Reggie Middleton's Apple Q4 2013 Analysis: RDF In Full Effect As Analysts & Press Go GaGa Over Garbage!Submitted by Reggie Middleton on 10/31/2013 10:49 -0400
RDF=Realith Distortion Field. I must have a NFG (Null Field Generator). How is it that when I look at numbers I see X & analysts & press sees Y?
Surprised why FB stock is soaring higher by 15% after hours on results that were a beat but nothing all that spectacular, with $2.02 billion in revenues ($1.91 billion expected), and EPS of $0.25 ($0.19 expected)? Because according to the company, it will soon need to colonize a new planet as it will promptly run out of real, bot-based, imaginary and potential users on planet earth following a ridiculous 25% increase Y/Y in daily active users to 728 million, and a mindblowing 18% increase in Monthly Active Users to 1.19 billion (however look at the charts below to see just where the bulk of the growth comes from). Putting Facebook's numbers in perspective: it has 199 million Monthly Active Users in the US, where the average revenue per user is highest. This is 44 million more than the entire labor force, and 63 million more than the number of employed people in the US.
Moments ago, AAPL beat the top and bottom line as follows:
- Q4 EPS of $8.26, Est. $7.92
- Q4 Revenues of $37.5 billion, Est. $36.84
- Q4 gross Margin: 37.0% vs Est. 36.9%
That was the good news: the bad is as follows:
- IPad sales of 14.1 million missed estimates of 14.3 million
- Q1 margin between 36.5-37.5%, below the street estimate of 37.74%, which is what according to some is pushing the stock lower after hours
Welcome to the commodity world: after all this is what AAPL wanted with the 5C right?
Judging by the plunge in IBM stock after hours (accounting for a major portion of the Dow Jones Non-industrial Average Index), the CFO can't pay shareholders with hopium and rumors. The reason: while IBM beat EPS modestly with a very adjusted bottom line of $3.99, beating estimates of $3.96, driven mostly by this: "IBM’s tax rate was 16.0 percent, down 8.6 points year over year" (assuming a flat tax rate Y/Y, GAAP EPS would plunge from $3.68 to $3.30), it was revenues - that ongoing 2013 horror story for the "stawk" and economic "recovery" - that was the problem, because instead of printing at $24.74 billion where it was expected, sales missed by a whopping $1 billion, or $23.72 billion. Of note: while America revenues of $10.3 billion dropped just 1%, and Europe was actually up 1%, it was the all important China and Japan, i.e. Asia-Pacific, where revenues cratered by an unprecedented 15%! So much for both Abenomics and the Chinese "recovery." And what's worse, the Emerging Market callamity of Q3 finally took a big bite: "Revenues in the BRIC countries — Brazil, Russia, India and China — were down 15 percent." Time to push the global recovery myth to the 4th half of 2013 (the third half is where the government shutdown will be squeezed).
The Russell 2000 made a new all-time record high and the S&P 500 gets close as rumor turned into almost news and expectations of a done deal by 11pm tonight. The rumor was bought on the back of JPY-carry surging once again, the "news" was sold - smacking the S&P down around 8 points to VWAP, and then the ubiquitous closing ramp lifted stock back near their highs. The kicking the can left USA CDS wider on the day, put a bid under T-Bills (though the Feb Bills underperformed), lifted gold and silver off their lows, and while the USD was sent scurrying lower (after an early surge), Treasury Bonds ripped lower in yield (10Y _8bps from its highs early on). Spot VIX was crushed back below 15% (down 20% - the most in 2013) and while the rest of the VIX term structure was bid, the Feb/Mar maturities were less exuberant.
VIX futures positioning hit another all-time record short just two weeks ago after collapsing to 12-month high levels as "Taper" concerns increased. From the start of July to the 3rd week of August VIX futures were sold in epic proportions providing the fuel to lift a plateaued stock market from taper-anxiety to new all-time highs (as nothing changed). Over 100 million contracts were sold in the 7-week period - a totally unprecedented amount of complacency. However, in the past 3 weeks, there has been an inflection; is this the end of selling, or are we about to pull VIX even lower with a concerted reflexive selling of even more shorts? As SocGen warns, this historic level of non-commercial short positions (read speculative) implies any market correction - or VIX-related spike - would increase short-covering and exaggerate the fall dramatically. With today's exuberant spurt lower in VIX, vol has caught back with stocks once again.
