Apple’s Earnings Fall Below Street Expectations

http://techcrunch.com/2011/10/18/apple-q4-2011-earnings/

by canistr • 15 years ago

30 48 15 years ago

techcrunch.com

jchrisa• 15 years ago

Apple may be one of the only companies that can get away with this without being punished in stock price.

bennesvig• 15 years ago

Down 23 points at the moment in after hours trading. http://finance.yahoo.com/q?s=aapl

radicaldreamer• 15 years ago

The stock is down over 6% in after hours trading.

chugger10• 15 years ago

For the quarter, Apple posted revenue of $28.27 billion and net quarterly profit of $6.62 billion, or $7.05 per diluted share, compared to revenue of $20.34 billion and net quarterly profit of $4.31 billion, or $4.64 per diluted share, in the year-ago quarter.

Apple's yearly profit and revenue were company records with Apple reporting more than $100 billion in yearly revenue for the first time ever.

Typical BS. These are the same clueless analysts who predicted iPhone 4S sales were going to be a disaster.

This is a blockbuster quarter for Apple. They earned $8 Billion more than the year-ago quarter.

chugger10• 15 years ago

This too.

Apple profits jump 54% on record sales

Only idiot Wall street analysts would be disappointed by a 54% jump in profit.

mcphilip• 15 years ago

I doubt anyone's disappointed that profits jumped 54%. The disappointment is that the earnings did not meet the street's expectations.

Symmetry2• 15 years ago

If you expected a 64% jump in profits and bought the stock at a premium on the basis of that then you actually do have a right to be disappointed.

davidedicillo• 15 years ago

"So why the miss? Well for one thing, Apple’s iPhone sales dipped over 3 million compared to last quarter. This is undoubtedly because the world was awaiting the next version, the iPhone 4S, which launched last week."

Exactly, indeed they sold 4M just in a weekend.

bjtitus2• 15 years ago

And these sales were not reported in the aforementioned quarter. I think this sell-off is extremely stupid and short-sighted. Q1 will be huge for Apple, especially with holiday sales.

georgemcbay• 15 years ago

"I think this sell-off is extremely stupid and short-sighted."

Taken at face value I think the whole thing is stupid too and I say that as someone who dislikes Apple and refuses to buy their products personally.

However, whether or not this situation is really stupid and short-sighted depends upon who you're talking about, the guys starting it off (evil, not stupid) or the herd who follows them (stupid).

The basic idea is this:

1) Initiate Apple sell-off (via analyst number games and maybe even selling off a small percentage of your own large holdings)

2) Wait for the herd to follow you, driving the price down significantly. Buy back during the dip.

3) Profit (as price goes back up to reality)!

I've heard from many different people in the finance sector that Apple stock is the go-to stock for large player manipulation these days.

yaykyle• 15 years ago

"Apple’s own guidance for the quarter was $25 billion in revenue" - So they didn't miss their own goal.

Steko3• 15 years ago

Apple's guidance has historically been laughably low.

chugger10• 15 years ago

so a quarterly revenue of $25 billion is "laughably" low?

jpadvo3• 15 years ago

This is not a story about Apple Computer, this is a story about analysts who mis-predicted something. Apple had predicted revenue of $25 billion, and they actually had revenue of $28.27 billion, their second best quarter ever.

So why did this fall below the expectations of the analysts? The article gives one clue:

"Well, even though Apple’s own guidance for the quarter was $25 billion in revenue, analysts seem to have wised up to Apple’s always-low estimates and were projecting numbers far higher: they were looking for around $29.5 billion. Apple came in at $28.27 billion."

The analysts assumed that Apple would do so insanely well that the only way to accurately predict how well they would do was to wildly overestimate. Turns out, they did overestimate.

Here are a few alternate headlines that could be applied equally well to this story:

"The iPhone 4S launch gives Apple second best quarter ever"

"Apple exceeds their expected revenue by $3.27 billion dollars"

I'd rather read about what actually happened and why, then to read about how somebody misestimated what was going to happen.

swombat2• 15 years ago

Actually, from the sound of it, the iPhone 4S launch is not even in that quarter.

jpadvo3• 15 years ago

Wow, thanks for pointing that out. That completely invalidates one of invalidates one of the alternate headlines.

My reading-comprehension-fu must be weak right now.

bjtitus2• 15 years ago

I think this is the key point here. I believe that these estimates would have been met had 4S sales been included in the earnings.

Did these analysts assume that 4S sales would be included? Are they simply overlooking those sales for next quarter?

ajross• 15 years ago

This is not a story about Apple Computer, this is a story about analysts who mis-predicted something

It cuts both ways though. Apple has routinely exceeded (i.e. underestimated) their own revenue numbers for the past few quarters. From Apple's perspective alone, that sounds good because it means their stock shoots up and they get good press. But it means that people who hedged based on the expected numbers got hurt. That annoys people trying to make a living trading (whether those people deserve to make a living trading is entirely a different issue).

So the analysts correct, and bake that offset into their estimates. And Apple "missed" based on those estimates. So people who hedged based on the new guesses have to dump the stock, and it drops.

That's just the way investment markets work. Apple can't ride the "unexpectedly good news!" waves without getting hurt by the "oops, not as insanely great as expected" quarters.

chugger10• 15 years ago

What you have to understand is that most of these artificially high estimates were created by hedge funds with short positions in AAPL.

