They matter because if you own AAPL you clients, internal sales people and boss are about to call you to ask what to do (as if you’ve had time to digest the info). They matter because it’s another data point and you should think about why the miss happened and whether it affects your thesis. Investing, for many, is a long term game but the long term is made up of quarters. Dismiss another data point without fully understanding it at your and your clients’ peril.
My sell thesis on AAPL stands. The inflection point for their business model was the iPhone because they were about to drive margins to ridiculous levels due to AT&T and now other phone companies’ subsidies on new phones and upgrades. With the Android, the cache of the iPhone is eroding just enough that phone companies no longer feel the need to maintain the same level of subsidies. iPhone margins are going to come down, or market share is going to drop rapidly. Either way, earnings are going to be challenged relative to estimates, although I’ll have to see how the SS reacts to this miss.
As a long-term investor, i can careless what any of my companies do next quarter. nice to know but in all honesty, i can careless…i don’t think i buy into companies that can collapse after a bad quarter or two or even a year or two of underperformance (think santander)…
and the stock price doesn’t matter for me…though with my screen flashing prices at me all day i do get influenced by it to a good extent…
i listen to earnings calls to learn about the business…i almost never listen to them on the same day…i’m not sure an earnings call will reveal any new “trends” to you, if you understand the business you should be well aware of whats going on by reading news/publications/annual reports
earnings calls i find provide some of hte least useful amount of information once you already understand the biz…
brain_wash_your_face, this is a good post and I agree with your assessment. I forgot to mention the sell-side angle as you did, since it’s now been four years since I last worked on the sell-side.
Also, it’s been intrigued by your bear thesis on AAPL. I would be interested in keeping in touch about investment ideas. Given where shares are trading now, how does valuation factor into your equation? It sounds like you’ll wait to see what consensus does with regard to estimates, but you’re also anticipating some pretty sizable multiple contraction too. Do you think there’s as much room for the latter?
Quarterly earnings are especially significant for momentum plays. Once the streak snaps, the stock can fall off a cliff. That’s not going to be the case with AAPL - not yet anyway - but names like Netflix, F5, Green Mountain, etc.
What are you all thinking going into the announcement on Wednesday? Long/short/no position?
I sold my AAPL a while ago for tax and other reasons, not because I wanted to, and I haven’t repurchased it yet. Trying to see what the thinking is here.
Connector on new iPhone may not work on old attachments (dock, speakers, etc). If true, in my opinion this is the first sign of a very stupid move. Now that there are competing technologies, the iPhone’s dominance relies on stickiness of existsing consumers more than growth in new customers. Changing the connection is a big F-U to them and at the same time frees them to buy non-iPhone since their existing attachments are now a sunk cost with no use. I like AAPL stuff and think it is relativley cheap…but, I also think that the pace/dominance will slow at some point in the next few years. It may follow the same trend as the PC, where AAPL dominated the market and then lost out to cheaper, more flexible competitors. And, Jobs isn’t around to save the company this time.
I traded around my AAPL positions in July and August but am still long. I’m not super excited about adding more shares to my position at this point but I think expectations have moderated a bit after their last quarter earnings despite the run-up in stock price, so my view is that there’s still more upside relative to downside.
iPhone is becoming challenged by competitors. iPhone enjoyed several years of limited competition, but that advantage is eroding rapidly.
Subsidies on iPhones will continue to erode, compressing margins.
Connector change further commodizes the iPhone.
Earnings miss was a meaningful event, showing management’s handle on company finances. Jobs loss is huge.
Funny, the only reason I would own AAPL is a a non-cyclical value play in tech. However, relative to its historical range (AAPL trades very strangely for a high growth tech stock) it is still not very attractive assuming slowing growth.
Well…If AAPL is going to be eclipsed by these competitors. Who are these competitors? Do you see Samsung “forking” Android and creating their own OS? Or do you see Android gaining market share? Do you see Blackberry turning around? Are you long MSFT or GOOG? (I am).
I have owned GOOG for a while. Unlike AAPL, competition is not an issue. I don’t own MSFT; don’t trust management to create value. I don’t own any hardware manufacturer because, as previously stated, I think there will always be a niche space for AAPL but hardware in general is headed the same direction as PCs: commoditization and compressed margins. GOOG Android is looking like it could become the “Windows” of smartphones. For hard assets, I prefer to play telecoms through EM.
It’s hard for me to imagine that Windows Phone is going to have 2% market share forever. They actually have a good product and decent brand recognition. Plus, Microsoft has a history of surviving big failures (Windows Vista) until they get it right, or throwing money at a business until they have large market share (XBox). Sure, they don’t have as many app developers as Apple or Android, but that can change quickly, and I’m pretty sure they will cross some development between Windows 8 and Windows Phone.
I’d also like to point out that MSFT sucks at manufacturing. I love the 360, but that’s despite the fact I’ve had to replace mine five or six times now.
Their phone will fail only slightly less than the BB 10.
I don’t know if it means anything, but my bro is a high school teacher and he tells me that the great majority of students now own samsungs. 2 years ago, 90% had Iphones. This is the age group we should be looking at to discern any trends.
Temporary game changer. Samsung has not proven itself to be adept with software historically. People buy Samsung now because of the features. Hardware is going to be commodity, long term there is going to be a network effect that drives the majority of mobile phones (niche AAPL excluded) from disparate OS’s to a single more ubiquitous OS (oxymoron, but you know what I mean). Right now Android is the best positioned to become the widely used OS simply because it is the most widely used now. That could change, but given the facts today I place my bet with Android.
