The most anticipated earnings release of the quarter has come and it has been a dud, at least judging by the market's expectations and its response. Because while EPS beats just barely (a far cry from the epic EPS beats of Steve Jobs days) coming at $13.81 on expectations of a $13.53 print, revenue outright missed, coming at $54.5 billion on expectations of a $54.9 billion Q1 2013 result. Furthermore, fears about profit margins were proven correct, with total gross profit coming in at $21.1 billion, which alas was 38.6% of revenue, well below the vaunted 40% threshold (as a reference margin was 44.7% a year ago, and 40.0% a quarter ago). And finally, the breakdown by components in the iPhone 5 release quarter was just, well, meh.
- iPhone sold: 47.8 million vs 47.8 sales expected, right in line with consensus, and a far cry from the Gene "Channel Checks" Munster 50 million+ handle
- iPads sold: 22.9 million, just above the 22.4 million expected, but offset by
- Macs sold just 4.1 million, well below the 5.1 million expected.
The guidance did not help, with AAPL seeing Q2 2013 revenue of $41-$43 billion while Wall Street was hoping for a $45.5 billion number. At this point AAPL is hardly sandbagging as it used to do under Jobs, while gross margin is expected to be 37.5% and 38.5%. It was 47.4% in Q2 2012.
The one bright spot was total cash and investments which rose by $16 billion in the quarter to a record $137.1 billion, however now that the company is dividending some $2.65/share absent the kind of record growth everyone used to expect, will hardly grow at this pace in perpetuity.
The bigger problem for Apple now is that the coolness factor has shifted to Samsung, and that increasing new product launches will merely cannibalize from future sales, as well as further deteriorate the coolness factor of a company where one could buy a product for one year and be set. Needless to say a 3-4 month product cadence would be suicide for Apple.
Finally, the biggest problem, naturally, is that absent some new revolutionary "must need" product that fills an unmet niche, i.e., the Steve Jobs genius shining through at least once more, the growth dream is absolutely over.
The relevant charts:
and total cash:
and the price behavior after-hours -(note the initial spike before taking out the year's lows)...
and all the analysts...
And why is there a Hedge Fund exodus after hours? Here's why: