July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Apple reported its second quarter 2013 results today, with revenue of $43.6 billion and income of $9.5 billion. Analysts had expected revenue of $42.5 billion and income of $10 billion. Apple’s guidance had been between $41 and $43 billion.

Device sales:

• iPhone: 37.4 million
• iPad: 19.5 million
• Mac: just under 4 million

These numbers are down, naturally, from the first quarter of this year, in which Apple sold almost 48 million iPhones, 23 million iPads, and 12.7 million iPods. That quarter includes the Christmas shopping season, however, which is a big season for Apple.

Last year’s comparable quarter, Q2 2012, was a big growth period for the company, with revenue of $39.2 billion and income of $11.6 billion and an 88 percent increase in iPhone sales and a massive 151 percent increase in iPad sales, year-over-year:

• iPhone: 35.1 million
• iPad: 11.8 million
• Mac: 4 million
• iPod: 7.7 million

The company’s iPhone numbers beat the year-ago quarter, but just barely, while iPad numbers were up healthily, although probably not as much as analysts would have liked. Mac numbers, of course, were down.

In other news, Apple is hiking its quarterly dividend by 15 percent and is planning to buy back $50 billion of its own shares.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Apple stock has jumped more than $18 since yesterday, adding $17 billion in stock market capitalization to the company’s value in the last 24 hours.

The company will announce its second-quarter earnings today around 1:00 p.m., and investors are expecting so-so news: a slight reduction in growth rate and reduced profit margins. Projected revenue of $42.6 billion would sound good for almost any company on earth, but Pace University professor Darren Hayes told me yesterday that “iPhone 5 sales have failed to impress.”

But perhaps in a sign that the avalanche of bad news that drove Apple stock down from last year’s lofty heights of $700 has priced all the risk out of the stock, AAPL is rebounding this morning. Since after-hours trading last night, the stock is up 5 percent, including a $7 jump just today.

A five percent jump is generally significant for any company, but it’s especially so for Apple, which has seen its stock erode steadily over the last six months.

One thing Hayes mentioned is that short sellers — those who profit when a stock goes down in value — have been aggressively driving Apple’s price down. But, he said, if there’s a significant bounce in the stock, they’ll need to cover their positions, which could have disproportionately positive effects on Apple’s stock price.

In other words, a stock that might move $5 up on fundamentals like revenue, margins, and future prospects, could jump $30 simply due to short sellers needing to buy back into the stock.

All that depends, however, on Apple both reporting at least fairly-good Q2 numbers and — more importantly — issuing strong positive guidance for Q3. Third quarter 2012 guidance is what started the company on its long stock price slide. The question today is whether Q3 2013 can reverse that trend.

It’s an uphill battle, but the early returns as of this morning are positive.

photo credit: JD Hancock via photopin cc

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Apple’s largest active shareholder, the $92 billion Fidelity Contrafund, cut its stake of Apple shares by 10 percent in the first two months of the year, according to Reuters. As a result, Google is now the funds’ largest holding.

Apple shares are down $7.26 so far today and down about $260 in the past six months.

In fact, the two company’s shares seem to be heading in opposite directions, with Google up about 25 percent in the past six months, and Apple down about the same percentage in the same half year:

Source: Google Finance

AAPL vs GOOG: the last six months

Apple stock has been hammered since the middle of last year, and even Tim Cook’s virtually unprecedented chat with Wall Street in February of this year had no positive effect, as the slide continued. Some investors have said that Apple’s fundamentals are sound, and that it is a bargain now — that a company with almost $140 billion in the bank will be able to continue its growth.

But Apple has yet to visibly demonstrate that is is willing to think different by producing a cheaper iPhone and react effectively to the competitive threat of Android. While Apple has been holding its own in the American market share battle, Android has been winning the global war.

Fund manager Will Danoff had held 11.56 million shares at the end of December 2012, but only held 10.43 million at the end of February. Fidelity Contrafund is up .5 percent on the day.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Investor Warren Buffet, recently the world’s richest man, seems to think that Apple stock is going to do just fine.

Asked on CNBC’s Squawk Box about Apple, its depressed stock price, and the fantastically large $137 billion cash stash that is bulging Apple’s back pocket, Buffet seemed to suggest that its stock is a good buy, although he doesn’t own any himself.

“If you could buy dollar bills for 80 cents, it’s a very good thing to do,” Buffet said.

That’s a generically true statement, of course. But Buffet said it in the context of recounting a conversation with Steve Jobs some years ago about what Apple should do with its rainy-day fund, and when answering a question about what Apple should do with all that money.

Apple’s stock value, of course, has slid a couple hundred billion dollars since the heights of September.

Source: Google Finance

Apple’s stock since late 2012.

Years ago, Buffet had advised Steve Jobs to buy back Apple stock. It seems he would advise current Apple CEO Tim Cook to do the same, but he did add something just a little bit different: ”The best thing you can do with a business is run it well, and the shares will respond.”

One other tidbit that Buffet shared: Part of the reason that Apple has so much tax is that “two-thirds of it has not yet been taxed,” which seems to be a common refrain around the tech world these days.

You can watch the interview on CNBC or catch a summary on CNNMoney.

photo credit: Images_of_Money via photopin cc

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Since December of last year, Google stock is up 20 percent. Since December of last year, Apple stock is down 20 percent.

I do not think those two facts are unrelated.

To borrow a phrase from Gary V, Google is crushing it. The search/advertising/mobile giant had its first $50 billion year in 2012, and ended the fiscal year with a monster fourth quarter that was up 36 percent year-over-year. That’s not just big and not just an increase, it’s also an acceleration from Q4 2011 numbers, where were already up 25 percent from 2010.

