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Look out below! Apple is down $55 after-hours as earnings disappoint

Posted: , by Alan F.

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Look out below! Apple is down $55 after-hours as earnings disappoint
After closing at $514.01 in regular trading, Apple's earnings have shocked the investment community and the stock is now trading after-hours at about $459 for a better than 10% decline. And yet, you will read that Apple set records for quarterly revenue, quarterly earnings, the number of Apple iPhones sold and the number of Apple iPads sold. Where did the company go wrong?

One major area that analysts were not happy with was Apple's gross margins, which dropped to 38.6% from the 44.7% recorded last year. The average price Apple recorded for each Apple iPhone sold was $641.57, close to last year's number. But the average price received per iPad sold dropped from $568.16 in the 2012 quarter, to $469.93. That is the result of adding the lower priced Apple iPad mini. One margins start declining, they tend to continue dropping. This one piece of data alone should scare Apple as it shows that Android tablets are beginning to take share away from the iPad.

Apple's first quarter numbers

Apple's first quarter numbers

Maybe Apple executives don't get it. Tim Cook said during the conference call that the Apple iPhone 4 was "in constraint" during the entire quarter. But this is the lowest priced smartphone in Apple's lineup and is offered free with a two-year contract by some carriers. This lowers margins and reduces the average price of sold iPhones. Cook was making this sound like a positive when frankly, it is the kind of thing that Apple investors fear. This quarter could give the suits in Cupertino a reason not to produce a low priced version of the Apple iPhone as it would bring margins down even more.

Apple could nip this in the bud by using some of the $137 billion in cash it has, to buy back a chunk of stock. The best way Apple can do this and achieve the results they want would be to buy a percentage of the stock outstanding at a premium in a tender offer. This would have much more of an impact than merely buying shares in the open market from time to time.

We're not sure what will change the current feelings about Apple. we've pointed out over the last few weeks how there is a malaise surrounding the company and there is the question if Apple has lost its edge. Something has changed and as Bob Dylan once sang, "You don't need a weatherman to know which way the wind blows." Apple sold a record number of Apple iPhones and Apple iPads and still can't please the investment community. The best thing that Tim Cook can do is to blow up current plans for things like a low-priced Apple iPhone and even put talks with China Mobile on the backburner. Apple has always been a company producing innovative new products and different variations of the iPhone is not innovation. Selling more of the device in China is not innovation. It is time for Cupertino to put the ol' thinking cap on and wow us with something new.

source: Bloomberg, WSJ ,


56 Comments
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posted on 23 Jan 2013, 19:42 42

1. zig8100 (Posts: 232; Member since: 13 Dec 2012)


:DD I feel bad being so happy. Lol

posted on 23 Jan 2013, 19:57 25

6. Droid_X_Doug (Posts: 5993; Member since: 22 Dec 2010)


Somehow, I think you will survive. ;-)

posted on 23 Jan 2013, 19:58 20

7. MeoCao (unregistered)


I said when JB came out that it was time to short Apple shares and was laughed off the door.

iOS is the back bone of Apple's empire and JB has beaten iOS 6 in every way and that pointed out Apple's rise was over.

posted on 23 Jan 2013, 21:10 4

20. maxis3G (unregistered)


THIS IS GOOOOOOOOOOOOOOOOOOOD NEWS FOR APPLE!!

posted on 24 Jan 2013, 02:15

39. gallison1983 (Posts: 47; Member since: 19 Dec 2012)


Maybe if you consider the entire world. The US market is a little tricky nowadays. Most people I have spoken to personally are looking for a value proposition. They want to make sure that what they pay for will maintain value and also maintain quality. Apple is a master of that in the US. One price point for one year. Drop the price with the new model. Some people become very upset when they look at Android. Most people that bought the Note 2 on contract subsidy don't have the funding to buy a potential octa-core Note 3 (assuming the octa-core will call that phone home [I made a phunny]) and thus knowing that their phone is now outclassed shortly after purchase is disheartening.

