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  1. Phil

    What the Hell was that?  

    Seriously, up to $430 and now back to $406?  Oh well, as long as they're buying their own stock at this price I'm thrilled.  Conference call killed it – no promise of new product but, on the other hand, if that was the guidance WITH new products, THEN I'd be concerned.  The guidance they gave with no new products is fine with me.  

    Apple (AAPL): FQ2 EPS of $10.09 beats by $0.02. Revenue of $43.6B (+11% Y/Y) beats by $1.1B. 37.4M iPhones, 19.5M iPads, just under 4M Macs. Expects FQ3 revenue of $33.5B-$35.5B, below $39.3B consensus. Buyback increased by $50B. Shares halted. CC at 5PM ET (webcast). (PR)

    More on Apple: Quarterly dividend increased by 15% to $3.05/share (3% yield); Apple "plans to borrow" to return cash. FQ2 iPhone and iPad sales beat expectations, Macs a little light. Gross margin was 37.5%, at low end of guidance range of 37.5%-38.5% and -990 bps Y/Y. Apple expects to return $100 in cash via capital return program by end of 2015, up from prior $45B. Exc. retail, Americas revenue +7% Y/Y, Europe +11%, Greater China +8%, Japan +19%, rest of Asia-Pac +26%, Retail +19%. iPhone revenue only +3% Y/Y, iPad +40%, Mac +7%, iPod -20% on 5.6M units. AAPL halted, to resume trading at 4:50PM. (PR)

    A little more on Apple: Implied FQ2 iPhone ASP of $613, down from FQ1's $641 (was emerging markets discounting or a mix shift to older iPhones the culprit?). iPad ASP was $449, down from FQ1's $467 (shift to iPad Mini). Mac ASP of $1,378, up from FQ1's $1,359. iTunes/Software/Services revenue +30% Y/Y to $4.11B. Accessories +15% to $1.38B. R&D spend +33% Y/Y to $1.12B, SG&A +14% to $2.67B. Cash balance stood at $145B at quarter's end, up from prior $137B. 

    Tim Cook (AAPL) on the five-inch smartphone: "Our competitors have made some significant trade-offs in many of these areas in order to ship a larger display. We would not ship a larger display iPhone while these trade-offs exist." He adds that if IDC's right, the tablet market declined 30% since December, so Apple's decline of 15% beat the market. 

    David Einhorn likes Apple's (AAPL) feisty share buyback : "We applaud Apple's decision to borrow money and return excess capital to shareholders, an idea that was off the table only months ago. This positive development represents a more shareholder friendly capital allocation policy and demonstrates the conviction of Apple's management and board in the Company's future."

    More from Apple's (AAPL) FQ2 call: Mix shift towards iPhone 4 responsible for iPhone ASP drop; iPhone channel inventory up 1M Q/Q. Greater China sell-thru growth was 18% Y/Y, above reported (sell-in) 8%. Revenue mix shift towards iPad hurt gross margin, expected to fall to 36%-37% in FQ3 due to lower revenue and mix, partly offset by lower costs. Tim Cook talks of "exciting new product categories" (an iWatch?). While Cook said competitors made tradeoffs to offer ~5" phones, he didn't mention one-handed use (Apple's traditional critique) – is he hinting one will eventually arrive? AAPL -0.3% AH, as investors focus on FQ3 guidance (implies rev. growth of -4% to +2% Y/Y). CRUS -1.9%. (transcript) (previous)

    Here's the transcript.