1) release an artificially high revenue estimate 2) wait for actual results 3) wait for stock to dip when estimate > actual results 4) sell short positions 5) profit

These analysts are not actually idiots, they're evil.

wbracken• 15 years ago

It is for this reason (amongst others) that companies like Warren Buffet's Berkshire Hathaway and Google do not give guidance.

wiredfool• 15 years ago

I think the real story is "Analysts wrong again, this time the other way". Seriously. The analysts have _never_ been right on Apple.

swombat2• 15 years ago

Time to buy Apple shares if you have any money to invest...

georgekv• 15 years ago

The thing I noted was their guidance for next quarter which is $37 billion. That is a helluva lot of iPhones.

mlinsey• 15 years ago

Impressive that iPhone sales, despite dipping vs. the previous quarter, were actually up 21% year-over-year. The year-ago quarter was the iPhone 4's launch quarter. If I'm remembering correctly, the iPhone 4 was supply-constrained around launch but could be found in stores somewhat easily by the end of August 2010.

Undoubtedly the presence of the Verizon iPhone accounts for most of this difference, but it's still very impressive that the iPhone 4 had many more sales in its last quarter (as the flagship phone) than its launch quarter.

shalmanese• 15 years ago

If the market is efficient, then companies should fall below expectations exactly 50% of the time.

Steko3• 15 years ago

I think the most interesting thing is the number of iPads (11 mil up 20% from previous quarter).

Apple will need exactly 15 million in the holiday quarter to hit their 40 million goal for 2011.

I really didn't think they would make it after their ipad 2 supply problems in the Jan-Mar quarter where they only sold 4.69 mil but it looks like they may pull it out. Maybe someone's bonus is on the line if they don't ship 40 million :)

hvs• 15 years ago

OK, someone explain this to me because I've never understood:

1) Company says it's going to make $1.00/share

2) "Analysts" says it's going to make $1.10/share

3) Company actually makes $1.05/share

4) OMG sell the stock!!1! it missed some arbitrary number!1

I'm a libertarian, but crap like this really irks me.

chugger10• 15 years ago

read my comment above.

harryh• 15 years ago

The current stock price is set by the market. It's (at least to a large degree) based on the market's best estimate of the future earnings of the company. This is certainly related to the company's public statements on the topic but as companies often "under promise so they can over deliver" it's not exact.

So now, new information has come in that slightly changes the market's view of the company's future.

How else do you think it should work?

rayiner• 15 years ago

The company has an incentive to under promise and over deliver. The analysts are morons.

kooshball• 15 years ago

Why does this irk you? It's a (mostly) free market and people do as they please. The stock price follows that naturally.

Before the earning, the stock is priced in at the value from 2). After the earning, the stock drops down to the price that's valued with the actual earning numbers, which is lower than 2). This should not be a huge surprise to anyone.

The apple case here is only slightly exceptional in that Apple is known for giving very conservative guidances, which is why the analyst's estimates are almost always higher than the guidance. In the past quarters, even that number was exceeded. It's just not the case here and the stock drops accordingly.

I do think there is likely potential for future growth given the extremely high guidance given for Q1, which knowning Apple, is still conservative.

disclosure: i'm long aapl

bestes• 15 years ago

Because it feels like irresponsible reporting.

Fine for the Wall Street Journal, I guess, since those readers know what it means.

I guess I should be happy if this is comparable to the "Apple is doomed!" stories that used to be in vogue.

Jun8• 15 years ago

Your sentiment is shared by so many people who deem this sort of thing "injustice". I think the problem is thinking that the stocks have an innate value, they don't, the value is completely determined by the market.

Compare and contrast with the following (too common, alas) scenario:

1) Student tells parents that he'll get a B on a course.

2) Parents just know that s/he can do better, so they expect A.

3) Student actually gets B+.

4) Student gets grounded, etc.

This would be different, since the grade that the student can "optimally" get from a course is determined outside of parents (simplistically speaking), so they are unjustified in having inflated estimations. That is, in this case, there's an actual quantity (the grade) that (i) is independent of the estimators and (ii) has a "true" value. Both of these assumptions fail for the stock example.

Another fallacy is, when reading news like "Markets slump, billions lost" to think that actually billions of dollars were lost. Money is lost when you drop it out of your pocket or when an asset is destroyed, e.g. by fire. In this case what is lost is the expectation of making money.

I'm just an engineer, this is my simplistic understanding of the matters.

brudgers• 15 years ago

>"This is undoubtedly because the world was awaiting the next version, the iPhone 4S, which launched last week."

Apple announced their upcoming announcement on September 21.

The quarter ended September 24.

Soft sales for the quarter were almost certainly due to strong competition and a more commoditized market for smart phones.

The spike in 4S orders may be due to the T-mobile roll out and the fact that T-mobile has offered its subscribers no contract plans at a discount when the subscriber purchases their own handset.

I suspect the 4S is having the effect of converting many of those accounts to two year contracts and a meaningful fraction of 4S orders are a side effect of those conversions.

nobody3141593• 15 years ago

But people have been expecting an iPhone 5 all summer so they may have put off buying an iPhone 4 even before the official 4s launch.

nfm• 15 years ago

"25 billion iOS devices sold last quarter."

What?

Apple’s Earnings Fall Below Street Expectations

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