posted on 23 Jan 2013, 23:27

30. anywherehome (Posts: 971; Member since: 13 Dec 2011)


and Apple still lies and adjusts true:
goo [dot] gl/s1ogE

really.....Apple's product can buy only an immoral person

posted on 24 Jan 2013, 06:00

44. Apple.IS.PEAKING (Posts: 3; Member since: 24 Jan 2013)


betanews.com/2013/01/18/i-cant-believe-i-switched-​from-iphone-5-to-galaxy-note-ii/

posted on 23 Jan 2013, 19:42 12

2. QWIKSTRIKE (Posts: 1180; Member since: 09 Mar 2010)


Closing under the $514.00 monthly point is not a good sign for long investors.

see my postherehttp://www.phonearena.com/news/Apple-reports-record-profits-sells-47-million-Apple-iPhones-in-fiscal-first-quarter_id39029/comments

When a stock fails the 50 day simple moving average most retail investors sell

posted on 23 Jan 2013, 19:56 3

5. jroc74 (Posts: 6015; Member since: 30 Dec 2010)


I'm just giving you thumbs up cuz you have been on point these past months about their stock. Despite what the nay sayers say about your guesses.

posted on 23 Jan 2013, 20:04 1

9. Droid_X_Doug (Posts: 5993; Member since: 22 Dec 2010)


Responding from a fundamentals perspective, Apple's market has matured. They have not been able to conquer new markets (China) and they are basically seeing their revenue steam reflect that circumstance. Since they have already squeezed maximum margin out of their iToys, they have hit a plateau of sorts. Steve actually recognized this before he departed. He was looking at video as the next great frontier. To date, that has been more of a work-in-progress.

Until Apple can connect the dots on a compelling value proposition around a new market (like video), look for more of the same results. My guess is that Apple's share price will drop another 5-10% before stabilizing.

posted on 23 Jan 2013, 20:15 1

12. QWIKSTRIKE (Posts: 1180; Member since: 09 Mar 2010)


If it cant get back over $517 the technical's say $300s. Right now the Technical bottom is here at $446.00 the daily pivot point S2 or the 1.382 retrace of the 701 high which is also $446.00!

posted on 23 Jan 2013, 20:54

15. Droid_X_Doug (Posts: 5993; Member since: 22 Dec 2010)


Well, there are at least 2 quarters before new iToys are released and will show sales results, so unless Apple can open up China or an iVideo market offering, there ain't no there there.

posted on 23 Jan 2013, 23:56

31. speckledapple (Posts: 892; Member since: 29 Sep 2011)


I think you are right. Their market has matured and they depend greatly on expansion into new markets and their current customers coming back for more. The problem is that customers are also getting tired of the yearly update schedules (im looking at you too Android) which carries so many disadvantages as many have gotten a contract already.

The market is older and much more competitive.

posted on 24 Jan 2013, 05:58

43. Apple.IS.PEAKING (Posts: 3; Member since: 24 Jan 2013)


About China Mobile.
China Mobile is the biggest Mobile Carrier in China with over 650 million user. China Unicom is the second largest Mobile carrier in China with over 200 Million user.

China Mobile DON'T care about iphone. because they already the biggest in China with over 75% user. So, why would they subsidize APPLE?? If apple want marketshare, they should be the one subsidizing their phone. That's the way China Mobile work.

China Mobile even want the 50:50 cut from 30% apple got from developer. It's the same idea that Apple want some $$$revenue$$$ from Microsoft sky drive that were used by iOS user.

posted on 24 Jan 2013, 06:02 2

45. Apple.IS.PEAKING (Posts: 3; Member since: 24 Jan 2013)


2013 will be remembered as Apple TRYING to catch up with android

posted on 25 Jan 2013, 06:04

55. QWIKSTRIKE (Posts: 1180; Member since: 09 Mar 2010)


http://www.phonearena.com/news/Apple-reports-record-profits-sells-47-million-Apple-iPhones-in-fiscal-first-quarter_id39029/comments

posted on 25 Jan 2013, 06:17

56. QWIKSTRIKE (Posts: 1180; Member since: 09 Mar 2010)


http://www.phonearena.com/news/Apples-stock-now-in-bear-territory-after-20-drop-from-peak-was-Elliott-Wave-correct_id36368/comments

posted on 23 Jan 2013, 19:44 2

3. tykemp7 (Posts: 4; Member since: 23 Jan 2013)


Huh, how did that happen, man it looks like its a continuous downhill no matter what, its pretty hard to stop a non controlled train going down hill.

