🍎 Apple is Big and Beautiful ~ Apple Delivers Amazing Products to its Customers ~ Apple Delivers Consistent Earnings to its Shareholders. Yesterday, 7/23/2013, was earnings day for Apple, as it released their fiscal Q3 2013 Financial Results. Here was one of many clues for the investment bankers, that was missed… iPhone activations on Verizon grew 41% year over year, and the “analysts” seemingly didn’t notice. Here are some more “analysts’ failures:”
🍎 Almost all the “Analysis” from the big Investment Banking Houses, most of which just passed puberty, albeit with advanced degrees, had the iPhone and a Apple “Dead in the Water” “over the hill, utility stock.”
🍎Almost all the “Analysis” concluded that SmartPhone Sales have “Peaked” as everyone that wanted a smart phone already bought one, and the only thing left would be very marginal changes in carriers.
🍎 Almost all the “Analysis” missed the point, because the iPhone 5 continues to Grow in Sales by exceeding “analyst expectations by 20%.
🍎 Almost all the “Analysis” predicted 25.5 million sales for the Quarter, however, actual iPhone Sales were in reality about 31.5 million units.
🍎 Almost all the “Analysis” predicted that the iPhone had “Peaked.”
🍎 Almost all the “Analysis” predicted that the iPhone 4 and iPhone 4S would be the large majority of the iPhone sales because they are lower priced. Not true as over half the iPhone sales and growth came from the sales of the iPhone 5.
🍎 Almost all the “Analysis” said that Apple’s franchise products center on devices that rest in saturated (“the iPhone has Peaked”) markets for high-end smartphones. The facts are unit sales and Apple’s 93% to 95% loyalty rate among iPhone customers look like a strong and healthy franchise.
🍎 Almost all the “Analysis” spoke of Apple’s inability to profit at lower prices. The facts are iPhone’s average selling price fell significantly to $580, down $32/unit in the this Q3 alone; and yet, Apple’s gross margin was near the 37% it placed at the high-end of the quarter’s guidance.
🍎 iPhone pricing continue to trend downward with the lower-priced iPhone expected in September.
🍎 Apple iPhone unit sales are likely to trend up in the event that new products materialize. The reason should be clear by now.
🍎 Given a more level playing field as to pricing with Android competition, many people will migrate iPhone, as their contracts expire. In fact, 51% of Verizon smartphone customers did just that this past quarter, activated iPhones, and those Activations was a 41% increase over the previous period, despite the launch of Samsung’s new Galaxy S4.
🍎 Apple’s iPhone 4 and iPhone 4S, last year’s iPhone models, are each out-selling Samsung’s new Galaxy S4. Therefore the iPhone 5, the iPhone 4S, and the iPhone 4 are each individually out-selling Samsung’s Galaxy S4.
🍎 Apple’s CFO Peter Oppenheimer and CEO Tim Cook both mentioned that Apple “is on tract to have a very busy Fall.” What could this reasonably mean. From reading all the “reports” from component suppliers, there are 5 likely new Products including a New Operating System, to come to market this year.
🍎 This list is what may cause Apple to have a Very Busy Fall:
📱 New iPhone 5S,
📱 Entry Level iPhone 5
📱 New iPad, version 5
📱 New iPad mini, with Retina Display
📱 New Operating System iOS7, this upload-able software upgrade is really a Big Thing, as it Improves the User Experience immediately for over 500 million iDevices. This is like getting a New Device, as this iOS7 upgrade is a massive improvement in both “look and feel.”
🍎 What will likely not appear this year: (A) no iPhone with a 5″ Display, (B) no iWatch, (C) no iTV, at least not yet.
🍎 However, my parents told me 50 years ago,
"The Line to Stardom is Not a Straight Line UP ."
🍎 In July of 2012, shares of Apple were trading in the low US $600 range and were about to embark on a rather sudden ascent to $700. The party, however, didn’t last long as Apple shares quickly began a steady decline, hitting a 52-week low of $390 this past April.
🍎 In an effort to explain why Apple stock was falling so precipitously, we were treated to a host of analysts and talking heads who were quick to proclaim that Apple had peaked and that it had, seemingly overnight, lost the ability to innovate.
🍎 Verizon today announced its earnings for Q2 2013. As expected, the carrier reported strong results with $5.2 billion in profit and $29.79 billion in revenue. Verizon added 1 million new customers and now has 100.1 million retail connections.
🍎 Verizon confirmed it activated 7.5 M smartphones, 51% of which were iPhones. This brings Verizon’s quarterly iPhone activations to approximately 3.87 million units, which is up from the 2.7 million it activated in the same quarter last year. This represnts a 143% increase in iPhone activations YoY. It is right on par with the 4 million activations it reported in the opening quarter of 2013. Recall it was not until later in 2010 that AT&T’s iPhone exclusivity expired, which let Verizon join the party.
🍎 An oft-heard refrain, absurd as it may be, was that everyone who wants an iPhone already has one and that Apple would face many challenges trying to sell more iPhones in an increasingly crowded marketplace. The absurdity is that (A) there is a stampeed of "Non-Smart Phone" owners (presently 40% of the cellular customers use "dumb-phones in the USA) that moving to Smart Phones, and (B) there are 26% of the Android Users that are migrating to iPhone very month, as their contracts expire.
🍎 But then a funny thing happened. Last week, Verizon reported its earnings results from Q2 2013 and the results were better than what most analysts were expecting. Last quarter, Verizon activated 7.5 million smartphones, of which 3.8 million units were iPhones. Put differently, nearly 51% of all smartphones Verizon activated last quarter were iPhones.
🍎 That’s pretty impressive, but the folks on Wall St. don’t care so much about product share as they do about overall growth. To that end, the 3.8 million iPhones Verizon activated this past quarter far eclipsed the 2.7 million units it sold during Q2 of 2012. Year over year, iPhone activations on Verizon grew by 40.7%.
🍎 And yet, somehow, that little tidbit was inexplicably glossed over by those who are so quick to paint a doom-and-gloom scenario for Apple based upon some sketchily sourced second-hand rumor about iPhone production emanating out of a manufacturing plant in Asia.
🍎 Apple is set to announce its earnings for the quarter gone Today, at 5pm eastern, and it remains to be seen how iPhone sales will measure up to the year-ago quarter. Indeed, many analysts are predicting that Apple’s year-over-year growth will be somewhat stagnant in that regard. And that may very well be the case.
🍎 After all, Verizon is just a single carrier and its recent results many not be representative of iPhone activations across all carriers.
🍎 I’m more positive, as Verizon was late to the iPhone Party, as were their sales associates, selling Android and BB almost exclusively. So here we are only several years later and Verizon is now selling More iPhones, than all the other phones combined, in the stores. IB Analysts not recognizing these facts is amazing to me.
🍎 BTW, I am not an Apple stakeholder so my opinions are not economically skewed.
🍎 That notwithstanding, it’d be nice if the investment banking analysts who get paid to keep up with Apple products, profits, pace, and the industry, paid as much attention to potentially good news as they do to potentially alarming news.
🍎 In Business as in Sports, everyone "hates" the Winner, and seems to cheer-on the under-dogs. IMHO, Apple IS actually Better, it delivers Better Products in every product category, and therefore should do Better business-wise.
However, the "Line to Stardom is Not a Straight Line UP."
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