note. The S&P 500 shed less than a point, ending the week higher by 1.3%, while the Dow Jones Industrial Average (+0.1%) cemented a 1.7% advance for the week. High-beta names underperformed, which weighed on the Nasdaq Composite (-0.3%) and the Russell 2000 (-1.3%).
Equity indices displayed strength in the early going with the S&P 500 tagging the 2,019 level during the opening 30 minutes of the action. However, ... More
More Market News
As geopolitical tensions threaten to spin out of control, investors are wondering how best to position their portfolios for the global turmoil.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'