The highlight of today's economic releases will be the 8:30 am non-farm payroll data, expected to print at 180K jobs, up from July's 162K, and result in an unchanged 7.4% unemployment rate. The "most important jobs number ever " is neither, because even if it comes as a wild outlier to the good or bad side, the Fed is unlikely to change its tapering intentions this late in the game. Still, it will provide fireworks in a very jittery market and if the number is far stronger than expected, expect the 10 Year to finally blow out from below the 3% range which it breached briefly overnight, and never look back, at least not until there is an August 2011 wholesale risk revulsion episode and stocks tumble. Speaking of jittery, overnight the WSJ reports that if picked as Bernanke's replscament, Larry Summers' faces an uphill battle to get the votes of three key democrats on the Senate Banking Committee (Jeff Merkley, Sherrod Brown and Elizabeth Warren). It would be only fitting that the dysfunctional Democratic dominated senate now lashes out against the president, and in the process scuttles the market's only hope of maintaining its Fed-derived gains over the past five years... And there is, of course, Syria which is becoming increasingly problematic for Obama whose support in Congress is looking ever shakier. Will he go it alone in the case of a no vote?
Today's most eagerly anticipated earnings release, that of Herbalife, also known as the focus of the most entertaining feud of 2013 between Bill Ackman and Carl Icahn, were just released, and they are a blowout.
- HERBALIFE LTD. 2Q ADJ. EPS $1.41, EST. $1.18
- HERBALIFE 2Q REV. $1.22B, EST. $1.16B
- HERBALIFE OPERATING CASH FLOW $214 MILLION
- HERBALIFE SEES YR ADJ. EPS $4.83-$4.95, EST. $4.78
- the always amusing: HERBALIFE 2Q HAS EXPENSES 7C-SHR ON 'ATTACKS OF CO BUSINESS'
The biggest news as always was not reported: it was the most recent short interest in the name. At 36% it means much more pain in store for shorts. But the punchline is that Herbalife just announced a $0.30 dividend per share: a dividend which will to a big extent come straight out of Bill Ackman's pocket.
- The Department of Justice has opened an initial probe into the metals warehousing industry (WSJ)
- Obama Says Budget Debate a Battle for Middle Class Future (BBG)
- Death Toll From Spanish Train Crash Hits 77 (WSJ)
- ‘Fabulous Fab’ takes to witness stand (FT)
- Banks Said to Weigh Suspending Dealings With SAC as Charges Loom (BBG) - what about Anthony Scaramucci?
- How the Muslim Brotherhood lost Egypt (Reuters)
- German Business Confidence Rises for a Third Month (BBG)
- Fraternities Lobby for Tax Break Without Hazing Penalties (BBG)
- China charges Bo Xilai with corruption, paves way for trial (Reuters)
- Airbus Pushes Higher-Density A380 to Counter Luxury Image (BBG)
Plunging Chinese manufacturing and an 11 month low PMI got you down? Don't worry: there's a Europe for that, which overnight reported that manufacturing and service PMI in Germany and, don't laugh, France soared far above expectations (German Mfg and Services PMIs of 50.3 and 52.5, up from 48.6 and 50.4, and above expectations of 49.2 and 50.8; French Mfg and Services PMIs of 48.3 and 49.8, up from 47.2 and 48.4 and an 11 and 17 month high, respectively, blowing away expectations of 47.6 and 48.8). The result was a composite Eurozone Manufacturing PMI of 50.1, above 50 for the first time since February of 2012, up from 48.8 and at a 24 month high - reporting the largest monthly increase in output sunce June 2011, as well as a composite Services PMI of 49.6, up from 48.3, and an 18 month high. In other words, European Composite PMI is expanding (above 50) for the first time since January 2012.
