The Mysterious Case of Apple's Missing Growth [View article]
Tom B:
Shortages of the new iMacs and constrained supplies of the iPad mini adversely impacted revenue and earnings growth in the quarter. The March quarter will be about execution and bringing product supplies into equilibrium with demand.
The Mysterious Case of Apple's Missing Growth [View article]
Robert0713:
Much of Apple's growth over the past few years has been through geographic expansion. I view Apple as an eco-system rather than the purveyor of independent device lines. The costs of providing infrastructure such as tactical data centers and retail store build outs in currently under served markets needs to be balanced with the ability to gain revenue share in those markets.
There's no question the iPhone was the most popular smartphone line in the United States in the December quarter. From the iPhone 4 through the iPhone 5, demand was very high. The iPad mini was in constrained supply at the end of the quarter and Apple is apparently struggling to produce enough of the new iMacs to meet demand.
Geographic expansion will take time and opening new markets requires product to sell. It's not that Brazil, India and Russia won't deliver revenue and profit growth, but establishing a presence and the services infrastructure to meet future customer needs will take time and resources.
The Mysterious Case of Apple's Missing Growth [View article]
noidea2:
By my charts, the fully diluted share count dropped by just under one million shares from the September quarter. It's my understanding the purpose of the $10 billion share repurchase program is to negate share creep in subsequent quarters and not to roll back the number of outstanding shares at the time the buyback was announced.
The Mysterious Case of Apple's Missing Growth [View article]
ccschons:
I focus on the long-term. I see Apple as an excellent long-term value especially after the recent sell-off. In my view, knowledge and patience are among a small investor's most productive resources.
In the December quarter, Apple generated net income at the rate of about $1 billion per week. This was in a quarter of lowered gross margin and constrained product supplies. I expect gross margin to improve sequentially and for real earnings growth to occur in the second half of the current fiscal year. But share price recovery may take time.
Asia-Pacific will replace Europe as Apple's second largest revenue region no later than the current quarter. Softness in Europe has been evident in Apple's results for the past few quarters.
For long-term investors, today's trading range presents an excellent entry opportunity. I've cautioned frequently over the past couple of months investors should avoid efforts at timing or forecasting short-term movements in the share price.
As Apple's customer base expands and additional geographic regions are explored, product purchase and use patterns among new buyers will be different. I consider competition good for consumers, good for product innovation and in the long run good for Apple shareholders. It prompts the company to move more quickly in bringing new and better products to market.
I don't start with Apple's guidance in developing estimates. The reason I referred to guidance in this article is because management and the current Street consensus suggest negative earnings growth in the quarter. I expect a modest rate of eps growth year-over-year.
Concerning last quarter, if you remove the impact of the accelerated recognition of foreign exchange-related losses, several of the independents came quite close to the earnings mark. While it's true in high growth quarters the independents tend to outperform the pros with their estimates and in slower-growth quarters the pros perform better than the independents, each new quarter presents its own challenges in forecasting results and each new quarter provides new and better information.
Web traffic and app use patterns change as Apple broadens its customer base and reaches into new demographic tiers for product sales and customer development. At best these numbers provide some useful corroborating data. I wouldn't rely on those stats as a primary guide in developing revenue and earnings forecasts.
Among a small investor's most potent resources are patience and knowledge. I agree. For long-term shareholders, today's price presents an excellent entry opportunity.
Most smartphones are sold through carriers. Carriers assign a high value to the iPhone because it reduces customer churn rates and increases carrier satisfaction among customers. This is why Verizon came to the table for an iPhone deal after originally passing on the product, why Sprint signed on the dotted line for a deal and why T-Mobile will add the iPhone most likely within the next 12 months.
The iPhone has yet to be made available on the world's largest carrier (China Mobile) and there are other high population regions that have yet to be explored.
