Apple, Amazon: A race to the bottom?
In this toughest earnings season since the crash of 2008, the worst man seems destined to win.
First, Apple reported a number that was extraordinary by any means, except by the means of Wall Street, where it was considered horribly disappointing, as if the company were made up of a bunch of brainless, arrogant bozos who couldn't shine Steve Jobs' shoes. IPads, iPods, iMacs, iPhones, iTV all below to well below what the Street was looking for.
Throughout the call there were several undercurrents. Let me tick them down.
- Apple has too many products, mostly at the wrong price points, that aren't selling well.
- Apple has either made too many devices and they aren't selling or it didn't order enough and wasn't ready for the onslaught, two mistakes that are considered equally poor.
- Apple's iPad sales are slowing dramatically, and there is a glut developing. The overpriced iPad Mini doesn't help the cause.
- Apple's current iPhone is a bust, and Samsung's competitor is much better.
- Apple's $120 billion in the bank is simply burning a hole in the company's pocket -- another sign that it doesn't know what it is doing.
- Tim Cook is an empty suit, and we have seen the end of the Steve Jobs products.
Suffice it to say that these analysts think Apple is pretty much finished and its 11x on next year doesn't matter because Apple is about to report its first down quarter in Q4, with sales light and expenses heavy. It's a lay-up short, because we now have enough detail to know that the company is washed up and on the way to Hewlett-Packard-like oblivion. Nice to know you, Apple.
Amazon, on the other hand, said nothing on its conference call. In fact, the company basically said its policy is to say nothing. It shouldn't even have had a call. There were no bright spots. It is selling like a drunken sailor, and who knows whether it is really adding customers.
The result? The stock, which sells at an indeterminate price-to-earnings multiple because who even knows whether Amazon cares about profitability, goes down for about 10 minutes to the low $200s and then spends the rest of the overnight session rallying. It is loved because, well, it is Amazon and it's doing really well. I mean, isn't it?
If we were to hold Apple to Amazon's standards, it would be at $1,200.
Now, I think you own Apple because its products are loved, if it can make them fast enough and it is storming the enterprise. I see its products triumphing in the enterprise, as users simply won't tolerate Hewlett-Packard (HPQ), Dell (DELL) and Research In Motion (RIMM) anymore. They want the Apple ecosystem. All of the canards about staying on Microsoft-Intel weren't answered by Windows 8, but more than 90% of the corporate world is stuck on it, and the IT people don't even feel threatened. (Microsoft owns and publishes Top Stocks, an MSN Money site.)
Amazon, on the other hand, doesn't have to answer to anyone about how it is spending or even what it is doing.
To me, it's nuts. It should be totally the other way around, as we told subscribers Thursday night for Action Alerts PLUS. But it doesn't matter. The judgments are being rendered, and Apple falls short and Amazon is better than expected.
So it goes in this toughest earnings season since the crash of 2008-09, when the worst man wins.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long APPL.
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Now unless they have his brain in a bottle attached to wires or they have perfected human cloning/electronic conscious transferal: It's game over for ever seeing Steve Jobs like innovation again.
"Apple has too many products, mostly at the wrong price points, that aren't selling well"??? If you haven't figured out Apple products are overpriced, you must be new to Earth. Also: I'd really like to know where in the world IMacs/iPhone/iPod/iPad/and mini-deals are "too many". Sounds like diversity to me.
LNKD: Forward P/E of 252.37x, Yield of 0%
FB: Forward P/E of 55.40x, Yield of 0%
AMZN: Forward P/E of 105.58x, Yield of 0%
AAPL: Forward P/E of 11.24x, Yield of 1.74%
Maybe it is in income or sales growth? No, APPL is nearly as good as FB at 61% and 45% respectively. AMZN has negative income growth and sales growth is worse than AAPPL. LNKD is much better but seriously 200% of $0.12 isn't that great. When you are that small, it is a lot easier to grow. Is that growth sustainable? The number isn't as big but AAPL has amazing sustained growth year after year. I can't think of any mature company this size that has year over year growth like this.
You can hate Cramer all you want but any market that puts such a high premium on FB, LNKD, and AMZN but trashes AAPL is not in its' right mind. It just proves an old quote from Warren Buffet. (paraphrasing) A successful stock is like a successful marriage. The most important thing is not income or growth. It is low expectations.
If all of us would suddenly think long term instead of short, that junk would correct immediately and Wall Street would have to think of some other tricks to get our money..
I have got to agree with Cramer on this one. Please tell me one company that posted the incredible numbers that Apple did. Revenue of 36 Billion ( in 1 quarter! ) Income of 8.2 Billion ! iPhone sales up 58%, iPad sales up 26%. They expect 52 Billion in revenue in the 4th quarter. These numbers are simply unbelievble. Yet Apple is plunging because the hedge funds that ran it up to 705 are now short and are spreading the negative news.
The iPhone 5 is a magnificent product built like a bank vault that works perfectly. The Samsung G3 runs on android. I have used it. It freezes up, has to be restarted and feels lunk a hunk of plastic. I returned it for an iPhone 5 which is a beatiful work of art that performs faster, smoother and is rock steady reliable. The same is true for the iPad. Try the others and then spend time with an iPad. It is simply the best one out there. The Microsoft Surfave Pro may challenge it when it is released in January, but the ipad is an incredible device that you just cant put down. While I own the new iPad, I have placed an order this morning for the iPad4 and 3 iPad minis. The Apple ecosystem is wonderfu.
Amazon, on the other hand posts questionable revenue of 13 billion and LOST 428 million. Their guidance said they will either make 310 million in profit the next quarter or lose 490 million. What other company could get away with this. Their Kindle fires are really built like junk. Amazon is actually a very expensive vendor to buy from. Their prices are not competitive. Pick a product on amazon then go to thefind.com and compare pricing. You will see that Amazon is always the most expensive. Why buy there and why pay for Prime. Most vendors know offer free shipping.
Amazon stock is owned mainly by Bezos' Princeton hedge fund buddies. It is beong manipulated as one can tell up $13 today on absolutely horrendous earnings. If any other company reported these numbers they would be cult in half, yet Wall Street rewards Bezos. How long before amazon burns through their cash on hand- how many quarters can they lose money. They have no pricing power and they sell nothing proprietary. Even the Nook is a far superior product compared to the Kindle. I vote to boycott amazon and send a message to Wall Street & Bezos that the consumer is not as idiotic as they think
He knows crappola. He is a shill and a con man. Where is "Gallagher" when you need him! He will be "busting" pumpkins" ... soon. Personally, I prefer 'watermellons" ..white on the inside with a tinge of red on the outside. Cante'lopes'..are good....this guy is as full of it as the that half and half in office.
Cramer, the Apple cider has turned. The iPhone 5 is unavailable. Those purchasing a new iPad version 4 (with a March, 2012 intro) in the past few months have an outdated product. The mini adapters for lightning to 30pin are unavailable so use to car, docking stations, and power hampered. A family with difference versions product need different versions of connectors now have a sorting problem...like having a remote for every source to the TV sitting on the coffee table. Pay attention Cramer, it is a mess. The Apple multiple you speak of must mean the added complexity to use their product set. Oh, and the mini eating up production cycles for what? More pins, adapters, and cables, oh my!
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