"GODDAMNIT, APPLE IS DOOMED!! Wait… that’s profit? Carry on." - Jim Dalrymple
Let me preface my comments by saying that I am LONG Apple, so I am not real happy at the moment.
Consider, a company that:
- Routinely beats its own projections, generating more revenue ($54B) in a quarter than Google generates in a year. (Side note: fuck the analysts' projections - if they knew shit, they would have anticipated the collapse of DotCom, the 2008 financial crisis, etc.)
- Is consistently, mind-numbingly profitable, yielding outsized profits that have fattened their cash hoard to $137 billion dollars. You'd have to look to the gas & oil industry to find another company that is comparably profitable.
- Has not one multi-billion dollar line of business, but six of them (iPhone, iPad, Mac, iPod, iTunes, Accessories), and all of these lines of businesses feed off of a common ecosystem, creating leverage, lock-in, loyalty and all sorts of halo effects. In fact, the company sold over 75 million iOS devices in this most recent quarter.
- Is unequaled in terms of having an R&D engine for creating new products that generate massive new revenue sources -- not just defensive moats.
- Has cracked the code to selling in China ($7B in most recent quarter; 60% year-over-year growth), something few other American companies have done.
- Despite a reputation for secrecy (with new product launches - duh), sets the bar for transparency with investors, breaking out minutiae on product lines, growth rates, ASPs, sales channels, same store numbers, etc. Contrast this with comparable growth companies, like Amazon, Google and Netflix, where the details are much more surface level.
Apple Revenue by Product and Operating Segments
Thus, it is with little surprise that Apple is:
- Getting tarred and feathered after hours, down $52, or 10%. As someone put so eloquently on twitter, "I never thought I would see "$54 Billion" and "light on revenues" in the same headline.
- Trading at a P/E of 10.4, and excluding cash, a P/E of 7.1. By contrast, Amazon is up over 20% following a report of a LOSS in their most recent quarter, and investors loved Google's most recent revenue miss (the stock shot up 5%). Oh by the way, neither Google nor Amazon pay dividends, something to keep in mind when you hear an investor lamenting that Apple should increase their dividend.
Stock Performance: Apple vs. Amazon vs. Google
Let me net it out for you
To say that investors are idiots, really is an unfair dig at idiots.
The more nuanced truth is that we tire of winners and root for their demise. We trust so-called experts, even when all of the data suggests that not only are they clueless but hopelessly conflicted as well.
And most disappointingly, we don't reward transparency and being treated like adults when it comes to investing.
We respond best when we are teased, ignored or treated like children.
For Apple, the hard truth on this one is to:
A) Be comfortable with the bottom line that rumors and outright lies nothwithstanding (I am talking about you, iPhone 5 rumor-mongers), there is only Apple when it comes to products, customers and profits. Everyone else is in the "not exactly" bucket;
B) Give up the game of sandbagging and then beating earnings, and focus investors on a real earnings range (as they did in this call) so clueless analysts and the media that lap up their dog vomit, can't harm them;
C) Embrace the Jeff Bezos ethos about being willing to be misunderstood for long periods of time, and wear that as a badge of honor with investors.
If you are Tim Cook, and company, you sleep well knowing that your North Star is as bright as ever.
But, at the same time, knowing how many investors are hysterically blind to the potent lights emitted by that star, must sting a little, no?
UPDATE:
- Jim Dalrymple, who I quoted in the entry to this piece, writes today, "How the hell does this happen? Amazon misses its earnings, income fell, sales missed Wall Street consensus and… the stock price goes up 6 percent.Apple sells a gazillion of everything, reports record revenue and profit, and its stock falls."
Related:
- OMG, WTF is going on with Apple Stock
- What is Apple Worth: The 'Gold Standard' Thesis
- Get ready for the Apple + iPhone backlash
- Apple's North Star: Four Takeaways from Apple's Q4 Earnings Call
