Copyright © 2016
Tag - Wall Street
The latest episode of The MacNN Podcast attempts to understand Wall Street thinking, which is surely an exercise in madness. Apple had a record (fiscal) Q1, again setting a record for the most profitable quarter from any company ever, but the fact that the growth wasn't as significant against last year's killer Christmas season made Wall Street unhappy, particularly with the guidance that next quarter will see the first-ever iPhone drop in sales from last year's quarter.
Despite missing the analyst consensus targets for both revenue and iPhone sales in Q1, as reported earlier Apple set all-time records in almost all areas of its business; it just didn't grow as much as Wall Street had anticipated, and the news about next quarter is genuinely tough, with a significant year-over-year drop in iPhone sales, the first for the company since it introduced the product nine years ago. Despite the various troubles Apple is dealing with even amidst record revenues, there were several bright spots that got overlooked, including an important milestone in the history of Apple: one billion active devices.
Wall Street analysts are heading into the quarterly results conference call for Apple's fiscal Q1 2016 results with an expectation that the company will once again set an all-time record for quarterly revenues, handily beating last year's $74.6 billion in earnings by a current consensus estimate of $2 billion. A polling of a broader range of analysts by Fortune magazine offers an even more rosy $77.4 billion, but many analysts are concerned that iPhone sales will not top last year's results of 74.5 million units.
As previously mentioned, as far as most analysts are concerned, Apple only makes one product: the iPhone. The stock very clearly rises or falls based on that single metric, despite the fact that the company makes billions every quarter from other products and services -- the iPhone's popularity and staggering growth overshadow these factors, and at the least are seen as a leading indicator of how well Apple will be doing. Two new reports and related comments from analysts say that current speculation on Wall Street about a downturn in iPhone sales in 2016 could be off-base.
Two investment analyst firms, Barclays Capital and UBS, have issued their first predictions on the number of iPhones Apple is likely to sell in its fiscal second quarter, which concludes at the end of March. The firms disagree on the exact number of units, but are within 10 percent of each other, ranging from 54 million to 58 million units. UBS' Evidence Lab is predicting higher numbers, but Wall Street estimates remain conservative.
After falling four percent on Thursday, Apple's stock closed out the week by bouncing back and regaining more than half the drop as Wall Street reacted positively to the company's refutation of the "bending" controversy. Some new questions are being raised about the original video that started the kerfuffle, as careful observation reveals that the video was edited (and the reported noted in the video that his iPhone 6 was already slightly bent before demonstrating the flaw). Investment firms Stifel Nicolaus and BMO Capital Markets have both raised their target prices for AAPL.
There is a tendency among analysts to think of Apple as only "the iPhone maker" and ignore its other products and services, feeling that the fortunes of its most popular and profitable product -- the iPhone -- is the key to the company's overall health, at least in terms of its performance on Wall Street. Barclay's analyst Ben Reitzes told investors in a memo on Thursday that he expects AAPL to stay within a narrow range for the next two years.
Newly-released sales figures of the iPhone on Verizon in the calendar second quarter of 2013 may foretell surprising success for Apple in its core iPhone business, says UBS analyst Maynard Um. The analysis, which relies on Verizon maintaining about the same average of total iPhone sales as it has for the past year and a half, projects that Apple may have sold as many as 34.7 million iPhones between April 1 and June 30 this year, what Apple calls its fiscal third quarter. Wall Street consensus on Apple's Q3 iPhone sales calls for only 26.5 million units sold.
Reports are surfacing that Apple may release a disappointing quarterly earnings report for investors on July 23. The consensus from 35 Wall Street pundits polled exactly matches the revenue from the year-ago quarter at $35.02 billion -- meaning zero revenue growth for the quarter, which is traditionally Apple's slowest. Apple itself said it would earn between $33.5 billion and $35.5 billion for the quarter, which ended on June 30.
Despite moves to buy back shares in itself and the creation of a dividend program, Apple adds money to its enormous cash reserve far faster than it can distribute it -- a problem many companies would like to have, but one that is actually quite thorny for Apple. Wall Street appears to be orchestrating an effort -- or acting on insider information -- to put pressure on the company to make some kind of announcement for a future, additional dispersal of cash to investors. Meanwhile, governments have increased their calls for the "repatriation" of foreign-held profits.