By the way, the iPhone does not have a 70% gross margin. Average margin runs about 50% on the line. Much of Apple's gross margin is delivered by supply chain mastery as well as strategic partnerships with key component suppliers in which Apple invests in production capacity to provide the components. Apple also develops iOS, saving the costs of a licensing fee and develops its own chips. These cost savings contribute to the gross margin outcome.
Until the iPod boom in 2003, which followed the opening of the iTunes Music Store and the release of iTunes for Windows, Apple was a single product line company - the Mac line of personal computers. Apple's Intel transition revived the Mac line and in 2007 Apple released the iPhone.
The company now has the greatest revenue diversity across product lines it has ever achieved in its history. About 80% of Apple's revenue this fiscal year will be derived from the iPhone and iPad lines. But the iPad is only now emerging from its nascent phase of global market development and Apple continues to expand its geographic footprint.
Understanding Apple's growth and Apple's growth potential is best gauged by observing the growth in the company's customer base. The company is approaching one-half billion iTunes accounts backed by credit cards and has yet to launch serious customer development efforts in India, Brazil and Russia. There are plenty of territories in the Asia-Pacific region and the Americas to fuel continued customer relationship growth for the next several years.
Not only is Apple the largest mobile device maker on the planet, Apple is also the world's largest distributor of commercial music and a global retailer with the highest sales per square foot of any retail chain.
Tim Cook remarked in the September conference call with analysts about the high percentage of customers that own multiple Apple-branded devices. Yield per customer for Apple is far more important than the incidental sales on any one individual product in isolation from the other products the company provides.
Apple's high margin is delivered not only by supply chain mastery, but also from developing their own chips, developing their own operating systems and selling to customers through the company's own channels, including the retail stores which allows for the savings on retail margin otherwise paid to 3rd parties.
Because the retail stores are the company's primary marketing, advertising and service centers, Apple saves hundreds of millions of dollars each quarter on traditional advertising expenses and this allows the company to keep operating expenses below 10% of revenue. Apple isn't highly profitable because of high product prices. Apple is highly profitable by reducing expenses in all areas of its operations while building a broad and diverse global customer base.
In Apple's fiscal year ended in September, the company sold over 183 million iPhones and iPads. That was an increase of 75% over the prior year in the number of units sold. In the current fiscal quarter, Apple will sell in the range of 80 million iPhones and iPads. In the US, sales of all iPhone models combined will reach close to 50% market share and well over 50% revenue share. Apple's smartphone revenue share in the US will be greater than the smartphone revenue of all competitors combined.
In the current fiscal year Apple will achieve about 40% revenue growth. The growth rate will be close to last fiscal year's 44.58% rise in revenue. The revenue growth rate may moderate slightly due to the decline in iPod sales and single-digit revenue growth from the Mac line. Even with single-digit revenue growth, the Mac will gain both revenue share and market share in the domestic and global markets.
The carriers pay high subsidies to Apple because the iPhone reduces customer churn and iPhone customers tend to have higher levels of carrier satisfaction. This is why Verizon came to the table for a carrier deal with Apple and why Sprint followed closely behind. T-Mobile will most likely be added as a 4th national carrier within the next 12 months.
Apple added a second authorized carrier on China's mainland last March. With two carriers offering the iPhone on the mainland through the regional holiday shopping season this February, the Asia-Pacific region will deliver solid revenue and earnings growth for Apple in both the December and March quarters. Shipments to the mainland carriers will commence later this month.
Brazil, India and Russia remain virtually untapped for Apple product sales. Continued expansion of the company's product sales presence in new markets will support satisfactory revenue and earnings growth rates for the next few years.
The Mysterious Case of Apple's Missing Growth [View article]
Shortages of the new iMacs and constrained supplies of the iPad mini adversely impacted revenue and earnings growth in the quarter. The March quarter will be about execution and bringing product supplies into equilibrium with demand.