     

    CC highlights:

    • Revenue for the quarter was $43.6 billion compared to $39.2 billion in the year ago quarter, an increase of $4.4 billion or 11% and $600 million over the high end of our guidance range.
    • Our revenue for the first half was over $98 billion and our net income was over $22 billion. During that time we sold 85 million iPhones and 42 million iPads. These are very, very large numbers unimaginable given to us just a few years ago.
    • Our revenues grew about $13 billion in the first half of the fiscal year. Event though that’s like adding the total first half revenue of Fortune 500 companies, our average weekly growth slowed to 19% and our first closure levels of a few years ago. Our 2012 results were incredibly strong and that’s making comparisons very difficult this year. Last year our business benefited from both high growth and demand per products and a corresponding growth in channel inventories along with the virtual mix of higher gross margin products and more favorable foreign currency environment and historically low cost.
    • Take the smartphone market for example IDC estimates that this market will double between 2012 and 2016 to an incredible 1.4 billion units annually and gardening into the tablet market is growing at an even faster rate from a 125 million units in 2012 to a projected 375 million by 2016.
    • An aggressive plan that more than doubles the size of the capital return program we announced last year to a total $100 billion by the end of calendar year 2015.  In addition, the share repurchases we are increasing our current dividend by 15% to further appeal to investor seeking yield.  
    • Based on research published earlier this month by comScore, iPhones garnered the number one spot in the U.S. smartphone market for the three-month period ended in February with 39% share, up from 35% in the previous (inaudible) period. In Japan, IDC, Japan announced that iPhone gained the number one position for all of calendar year 2012 as well as for calendar Q4 2012 in both handsets and smartphones. It’s also for the first time, a non Japanese company has achieved the number one spot for an entire year.
    • Turning to iPad we were thrilled to 19.5 million iPad during the quarter, compared to 11.8 million in the year ago quarter that’s an increase of 7.7 million units or 65%.  The most recent (inaudible) indicated a 96% satisfaction rate among iPad customers. 
    • First let me start with the tablet side, the numbers that we’ve seen from IDC would indicate that they believe the market in March declined by 30% from December, December being obviously seasonally high quarter with a holiday. As you can see from our numbers, we declined 15% and so if that holds, we did much better than the market and had a very nice pick up in market share.
    •  I think the reason that we were down last quarter, (inaudible) as Peter mentioned, the market for PCs are incredibly weak. I did see – said that the market for the March quarter was down 14% year-on-year which is the largest decline that I remember from being in this industry for long time. At the same time we sold almost 20 million iPads and it’s certainly true that some of those iPads cannibalize some Macs. 
    • Cumulative app downloads have surpassed 45 billion and app developers have made over $9 billion for their sale through the App Store, including $4.5 billion in the most recent four quarters alone. 
    • I’d now like to turn to the Apple retail stores. Revenue for the quarter was $5.2 billion compared to $4.4 billion in the year ago quarter, (inaudible) 19%. This was primarily by strong sales at iPhone and iPad. We ended the quarter with the total 402 stores including a 151 outside the United States. We expect to open about 30 new stores in total in fiscal 2013 and at least 20 stores in August. With an average of 401 open in the March quarter, average revenue per store was $13.1 million compared to $12.2 million in the year ago quarter. The segment income was $1.1 billion.  We had $91 million visitors to our stores during the quarter compared to $85 million in the year ago quarter.
    • And turning to our cash, we ended the quarter with $144.7 billion in cash for short-term and long-term marketable securities. From $137.1 billion at the end of the December a sequential increase of $7.6 billion overall $2 billion (??) of our total cash was off shore at the end of the March quarter
    • And cash flow from operations was $12.5 billion. We paid $2.5 billion of dividend in the March quarter and earlier this month we concluded $1.95 billion dollar accelerated share repurchase program that we initiated in the December quarter. Resulting in the retirement of over 4 million shares of Apple stock.

    Certainly not a stock we're upset to own long-term but I think we'll have a lot of opportunities to sell calls while we wait for things to pick up into 2014.  



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Phil's Favorites

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Today’s MLP of the Day – Energy Transfer Partners LP, ticker symbol ETE. In a tersely-worded 8K, the company announced the replacement of their CFO. I don’t know anything about the company, but the investors in the name are clearly shooting first here and getting the hell out of dodge. Shareholders in this and many other MLPS are now learning an abject lesson in portfolio construction and the true nature of risk-reward tradeoffs in fixed income.

For a 4.5% income stream in ETE during the salad days of MLPs, investors endured almost complete wipeout of their principal.

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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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