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Post by Deleted on Jan 23, 2013 19:04:38 GMT -8
In light of todays result, and seemingly dismal guidance for next quarter, I made this little chart, comparing our actual Operating Profits, compared to what operating profits calculated on a 38% Gross Margin, for the last 2 years: My conclusion is that the reason for all the doom and gloom is the fact that we were "blessed" with absurdly high GM% in the year ago quarters, and if not for them, our growth rate would instead look very good. GM% is unlikely to fall any further than 38% (i think) in the near future, and we should greet any GM% in the 40's as short term gifts.
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Mav
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Post by Mav on Jan 23, 2013 19:07:19 GMT -8
There we go. More like this, burgess. Knowledge is a great tonic for uncertainty.
Please feel free to repost that in the fundamentals thread.
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Post by mbeauch on Jan 23, 2013 19:48:25 GMT -8
Burgess, you are right. Problem is that results are viewed through android glasses. Q2 has 47% GM's and after a big bounce, sold off hard in April. 47% GM makes the YOY impossible to beat really. This quarter was a good quarter for the most part. The only negative I saw was in the iMac. That was an execution issue. It was announced, but not made available. I still don't understand. I really do not understand the multiple launches in the Christmas quarter. Everything should be in the pipeline before October.
I am still trying to figure out the GM. The mix would imply higher. The ipads had to be the culprit.
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Post by prazan on Jan 23, 2013 20:04:08 GMT -8
In light of todays result, and seemingly dismal guidance for next quarter, I made this little chart, comparing our actual Operating Profits, compared to what operating profits calculated on a 38% Gross Margin, for the last 2 years: My conclusion is that the reason for all the doom and gloom is the fact that we were "blessed" with absurdly high GM% in the year ago quarters, and if not for them, our growth rate would instead look very good. GM% is unlikely to fall any further than 38% (i think) in the near future, and we should greet any GM% in the 40's as short term gifts. Cross posting from intraday thread: Nice graph, Burgess. And next quarter's 47% GM will be a hippo going through a python. Has anyone else noticed that Apple changed the format and contents of its Unaudited Summary Data this Q? Macs are no longer broken out by desktop vs portable, "Other Music Related Products and Services" and "Software, Services, and Other Sales" have become "iTunes/Software/Services," and it appears that "Peripherals and Other Hardware" have become "Accessories." A headache for home spreadsheets.
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Mav
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Post by Mav on Jan 23, 2013 20:49:06 GMT -8
In terms of my own spreadsheet, I just changed out the 3 categories of other music, software and peripherals to iTunes/software and Accessories.
A little bit of a headache, but not too bad for the simpler spreadsheets.
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Post by Deleted on Jan 23, 2013 21:49:41 GMT -8
Another positive note. Despite apples cheaper product lines becoming a larger % of sales, Apple has managed to edge closer towards 90 million devices shipped while maintaining a total device ASP over $560 - which is over $60 higher per device compared to when it shipped only 47 million total devices just 2 years ago:
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Post by bryanyc on Jan 23, 2013 23:00:03 GMT -8
Another positive note. Despite apples cheaper product lines becoming a larger % of sales, Apple has managed to edge closer towards 90 million devices shipped while maintaining a total device ASP over $560 - which is over $60 higher per device compared to when it shipped only 47 million total devices just 2 years ago: THAT is actually an important metric, thanks for bringing it up. As opposed to a comment in the daily thread, Apple has gained a little bit of market share in the US with the introduction of the the i5. This is a two horse race at the moment, and Apple has a stickier ecosystem for the time being, at least in terms of return customers. Like Tim said, selling devices to new customers means that those customers often buy another Apple product. We have to think long term here. Like the way Wall Street thinks of Amazon for the moment (pardon the comparison but..) Amazon is making a minuscule profit to grow their market share and as a barrier to competition. Well Apple is increasing the number of iOs customers and producing the best product available - and keeping their profit margin extremely high. This positive experience with the product (and the investment by the customer in Apps) is sticky and brings the customer deeper into the iOS ecosystem. Ultimately I think there will be a transition to more content and transaction based income for Apple based on iOS users. And hopefully they will use their mountain of cash to engineer in this recurring revenue stream that Wall Street seems to value so highly.
