So(apparently), Apple's Q3 results were a disappointment with:
- just a 21% uptick in profits to $8.8bn v. the corresponding quarter last year.
- Gross margins of 42.8% (41.7%).
- International sales accounted for 62% of revenues.
- 17m iPads sold (+84%)
- 4m Macs (+2%)
- 6.8m iPods (-10%)
but the concerning number was an unexpected decline in iPhone sales:
- 26m iPhones (+28%).
Analysts had been expecting revenues of $37.2bn with iPhone sales of 28m.
But as far as the revenues go the company appears to have beaten its own guidance from Q2 where:
"Peter Oppenheimer, the CFO..... added a company Q3 Revenue expectation of $34bn" (Apple Q2 Results lead bounce back in after hours trading.).
However, Wall St appears to have got used to Apple busting its own guidance and analysts inflations.
It also seems like we have been here before (Apple update: record breaking 4th quarter results disappoint!).
But as far as the revenues go the company appears to have beaten its own guidance from Q2 where:
"Peter Oppenheimer, the CFO..... added a company Q3 Revenue expectation of $34bn" (Apple Q2 Results lead bounce back in after hours trading.).
However, Wall St appears to have got used to Apple busting its own guidance and analysts inflations.
It also seems like we have been here before (Apple update: record breaking 4th quarter results disappoint!).
Most headlines have gone with this being only the the company's second disappointment in a decade but just who is deluding who, I wonder?
Last years 4th quarter numbers were also record busting with a 28% increase in revenues but again fell short of analysts expectations along with disappointing iPhone sales of 17.1m. A miserly 21% increase on the previous years Q4.
I would suggest (as many analysts already are), that the issue, other than inflated expectations, is one of competition, and media speculation on the specification and launch dates for iPhone 5.
Last years 4th quarter numbers were also record busting with a 28% increase in revenues but again fell short of analysts expectations along with disappointing iPhone sales of 17.1m. A miserly 21% increase on the previous years Q4.
I would suggest (as many analysts already are), that the issue, other than inflated expectations, is one of competition, and media speculation on the specification and launch dates for iPhone 5.
And, once again in these difficult times I would expect a proportion of potential purchasers/upgraders to hold off until the latest model is announced.
Worryingly for me is the fact that this "huge" disappointment is a full quarter earlier than last year which was strategically important because it meant that the launch of iPhone 4S mainly fell into the most significant first quarter, and one that included Christmas.
So if the company follows last years roadmap then it might be that expectations for the next quarter need to be carefully managed if they don't include iPhone 5.
As expected the company also declared its dividend to be $2.65 per share payable on the 16 August to shareholders on the register as at 13 August.
Worryingly for me is the fact that this "huge" disappointment is a full quarter earlier than last year which was strategically important because it meant that the launch of iPhone 4S mainly fell into the most significant first quarter, and one that included Christmas.
So if the company follows last years roadmap then it might be that expectations for the next quarter need to be carefully managed if they don't include iPhone 5.
As expected the company also declared its dividend to be $2.65 per share payable on the 16 August to shareholders on the register as at 13 August.
Looking forward, and considering how this might affect my investment in Apple, the company is on a forecast pe ration of just 12.26 times with access to cash and equivalents of approximately $100bn.
At yesterday's close, the company was valued at $537bn so you can see that 18.6% of this valuation is actual cash.
Just for a bit of fun then, taking this out of the equation leaves a pe ratio of just 9.98 times for the company's prospects.
Compare these numbers to my previous question of: Apple: Cheap at 11.4 times 2012 earnings?, when the shares stood at $395.
As at the end of June when Apple stood at $599.41 (June 2012: Portfolio Update.), the shares had given me an individual gain of 217% but the company's ongoing task, to keep beating previous comparables, is now a huge challenge given the company's success of recent years.
However, whilst the numerical valuation is modest, and even with that cash pile, the company probably has very little room to manage disappointment for too long given the level of hyped expectations that follow it.
As the biggest company in the world by capitalisation it has put itself into an enviable position but, if it does stumble, commentators will no doubt point back to the loss of the company's visionary founder and saviour, Steve Jobs.
They're still a hold for me though.
Related article links:
- http://www.apple.com: Apple Reports Third Quarter Results
- http://www.independent.co.uk: Apple not immune to the economic pressures in Europe as shares dive following Q3 results and iPhone 5 gossip
- http://www.guardian.co.uk: Apple disappoints analysts despite posting a 21% rise in profits
- http://www.telegraph.co.uk: Apple shares dive after Q3 results miss expectations
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