Apple Beats On Stronger iPhone, Weaker iPad Sales; Cash Grows To Record At Slowest Pace In Three YearsSubmitted by Tyler Durden on 07/23/2013 16:53 -0400
Here are the highlights:
- Q3 Revenue of $35.32 billion beats expectations of $35.04 billion; This compares to $35.0 billion a year ago, or the firm barely posted a revenue increase this quarter - the first time in years
- sees Q4 revenue of $34-37 billion, Exp. $36.97 billion;
- Q3 EPS of $7.47, Exp. $7.31
- Q3 Gross margin of 36.9%, Exp. 36.7%; Sees Q4 margin of 36%-37%
- iPhone sales of 31.2 million, Expected 26.1 million
- iPad sales of 14.6 million, Expected 17.4 million
- And since margin did not reflect a pick up in iPhone sales, sure enough the Q3 iPhone ASP was $581, vs Expectations of $597
- AAPL total cash and investment rose to a record $146.6 billion up from $144.7 billion, however the sequential growth of "only" $1.9 billion was the lowest since March 2010
And on those news the stock is up some $15 after hours: hardly indicative of the epic moves in days gone by.
While the NFLX results for the quarter beat on the bottom line with EPS at $0.49 vs Exp. $0.40, and revenue coming right on top of expectations of $1.07 billion, the stock is currently sliding after hours. The reason: despite a massive spending ramp up in the quarter with substantial costs raked up for new content, the firm generated just 630K net total "member additions", below the expectations of a 700K number, and well below recent quarters which saw subscriber growth ramp up to over 2 million in the past quarter. In fact, with all the content spending, NFLX added just 105K more total subs in the June quarter compared to a year ago.
Following yesterday's disappointing results from Intel, and the IBM revenue miss, completing the sad state of Q2 earnings season for tech companies are the just reported GOOG and MSFT results, both which missed not only on the topline but also on the bottom line. Guess they didn't have billions in reserve releases and Available For Sale MTM fudges to confuse HFT algos and pundits with.
Those who have been following the ongoing "revenue recession" will hardly be surprised that in the trifecta of major corporate earnings releases hitting the tape after the close, there were precisely zero revenue beats. To wit:
- INTC: Revenue misses $12.81bn, Exp. $12.89 bn, cuts guidance.
- EBAY: Revenue misses $3.88bn, Exp. $3.89bn, sees earnings and revenue on lower end of guidance.
- IBM: Revenue misses $24.92 bn vs $25.34 bn; But since this is the largest component of the DJIA, leaving it there may lead to unpleasant consequences for tomorrow's Dow, the company had to inject a mega dose of hopium and boosted its forecast.
Since EPS is the most easily fudgable number in existence (just look at BAC's "non MTM" EPS today), all companies beat on the bottom line. Without looking we will assume that at least 2 out of the 3 are trading higher after hours. And if not, all the three companies need to do to make the algos forget about the top-line non-growth reality is take a page from the YHOO book, hold a very "edgy" video conference call, and see their stocks up 10% tomorrow. Of course, everyone will ignore that the relentless decline in revenues is merely a function of depressed CapEx spending, a tapped out consumer, a crash in EM demand, and major FX headwinds, and blame it all on the [hot|cold] weather.
Even with duelling Fed members today (Bullard vs Plosser) the message from 'the man' led markets on a one-way street all week. Even though Boeing impacted the Dow (and Trannies):
- S&P managed its best week in 6 months (+2.6%);
- Gold's best week in almost 8 months (+5.1% or $62);
- Treasuries' best week in 13 months (10Y -14.5bps);
- High Yield bonds best week in 20 months (+3%); and the
- USD's equal worst week in 21 months (-1.8%).
VIX remains modestly bid and IG credit spreads are underperforming. Market breadth today was weak as S&P volume was very low and the intraday range the lowest in 5 months. The 330ET Ramp was 10 minutes late but just as effective in its goal of running stops to a green Dow as Bullard's words seemed magical.