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Post by Deleted on Jan 24, 2013 0:14:51 GMT -8
Sorry to turn this into my own personal chart frenzy - but here is my very conservative estimates on revenue & EPS for the next 4 quarters. Even with conservative factors (38% margin, 24% net profit ratio, low revenue growth), you can see Q12014 being record earnings for a US company. Now think about what it means if: - Gross margins climb (likely if still using current form factors) - Higher net profit ratio (likely if GM increases, Op Ex % continues to decrease, and OI&E grows faster than revenue) - Revenue climbs higher than my low forecast - Any new product lines introduced (quite likely we finally see a TV) - A large share buyback increases EPS Any of these factors will increase my conservative projections.
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Post by mbeauch on Jan 24, 2013 3:08:59 GMT -8
Apple has to look for ways to gain earnings. Nothing will make the earnings rise faster than buying back a large block of shares. It is the gift that keeps on giving also. It does not just raise the EPS for one quarter, it last forever. over the years we have debated the cash pile and many here kept saying they trusted Apple and felt Apple had a plan for the cash. Well guess what, they don't have a plan for the cash and that is why WS gives it no value. There is no rational reason for AAPL to be sub-500, 600 really. The stock will be fine in a few years when Tim cashes out his first set of RSU that mature at 5 years.
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Post by Deleted on Jan 24, 2013 15:04:20 GMT -8
right - finally figured out the adding image thing - have changed all my posts above.
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Mav
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Post by Mav on Jan 24, 2013 15:41:53 GMT -8
Apple may continue to delibrately suppress gross margins. At some point, flash storage capacities will go up, for example.
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Post by Deleted on Jan 24, 2013 16:08:20 GMT -8
The 10-Q mentioned that they expect GM% of 37.5-38.5 to continue for all of 2013
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macorange
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Post by macorange on Jan 24, 2013 16:36:22 GMT -8
What are your assumptions underlying flat revenue from q2 to q3 when revenue declined sequentially last year? Where does the revenue come in q3 to replace the large international iphone sales in q2?
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Post by Deleted on Jan 24, 2013 17:30:16 GMT -8
Its more to do with bigger sequential drop Q1->Q2 compared to last year, than it is a bigger Q3.
Q1->Q2 last year was a 15% drop (and that was with a 14 week Q1)
Q1->Q2 this year I'm forecasting a 20% drop.
Reason for Q2 bigger drop? i think Apple produced more iPhones in Q1 and so not as many will be produced in Q2 (channel inventory is better than a year ago). Also for Q2, Macs & iPad minis remain supply constrained.
I think in Q3 macs & iPad minis will be in plentiful supply, along with new macbook airs due.
My chart doesn't quite show it, but i'm forecasting revenue a billion less in Q3 than in Q2. I think there will be a drop in iPhone shipments, but not as big a % a sequential drop as 2012. I think the drop will mostly be outweighed by increased iPad & Mac sales.
I haven't included the possibility in Q3 for early/additional iPhone/ipad releases, China Mobile &/or NTT Japan iPhone deal, Apple HDTV launch, or new iOS accessory - but theres a reasonable chance that could happen.
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Post by rutgersguy92 on Jan 25, 2013 14:42:20 GMT -8
Burgess, you are right. Problem is that results are viewed through android glasses. Q2 has 47% GM's and after a big bounce, sold off hard in April. 47% GM makes the YOY impossible to beat really. This quarter was a good quarter for the most part. The only negative I saw was in the iMac. That was an execution issue. It was announced, but not made available. I still don't understand. I really do not understand the multiple launches in the Christmas quarter. Everything should be in the pipeline before October. I am still trying to figure out the GM. The mix would imply higher. The ipads had to be the culprit. I think realized the IPad mini would hurt GM, so to keep EPS on the right track, he threw the kitchen sink in Dec. Q. This included not only the 4 refreshes, but also early launch in a slew of countries. Unfortunately, he was not ready for this launch. Memo to TC: please limit refreshes to two per Q, and start making the stuff at least a month earlier than you started this year. I'm sure there's a bunch of things in lessons learned.