Big companies usually just don’t grow at this pace.

But it’s been a long tough road for Google, in some ways. The undisputed search engine heavyweight champion of the world was long an investors’ darling, running up to $700 heights in December 2007, only to sink as low as $262 near the end of the following year. It was only returned to those rarefied heights in late 2012, and it has continued its slow but seemingly inexorable climb to the current $802.09.

Google’s primary product development focus as a company is driven by the masses of data that its search engine, advertising business, social network, and mobile operating systems generate. Iteration and innovation is driven by data on what people are doing with the tools. Apple’s innovation focus is on designing products with an overarching human ethic: software, hardware, and services melding into a single simple tool.

The difference could not be clearer than in Apple’s Maps fiasco: data was the difference.

The contrast in the last three months with its biggest mobile rival, Apple, could not be more stark. AAPL has shed hundreds of billions in value, and not even a Wall Street insider fireside chat with CEO Tim Cook helped: the stock dropped another two percent.

The ironic part?

Apple’s revenue for the company’s first quarter of 2013 — $54.5 billion — was more than Google’ revenue for all of 2012. And its profit for that quarter, $13.1 billion, is more than Google’s profit for all of 2012. And Google is a more expensive share, at a 24.7 price/earnings ratio, to Apple’s 10.4.

But stock price, unlike revenue, is not a trailing indicator. It’s a bet on the future. And analysts seem to believe that Android is going to eat Apple’s lunch (probably because 76 percent of Apple’s revenue is dependent on Android competitor iOS).

If that does happen, a bet on Google’s future is probably a good one. But the fat lady hasn’t sung quite yet.

Image credit: Google Finance/John Koetsier

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Apple is releasing its earnings in just a couple hours, and analysts have been tightening down their estimates. Official guidance from the company was $52 billion in sales, but very soon we’ll see how close the analysts are.

The big question, however, is this: Even if Apple has a stellar quarter, will it be enough to pull it out of its stock market doldrums?

Over the past year, Apple has seen its stock lose almost $200 billion in value, from a high of $700 to below $500, before a recent rise just north of the $500 mark. This is in spite of topping 53 percent smartphone market share in the U.S., selling 7.2 million iPhones last quarter through AT&T, over 6 million iPhones with Verizon, and being the phone of choice for 50 percent of smartphone buyers.

Oh, and by the way, on the path to meeting investors’ expectations in the last quarter of 2012, Apple sold 27 million iPhones and 14 million iPads, resulting in revenue of $36 billion and  profit of $8.2 billion — an increase of $1.6 billion from the year-ago quarter.

Not too shabby?

Apparently, shabby enough to shave tens of billions of stock market valuation. The big worry is Google’s Android: Will Apple reprise the past and fade into the sunset again, as it did (temporarily) with the PC market?

The worry is that Android will grab the lion’s share of Apple’s fast-growing and most-profitable mobile market, as it did in the third quarter of 2012, and that Apple will not make the kind of hard decisions it needs to make to retain mobile leadership.

Analysts are predicting anywhere from the low $50 billions to the mid-$60 billions, with 50 million to 55 million iPhones and 22 million to 26 million iPads. Macs and iPods are much less relevant to Apple’s bottom line. Wall Street’s consensus is $54.58 billion, 50 million iPhones, 23 million iPads, 12 million iPods, and 5 million Macs.

My guess is that to make the stock price pop, Apple will have to exceed those numbers by a considerable margin.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Sterne Agee analyst Shaw Wu has upped his price target for Apple stock for the second time since the iPhone 5 release. He now believes the stock will hit a stratospheric $840 based on two things: iPhone 5 and iPad Mini.

Wu predicts iPhone 5 sales of 27 million units in the current quarter, up a million from his previous prediction, and 46.5 million units in Apple’s next quarter, which starts in December. He did note that supply-chain constraints on the new touchscreens may hamper December-February sales.

I spoke to Wu, who just arrived back from Taiwan, where he was visiting some of Apple’s suppliers. He had a chance to play with the iPhone 5 after the introduction, calling it a “very compelling upgrade” due to the larger screen, faster processor, and improved maps.

“Despite the fact that a lot of the reviews are somewhat lukewarm, we think this phone will sell extremely well,” Wu said. “This isn’t the first time that iPhone has been panned.”

Source: Apple

iPhone 5

iPhone 4 had Antenna-gate, iPhone 4S was not different enough, and iPhone 5 doesn’t have LTE, NFC, or a significantly new innovation, Wu pointed out.

“But at the end of the day, Apple is able to produce the best phone out there.”

In terms of the iPad mini, Wu talked to Asian suppliers who were being told to prepare for “something,” and he suspects an October launch may be in the cards.

“From a supply-chain perspective it is ready to go,” Wu told me. “Apple has to balance the harm that rumors do to sales against spacing out the launch after iPhone 5.”

Totaling up the numbers if he is right, Wu said Apple could have a $36.6 billion September quarter and a $157 billion 2012. The $840 stock price is based on a fairly reasonable 13 times price/earnings ratio, with Apple’s cash reserves of $124 billion tacked on.

One thing I asked Wu: How accurate are your previous projections?

“It varies,” he said, laughing. “One quarter we really take pride in was last year when people over-estimated iPhone sales. The street was at 20-22 million units while actual was 17 million. We were at 18 million, so we were off too, but we were the closest.”

He paused, then added:

“I prefer to err on the cautious side.”

With Apple, that’s sometimes hard to do.

photo credit: ~FreeBirD®~ via photo pin cc