The Mysterious Case of Apple's Missing Growth [View article]
Much of Apple's growth over the past few years has been through geographic expansion. I view Apple as an eco-system rather than the purveyor of independent device lines. The costs of providing infrastructure such as tactical data centers and retail store build outs in currently under served markets needs to be balanced with the ability to gain revenue share in those markets.
There's no question the iPhone was the most popular smartphone line in the United States in the December quarter. From the iPhone 4 through the iPhone 5, demand was very high. The iPad mini was in constrained supply at the end of the quarter and Apple is apparently struggling to produce enough of the new iMacs to meet demand.
Geographic expansion will take time and opening new markets requires product to sell. It's not that Brazil, India and Russia won't deliver revenue and profit growth, but establishing a presence and the services infrastructure to meet future customer needs will take time and resources.
The Mysterious Case of Apple's Missing Growth [View article]
By my charts, the fully diluted share count dropped by just under one million shares from the September quarter. It's my understanding the purpose of the $10 billion share repurchase program is to negate share creep in subsequent quarters and not to roll back the number of outstanding shares at the time the buyback was announced.
The Mysterious Case of Apple's Missing Growth [View article]
I focus on the long-term. I see Apple as an excellent long-term value especially after the recent sell-off. In my view, knowledge and patience are among a small investor's most productive resources.
In the December quarter, Apple generated net income at the rate of about $1 billion per week. This was in a quarter of lowered gross margin and constrained product supplies. I expect gross margin to improve sequentially and for real earnings growth to occur in the second half of the current fiscal year. But share price recovery may take time.
Why Apple Will Beat The Street [View article]
Asia-Pacific will replace Europe as Apple's second largest revenue region no later than the current quarter. Softness in Europe has been evident in Apple's results for the past few quarters.
Why Apple Will Beat The Street [View article]
Why Apple Will Beat The Street [View article]
http://bit.ly/11ekuHk
I plan to publish my next article following the release of Apple's December quarter numbers.
Why Apple Will Beat The Street [View article]
For long-term investors, today's trading range presents an excellent entry opportunity. I've cautioned frequently over the past couple of months investors should avoid efforts at timing or forecasting short-term movements in the share price.
Why Apple Will Beat The Street [View article]
As Apple's customer base expands and additional geographic regions are explored, product purchase and use patterns among new buyers will be different. I consider competition good for consumers, good for product innovation and in the long run good for Apple shareholders. It prompts the company to move more quickly in bringing new and better products to market.
Why Apple Will Beat The Street [View article]
I don't start with Apple's guidance in developing estimates. The reason I referred to guidance in this article is because management and the current Street consensus suggest negative earnings growth in the quarter. I expect a modest rate of eps growth year-over-year.
Concerning last quarter, if you remove the impact of the accelerated recognition of foreign exchange-related losses, several of the independents came quite close to the earnings mark. While it's true in high growth quarters the independents tend to outperform the pros with their estimates and in slower-growth quarters the pros perform better than the independents, each new quarter presents its own challenges in forecasting results and each new quarter provides new and better information.
Web traffic and app use patterns change as Apple broadens its customer base and reaches into new demographic tiers for product sales and customer development. At best these numbers provide some useful corroborating data. I wouldn't rely on those stats as a primary guide in developing revenue and earnings forecasts.
Thanks for the feedback.
Why Apple Will Beat The Street [View article]
Apple has the most diverse product line and the broadest range of geographic revenue sources that at any other time in the company's history.
Why Apple Will Beat The Street [View article]
Among a small investor's most potent resources are patience and knowledge. I agree. For long-term shareholders, today's price presents an excellent entry opportunity.
Why Apple Will Beat The Street [View article]
Most smartphones are sold through carriers. Carriers assign a high value to the iPhone because it reduces customer churn rates and increases carrier satisfaction among customers. This is why Verizon came to the table for an iPhone deal after originally passing on the product, why Sprint signed on the dotted line for a deal and why T-Mobile will add the iPhone most likely within the next 12 months.