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Post by rutgersguy92 on Jan 25, 2013 14:45:27 GMT -8
The 10-Q mentioned that they expect GM% of 37.5-38.5 to continue for all of 2013 Would that be a telegraph of a cheaper IPhone, which, like the mini IPad, has an inherently lower GM?
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Mav
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Post by Mav on Jan 25, 2013 17:34:15 GMT -8
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Post by Deleted on Jan 25, 2013 18:14:38 GMT -8
Thanks for the correction Mav.
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Post by Deleted on Jan 26, 2013 16:11:22 GMT -8
Some thoughts on 2nd & 3rd Quarter Revenue guidance, and the importance of Aprils earnings report.
For quarter 2, apples guidance range is a 5% - 10% y-o-y revenue increase, which would by far and away represent apples worst increase for the last 3 years if it actually came in at those levels. (Apples previous quarter just gone was the previous lowest y-o-y growth for the last 3 years at 17.7%). GM % guidance is 37.5-38.5%
Gross margin figures based on apples Q2 guidance is as follows:
5% y-o-y revenue increase - $41 billion x 37.5% gives us GM of $15.375 billion (decrease of -17.2%) 5% y-o-y revenue increase - $41 billion x 38.5% gives us GM of $15.785 billion (decrease of -15%) 10% y-o-y revenue increase - $43 billion x 37.5% gives us GM of $16.125 billion (decrease of -13.1%) 10% y-o-y revenue increase - $43 billion x 38.5% gives us GM of $16.555 billion (decrease of -10.8%)
So It would take a 12.14% beat on apples top revenue & GM % guidance to match the year ago figure.
If we give apple the benefit of the doubt (no sandbagging), and assume that revenue growth is indeed falling to these low levels, how would this project onto potential Q3 guidance?
Q3 2012 saw $35.023 billion in revenue, a 5-10% y-o-y increase would see Q3 guidance of $36.775 to $38.525 billion (probably rounded to $37 to $38.5 billion). This year Q3 GM% shouldn't be any lower than 38.5%, it will probably be higher, but lets assume conservatively and presume apple guides the same as Q2 with a range of 37.5-38.5%.
Last year Q3 GM% was 42.81% which gave us $14.994 billion.
5% y-o-y revenue increase - $37 billion x 37.5% gives us GM of $13.87 billion (decrease of -7.5%) 5% y-o-y revenue increase - $37 billion x 38.5% gives us GM of $14.24 billion (decrease of -5%) 10% y-o-y revenue increase - $38.5 billion x 37.5% gives us GM of $14.44 billion (decrease of -3.7%) 10% y-o-y revenue increase - $38.5 billion x 38.5% gives us GM of $14.82 billion (decrease of -1.1%)
For apple to match last years gross margin figure, it would require a beat of only 1.2% on apples top end of guidance.
On April earnings report in 12 weeks time, we will know how much sandbagging there is in apples guidance, and if there is any beat of the top end of guidance whatsoever (likely), then we can probably count on Q3 Y-o-Y increases in Operating profits.
Given growing positives of increasing OI&E, decreasing operating expenses as share of revenue, decreasing share count, then I am as certain as I can be at this early stage that Q3 will see positive EPS increases - and that this will become apparent when April earnings are released.
Thoughts? Rebuttal?
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Post by Deleted on Jan 28, 2013 16:15:15 GMT -8
Here is a couple of charts I whipped up showing the relative underperformance of Retail, and the overperformance of Japan.
