Ben S.
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Latest Comments12 Comments
Why I'm Shorting Apple Ahead of Earnings
I don't especially have the time to do some LT analysis on AAPL right now, but I could definitely see the stock getting cheaper over the ST. The rally that we saw from 147 I believe was a bit premature. The questions still remain with GM, falling ASP in iPod and Mac, etc. I wasn't entirely sold on Q3, especially with guidance on gross margin.
I'm guessing I'll piss off more Apple enthusiast, but I think we are going lower, at least until the "new product" is unveiled. At 33X earnings in this economic environment I'm not buying. I think it will get cheaper.
Why I'm Shorting Apple Ahead of Earnings
Why I'm Shorting Apple Ahead of Earnings
EPS
1.19 vs 1.08 - realize that GM of 34.8 included a one time 70 bps contribution SO at GM of 34.1 (only 40 bps above projection) EPS would have been 1.14.
iPod
11 mil vs 10.1 - I'll admit unit sales were much higher than I expected but ASP declined significantly enough for iPod rev to fall 8% year over year.
Mac
25 mil vs 24 mil - Pretty much in line with my prediction.
Rev
7.46 vs 7.51 - Will be tough to find anyone closer than this.
Emotions
Well a lot of you have sealed this for me.
My summarizing statement was:
"Apple will beat their $1.00 in EPS and they just might beat my 1.08 EPS but the stock will get beaten down based on the specifics of their earnings, the non-rational emotional high that a lot of Apple investors are on with the 3G iPhone, and guidance that, while a bit more aggressive than in the past, is still considerably lower than the street."
I'd say it was pretty on par.
No need to call anyone out, we all get it wrong sometimes, I really appreciate those who gave constructive criticism and helped guide my estimates, to those who didn't, I'd advise it in the future.
Thanks
Why I'm Shorting Apple Ahead of Earnings
EPS was great coming in at 1.19, but once again guidance kills the stock. 11 million iPod sales is very impressive to me, I'm guessing their ASP took a big hit with shuffles being a larger percentage of mix. Rev, Mac and iPhone in line with what I expected.
Lets all listen in to the call.
Why I'm Shorting Apple Ahead of Earnings
Are you being serious, or are you joking? Don't act like my analysis is moving this $145 billion company's stock. If it is, I will proudly pat myself on the back...please remember this site is essentially a blog. It is not unethical, there is a disclosure which details my holdings, my bias, and anyone that reads this should know to take my analysis with a grain of salt, just like you should do with anyone's opinion.
Shame on me? Sorry Mom.
Why I'm Shorting Apple Ahead of Earnings
Thanks for your input.
I agree that China and India are HUGE growth markets for Apple and the halo effect from the iPod/iPhone will start being seen especially in Mac sales in the future. It will be interesting just how much Apple includes this is their guidance for Q4.
With regards to the iPhone, I doubt Apple would guide for any iPhone revenue coming from China/India in Q4. In the past we have seen Apple guide conservative, ESPECIALLY in emerging markets (China, India, etc.) and I wouldn't expect them to deviate from that trend in such a dramatic fashion. If they do, I agree, it could be an upward surprise in guidance which would be a BIG boost for shares.
When I initiated my short opinion APPL was above 174 and currently it is trading below 163 (7% drop) while over that same time the S&P is up 1%. I didn't expect this extent of negative movement prior to earnings, especially with positive movement in the market, and at this point I think sentiment going into earnings is pretty negative. If you followed my advice in the short up to this point, I would slim down that position to lock in a portion of your gains. I still think my projections are good, they just looked better when Apple was trading at a higher multiple.
Why I'm Shorting Apple Ahead of Earnings
I appreciate your constructive response. I agree that there will be some additional revenue that will be recognized this quarter on the iPhone, but my point was that it will be immaterial when compared to Q2.
Apple doesn't recognize iPhone revenue on a monthly basis, it is rather a daily basis, spread across two years (730 days). Last quarter they sold roughly 1.7 million iPhones. In order for Apple to recognize around 440 million in revenue, a huge portion of those sales would have had to of been back loaded towards the end of the quarter.
I expect somewhere between 390 - 400 million. 440 or 430 is too high.
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Why I'm Shorting Apple Ahead of Earnings
Not sure what your projections are for iPhone revenue, bit if you read the article/listened to the conference call, Apple stated:
"Because we announced the specific new features to be included in the iPhone 2.0 release and plan to provide them to iPhone customers as a free upgrade in late June, we will delay the start of revenue recognition for all iPhones sold on or after our March 6th announcement date until the iPhone 2.0 software is delivered [italics added]."
In Q2 Apple reported $378 million in iPhone revenue, SO you would have to expect very similar Q3 revenue numbers from the iPhone than in Q2. I am expecting anywhere between $380 - 400 million.
Not sure what you are talking about in terms of 1 million sold; if you are referencing the 3G iPhone launch, that is all Q4 not Q3 - which is what I am writing on.
You may be right, they may beat $1.10, we will see, but I still expect the stock to fall post earnings. Good analysis Hardhead.
Why I'm Shorting Apple Ahead of Earnings
Q1 earnings we saw Apple close on the 22nd @ 155.64 prior to earnings and fall to 139.07 after earnings on the 23rd (almost 11% drop).
Q2 we saw a 4% jump day after.
A lot of Apple's movement will depend on the general market mood for the day. If market is bad and earnings are as I have estimated, I would say we could see a 6-8% drop in the stock at which time we would see some GARP investors jump in and pick up AAPL at 33X earnings.
Enough with the pissing contest.
Why I'm Shorting Apple Ahead of Earnings
My belief is that Apple will beat earnings (like they always do and are expected to do) at a smaller % than in prior quarters due to somewhat disappointing numbers in iPod, iPhone, Mac sales, and Gross Margin. Guidance will once again be below the street and the stock will fall, creating a BUYING OPPORTUNITY.
The mass of responses is great and it only further proves my point about the emotional attachment of Apple investors. Do the research and maybe you will or maybe you won't stumble upon similar numbers that I have; but either way, most of you are the type of investors that will buy Apple with a PEG of 2.5 and in six months wonder why you just lost half your money.