The iPhone has yet to be made available on the world's largest carrier (China Mobile) and there are other high population regions that have yet to be explored.
By the way, the iPhone does not have a 70% gross margin. Average margin runs about 50% on the line. Much of Apple's gross margin is delivered by supply chain mastery as well as strategic partnerships with key component suppliers in which Apple invests in production capacity to provide the components. Apple also develops iOS, saving the costs of a licensing fee and develops its own chips. These cost savings contribute to the gross margin outcome.
Why Apple Will Beat The Street [View article]
Until the iPod boom in 2003, which followed the opening of the iTunes Music Store and the release of iTunes for Windows, Apple was a single product line company - the Mac line of personal computers. Apple's Intel transition revived the Mac line and in 2007 Apple released the iPhone.
The company now has the greatest revenue diversity across product lines it has ever achieved in its history. About 80% of Apple's revenue this fiscal year will be derived from the iPhone and iPad lines. But the iPad is only now emerging from its nascent phase of global market development and Apple continues to expand its geographic footprint.
Understanding Apple's growth and Apple's growth potential is best gauged by observing the growth in the company's customer base. The company is approaching one-half billion iTunes accounts backed by credit cards and has yet to launch serious customer development efforts in India, Brazil and Russia. There are plenty of territories in the Asia-Pacific region and the Americas to fuel continued customer relationship growth for the next several years.
Not only is Apple the largest mobile device maker on the planet, Apple is also the world's largest distributor of commercial music and a global retailer with the highest sales per square foot of any retail chain.
Tim Cook remarked in the September conference call with analysts about the high percentage of customers that own multiple Apple-branded devices. Yield per customer for Apple is far more important than the incidental sales on any one individual product in isolation from the other products the company provides.
Apple's high margin is delivered not only by supply chain mastery, but also from developing their own chips, developing their own operating systems and selling to customers through the company's own channels, including the retail stores which allows for the savings on retail margin otherwise paid to 3rd parties.
Because the retail stores are the company's primary marketing, advertising and service centers, Apple saves hundreds of millions of dollars each quarter on traditional advertising expenses and this allows the company to keep operating expenses below 10% of revenue. Apple isn't highly profitable because of high product prices. Apple is highly profitable by reducing expenses in all areas of its operations while building a broad and diverse global customer base.
Why Apple Will Beat The Street [View article]
In Apple's fiscal year ended in September, the company sold over 183 million iPhones and iPads. That was an increase of 75% over the prior year in the number of units sold. In the current fiscal quarter, Apple will sell in the range of 80 million iPhones and iPads. In the US, sales of all iPhone models combined will reach close to 50% market share and well over 50% revenue share. Apple's smartphone revenue share in the US will be greater than the smartphone revenue of all competitors combined.
In the current fiscal year Apple will achieve about 40% revenue growth. The growth rate will be close to last fiscal year's 44.58% rise in revenue. The revenue growth rate may moderate slightly due to the decline in iPod sales and single-digit revenue growth from the Mac line. Even with single-digit revenue growth, the Mac will gain both revenue share and market share in the domestic and global markets.
The carriers pay high subsidies to Apple because the iPhone reduces customer churn and iPhone customers tend to have higher levels of carrier satisfaction. This is why Verizon came to the table for a carrier deal with Apple and why Sprint followed closely behind. T-Mobile will most likely be added as a 4th national carrier within the next 12 months.
Apple added a second authorized carrier on China's mainland last March. With two carriers offering the iPhone on the mainland through the regional holiday shopping season this February, the Asia-Pacific region will deliver solid revenue and earnings growth for Apple in both the December and March quarters. Shipments to the mainland carriers will commence later this month.
Brazil, India and Russia remain virtually untapped for Apple product sales. Continued expansion of the company's product sales presence in new markets will support satisfactory revenue and earnings growth rates for the next few years.