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Bernstein and FBR air a familiar refrain about Apple's (AAPL) Tuesday FQ3 report: They're...
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Friday, July 20, 2012, 5:29 PM ETBernstein and FBR air a familiar refrain about Apple's (AAPL) Tuesday FQ3 report: They're worried Apple could miss estimates and issue weak FQ4 guidance, but are staying bullish on expectations of a huge FQ1. Bernstein thinks China and Europe's macro issues, the late introduction of a MacBook refresh, and the failure of the new iPad to launch in China until today will lead to an FQ3 miss. Of course, this week has seen several tech large-caps rally after posting mediocre results.
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China and Europe macro issues: Europe, may be. China: not a change. People there still crazy about Apple products. All you need to watch is the traffic at the Apple Stores.
Late MacBook intro: not all people are knowledgeable enough of the refresh cycle to delay the purchase. In addition, the Mac line is as but a small percentage of Apple's revenue (and even smaller profit). A blip of a blip?
iPad 3 launch "failure": let's not forget where those iPads are made. The reason the launch today has been so calm was because anyone wanted an iPad 3 so badly would have gotten one months ago. Gray market is well and healthy in China.
Sound an awful lot like last quarter to me.
This has to be manipulation. He may not own the stock but he swaps favors with other analysis. Imagine if you could just give your opinion and drive a priice in a favorable direction Where is the SEC? Let me check, oh, they're absent, AWOL!
http://yhoo.it/Kbkr3A
Apple investors who reflexively attack any analyst who says something a little negative about the company do themselves a disservice.
Yes they do, but this guy (Toni Sacconaghi) is notorious in the Apple community.
http://bit.ly/NIwxCE
From 2008:
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And yes, that’s the same Sacconaghi who a month ago invented the idea that around 1.4 million of the iPhones sold were probably sitting in inventory somewhere [...] Never before in the history of consumer electronics have analysts worked so hard to contort reality in order to find potential problems with the sales, inventory, and consumer usage patterns of a device, and then extrapolate these into scary reports that suggest the imminent collapse of a highly successful company at the hands of its incompetent rivals.
More recently, Sacconaghi has been warning that Apple is being “optimistic” to think it can sell 10 million iPhones in 2008, and he fears that the company may lose as much as $1.3 billion in revenue on unlocked phones this year....
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So you can see not all analysts who "say something a little negative" about Apple are the same. Some have been alarmist, cautionary, and wrong since 2008. Toni Sacconaghi of Bernstein is one such animal.
Editors who reflexively assume that an apple investor who is saying something negative about an analyst must be reflexively attacking someone for having a negative opinion do themselves a disservice. You see what I did there?
Also, Sacconaghi has made plenty of positive comments about Apple as of late. Here's one from December praising its low valuation:
http://seekingalpha.co...
There are few companies for whom analyst commentary is as overwhelmingly positive as it is for Apple. Yet there are some investors who choose to focus only on the negative commentary (much of which, like Bernstein and FBR's reports, is only mildly negative) to somehow imagine that analysts hate the company.
Some go as far as to declare all analyst opinions to be worthless and/or assume ulterior motives. Oddly enough, you never see that in the many instances where analysts have good things to say about Apple.
A 750 price target is not terribly bullish, actually. And if he maintains this mild (and what will prove to be very beatable) price target while throwing up all kinds of silliness about how enterprise will not adopt the iPhone and they may be struggling to sell anything until iPhone 5, or any of the other silliness he has come up with, he can apparently fool some people into thinking he is doing a sound job. But just like my claiming Lebron James might score 10 points, it demonstrates a basic misunderstanding of the forces in play.