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Post by Deleted on Jan 29, 2013 18:00:22 GMT -8
here's some interesting data: 2012 iTunes/software/services Revenue: $13,557,000,000 / 500 million iTunes users = $27 per iTunes user per year 2011 iTunes/software/services Revenue: $10,246,000,000 / 350 million iTunes users = $29 per iTunes user per year iTunes user growth is not slowing down, I predict it will get to a billion users and retain an average annual user spend over $20 within 2 years. Should be good for at least 20 billion in revenue a year (more likely closer to 25 billion), or about 1 billion per quarter in operating profit (assuming 20% margin). Horace has a good chart n platform growth here: www.asymco.com/?s=iTunes&submit=Go
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Post by mbeauch on Jan 29, 2013 18:14:43 GMT -8
I am not real happy about this combination. It hides the actual value of itunes. Who knows, maybe that is the point.
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Mav
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Post by Mav on Jan 29, 2013 18:16:57 GMT -8
iTunes has been and I think always will be more of a user draw than a profit center...unless Cue can negotiate some big cut in content from the providers if an Apple television ever launches, and worldwide.
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Post by Deleted on Jan 29, 2013 18:19:54 GMT -8
I think the proportion of Apps is growing far faster than music, so the margins should be increasing towards the app store(s) 30%, rather than the lower margin music/books/video.
I presume the bigger the store gets, the better economies of scale in the data centres, and the higher the net margins creeps.
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Post by mbeauch on Jan 29, 2013 18:21:46 GMT -8
iTunes has been and I think always will be more of a user draw than a profit center...unless Cue can negotiate some big cut in content from the providers if an Apple television ever launches, and worldwide. It is the backbone. You can buy a device, but you can't buy itunes. It will always be that way. Apple gets 30% from itunes and 15-20% of it is profit, nice profit margin.
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Post by Deleted on Jan 29, 2013 18:22:19 GMT -8
I am not real happy about this combination. It hides the actual value of itunes. Who knows, maybe that is the point. The category is growing far faster than the iPod (which is declining) - they might as well roll up iPods into the accessories category, and move iPod touch sales into the iPad category.
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Mav
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Post by Mav on Jan 29, 2013 18:49:14 GMT -8
For a long time iTunes was running about break-even.
Since Apple finally has a "SAAS" revenue category in all but name, I'll be watching it with great interest looking forward. Still need to read through the reconciliations of past quarters.
I've been wondering what Apple will do with iPod's categorization myself, as it continues to slowly fade away (but never entirely, I'm guessing...at some point sales should stabilize)
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Post by vikesfaniv on Jan 29, 2013 23:43:33 GMT -8
Even though the iPod category continues to slowly shrink I still feel it is of vital importance to Apple. To me the first apple product teenagers (or younger) are introduced to is an iPod. I think a vast majority of kids get a music device of some sort long before their first phone. I love seeing apple continue to devote resources and improve the iPod line even though sales are slowly decreasing. As long as apple maintains their 70%+ market dominance I pretty much automatically disregard any story about apple losing its "cool" factor with the younger generation.
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Post by mbeauch on Jan 30, 2013 7:50:51 GMT -8
Even though the iPod category continues to slowly shrink I still feel it is of vital importance to Apple. To me the first apple product teenagers (or younger) are introduced to is an iPod. I think a vast majority of kids get a music device of some sort long before their first phone. I love seeing apple continue to devote resources and improve the iPod line even though sales are slowly decreasing. As long as apple maintains their 70%+ market dominance I pretty much automatically disregard any story about apple losing its "cool" factor with the younger generation. In my tin foil hat so be prepared. ;D The media coverage about Apple losing its cool is an effort to slow Apple sales. It is not like customers are writing the media outlets making these claims. The media is a dictator and wants to assert its will on the populace. CNBC has taken the lead on this and its mission is to destroy Apple. Crushing the stock is just a bonus for them. Look at AMZN, it is the poster child for a Marxist economy. It is propped up by the media. Does the media ask, how can you have 24% GM's and only have 95 million in net income. Of course not. Grrrrrr, gotta stop.
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coma
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Post by coma on Jan 30, 2013 10:50:47 GMT -8
In my tin foil hat so be prepared. ;D The media coverage about Apple losing its cool is an effort to slow Apple sales. It is not like customers are writing the media outlets making these claims. I have a tin foil hat also and under it is brewing the theory of Samesung involvement in this effort to discredit AAPL for market share.
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