posted on 23 Jan 2013, 19:52 1

4. zig8100 (Posts: 232; Member since: 13 Dec 2012)


All their profits where from carriers and huge margins from sales.
Investors are selling high from how they see it because they see more of a drop coming. Its going to keep dropping until a new product is announced.
P.S. Pretty sure all the new Android phones announced and the upcoming Samsung phones have investors pretty scared. A lot of people are talking about switching over to the Note 3 n Galaxy S4. Even if Apple Math is true it wont compare to GS4 or Note 3 and everyone knows that.

posted on 24 Jan 2013, 02:05

38. gallison1983 (Posts: 47; Member since: 19 Dec 2012)


Says the person that has oversight for both Samsung and Apple.

posted on 23 Jan 2013, 20:03

8. phil2n (Posts: 487; Member since: 30 Apr 2012)


in the product process the apple stock is in the state of MAD DOG. To be disposed soon.

posted on 23 Jan 2013, 20:04

10. jroc74 (Posts: 6015; Member since: 30 Dec 2010)


One one hand.....as a former rookie stock market player.....I wish they would go low enough for me to buy back in at a low price. But....would they ever go back to the $700's, 600's or 500's again if they dropped all the way down to the $100's?

Based on this and Zynga....I'm glad I dont play the stock market anymore. I may again if I get bills in order and money saved up again.

posted on 23 Jan 2013, 20:15

11. fanboy1974 (Posts: 1345; Member since: 12 Nov 2011)


I'm no financial wiz kid but I seen this coming a mile away. If you introduce a cheaper smaller iPad it's going to eat at the more expensive larger model. I highly doubt that Apple is going to release a Retina iPad mini at $329. How many people here would by a $500 9.7" ipad over a $329 with the same resolution? Apple would be dumb to release a better display on a cheaper device.
If I was Tim Cook I would introduce a larger iPhone with higher resolution, slightly faster processor and charge a $100 premium while keeping the 4" around. iFans and a few Android deflectors would by a phone like that.

posted on 23 Jan 2013, 20:44 1

13. zig8100 (Posts: 232; Member since: 13 Dec 2012)


So 300 for a 16 gig with a 4.5 inch display, 400 for 32 and 500 for 64? On a 2 yrs contract? They really going to fail. They would push everyone right into Samsungs open arms.

posted on 23 Jan 2013, 22:01

25. fanboy1974 (Posts: 1345; Member since: 12 Nov 2011)


No. More like 5" (or larger) for $300. Apple will need at least a 1920x1080p screen and putting that into a 4.5" doesn't make sense. Don't forget about the faster processor and larger battery.
Apple would have no problems selling a 5" $300 1920x1080p phone while keeping the 4" iPhone 5s at $200. iFans are spending $100 for only a 16gig jump on the current model. So I know for sure they would do the same for a larger iPhone.

posted on 24 Jan 2013, 02:02 1

37. gallison1983 (Posts: 47; Member since: 19 Dec 2012)


The only ecosystem that has systematically been brute forcing software with beefy hardware is Android. I'm starting to see reviewers from all over remark how Android just doesn't seem to be as fluid on 1 GB of RAM. Either you are cramming loads of brilliant new features into your system that require massive number crunching or your OS is the victim of bloat.

posted on 23 Jan 2013, 20:45

14. joey18 (Posts: 589; Member since: 20 Jul 2010)


why allways blame off apple

posted on 23 Jan 2013, 20:55 4

16. -box- (Posts: 3991; Member since: 04 Jan 2012)


This is easy predictions coming to fruition. It's not even close to over yet, either. Can't wait to see it drop below $100.

posted on 23 Jan 2013, 20:58 3

17. lyndon420 (Posts: 4564; Member since: 11 Jul 2012)


Absolutely dead on. It would be awesome if apple could just come out with some cool new and amazing tech. Must be boring to be looking down at pretty much the same looking device for so many years now. Even a cool new gadget that would help to avoid having to look at it as much would help.

posted on 24 Jan 2013, 09:20

47. InspectorGadget80 (unregistered)


They won't come up anything new. All they do is cut a few inches off their products & a inch higher for their iphone ios will still look their same

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