Regarding his iPhone forecast, I'd again recommend checking out what he has to say. He's forecasting 28.5M for FQ3 and 24.2M for FQ4. A decline, but hardly "struggling to sell anything" ahead of the next iPhone's launch. He also writes:
“Despite the possibility of sluggish performance in the near term, we remind investors that Apple is a very difficult stock to time, and that the stock’s outperformance over the last 2 years has been concentrated in short time periods,” he writes. “Moreover, we note that the issues we highlight are principally related to the timing and the launch of iPhone5, and other than enhanced seasonality, our thesis and outlook for Apple remain unchanged. Moreover, once visibility into the timing of the iPhone 5 launch becomes apparent, we believe that investor sentiment will become meaningfully positive.”
I have read his comments. I believe it is important to hear what everyone is saying about Apple, not just the uber-bulls. But I also believe in ranking how much weight I give to these comments with both the analyst's past performance and with any signs that he seems not to understand the company or its products. And as I cited above (just one earlier example of many I could find) this analyst has demonstrated that he doesn't grok Apple's market position right now. That's not a crime. It doesn't mean he is in the pocket of shorts who are trying to make a killing on the "slingshot effect". It doesn't even mean he is bad at his job. It simply means he has a long history of conjecture that turns out not to be true, cautionary concerns that turn out not to be warranted, and sales estimates and price targets that turn out to be woefully low.
But don't take my word for it. Let's come back Tuesday evening and see how well Toni's EPS of $10.24 matches reality. And then next year we'll compare AAPL's price to $750. I expect the results will be illuminating. And I will happily eat crow and post "That is why Toni makes the big bucks" if his work proves accurate.
And just to be clear, here, Toni is saying there is a reasonable probability that Apple will MISS the street. That's pretty cautionary in my book. An investor following his advice would be setting up for a sizable drop in AAPL -- exiting some positions, going to cash to buy back lower. Let's see how that works out.
That is why Toni Sacconaghi makes the big bucks.
Pass the crow.
I go into all my trades with my eyes wide open and though I am certainly an Apple fan, I am not naive enough to think that Apple won't miss a quarter someday, I just don't think this is the quarter that is going to happen. Loaded up on Jul 27 calls Friday.
The fact is, whatever the exact numbers quarter to quarter, Apple is by far the best, most profitable, fastest growing large company on the planet and should be considered a separate economy from any macro considerations. Here in South America for instance, I see thousands of people with Apple products, yet Apple has invested very little in latin America. A few billboards at the airports, no offices, no TV ads, they dont even need to advertise. What other company on earth can grow like Apple, never discount anything and hardly even advertise?
And China growth is just beginning -- and iPhone 5 will be the biggest product launch in world history -- and a low priced tablet to crush samsung and amazon -- and Apple TV possibly -- and just basically a huge growth story with hardly any real competition except on the low end -- also didn't Apple give low guidance three molths ago specifically to eliminate any chance of missing estimates? If they were to miss, it would be a very temporary problem. I expect iPhone 5 annoncements to start happening very soon, maybe even during the olympics to steal the spotlight from samsung which is a sponsor. Certainly by september which is only 5 weeks away. Also, look at Apple's PE. So low, so cheap by any normal metrics. I see this as a $1000+ stock within 9-18 months and $750 a lot sooner, so buy, buy, buy and ignore the naysayers. Probably just jealous parties or hedge funds trying to accumulate more cheap shares. and Apple is cheap now, make no mistake.
Again, I always try to keep an open mind. Nothing is certain until the announcement. One day AAPL will truly disappoint and it will be a gut check for investors everywhere. This Tuesday does not figure to be this day in my book.
iPad sales are going to be substantially higher than last quarter. Thousands of new users enter the Apple eco-system every day. Of course some people are waiting for the iPhone 5, but that's the minority. China and the rest of the world are only expanding the Apple footprint. If your current plan is expiring or you see all of your friends/co-workers w/ an iPhone, you're not waiting 6 months for a new phone. Worst case is that iPhone sales are somewhere in the high 20 millions. Best case, sales are about where they were last quarter and the enhanced iPad sales and expanding blueprint deliver earnings north of $13. The earnings will be somewhere between $11 and $15 per share. Where it lands, who knows? but history suggests that we're looking at another significant beat.
http://seekingalpha.co...
Also, most analysts defended Apple after that miss, correctly arguing huge iPhone 4S sales in the December quarter would make up for it. That also seems to be forgotten by those who think analysts are out to get Apple.
1. If they missed once due to an iPhone shortfall ahead of a new product launch, they can miss again. Don't know if they'll miss this time (and it might be priced in regardless), but it's worth remembering.
2. Bernstein is suggesting Apple could miss consensus, not its own forecasts, which are low-balled and rarely taken seriously.
Thanks for weighing in as well.
The quarter in question the iPhone 4 was over a year old and many perceived the new release to be 3 months overdue. There were many people who were not going to buy a 14 month old phone when the much awaited new phone was finally arriving. Contrast that to the end of this quarter, when the iPhone 4s is only 9 or 10 months old and the new release is 3 to 4 months away. NEXT quarter is the quarter to worry about Apple not selling the 4s, not this most recent quarter. It's less than 6 months old in lots of the world. That's reasonably new even in tech.
I basically think this is a red herring.
Furthermore, if you consider the timing of product launches, seasonality of the business, the strongest showing for Apple is always the last quarter of the actual year.
Do I think apple will miss? Not at all. Last quarter only saw the iPhone introduction in China during the tail end of that quarter. With a full quarter under the belt, and supply in shape, I think that iPhone sales may come in higher than expected. Another I think nice surprise will be the sales in regard to the new MacBooks. I think the refresh of this product line will contribute, albeit extremely minimal compared to iPhone sale, greater % to revenue Pie.
I'm most interested in their outlook for China, how europe is effecting their business and the margins on their business. (I don't hope for any new product information because that is a rarity in the Apple world). When I went into the Apple store about a month ago, there was a 4-6 backlog on both version of the Retina Display MacBook Pros. It shall be interesting how much this contribute to the margin's this quarter.
You are quite right. But Apple 2.0 has what it calls the "Earnings Smackdown" each quarter, tracking the estimates (and results) of 60+ analysts. Toni Sacconaghi is not the worst (by any means) but he consistently falls in the lower half of all analysts when his projections are measured against actual results. So "sifting through the information" can involve considering the source of that information. Andy Zaky, for example, is one of the highest rated analysts when you look at how nearly he predicts Apple's results. He is calling for EPS of 12.46 compared to Toni's call of 10.24 (which would be a miss of the street's expectations and would be a very bad thing).
So this does not mean that Zaky has to be right and Sacconaghi has to be wrong. It simply suggests that Zaky is closer to the mark than Sacconaghi. So every analyst is entitled to his opinion, but you can weigh the record of that opinion against reality to get a more complete picture.
This quarter seems to be a tweener but still with a ton of upside potential, Expect massive earnings, no bad news, and maybe one or two keyy announcements like China Telecom and-or when the dividend kicks in. Also, the iPhone 5 launch could be announced as early as next month (to step on Samsung) and the cheaper mini pad as well quite soon (to step again on samsung but also Amazon and any other Windows pads). So though we can be almost positive there will be no big miss, any less than stellar news would be very temporary and again create a small window buying opportunity before the big news starts coming in in the next 1-3 months. And that is a very short time to have to wait.
My guess is they beat estimates, margins are still high and profits are as good as last quarter, maybe a slight difference only, So far, almost no one is putting off purchases waiting for the next upgrade. If that hits it would probably be next quarter. But I also believe Apple is keenly on top of these timing issues. So they dovetail new releases more smoothly than last October why they probably saw as a slight flaw in their roll-out scheduling.
Also, next quarter we will get the full impact of the China iPad release earnings. This quarter will only show a a week worth, and that only because Apple made Chinese pay and reserve in advance. So all this is good news, very good, and nobody should be the least buit pessimistic about this tock which remains one of the cheapest large caps in the market. Same PE as Intel, and whose shoes would you rather be in going forward. Intel is a great company, but Apple is king and will be for years to come, maybe even decades.