AAPLTalk, 4/30/14 Market Close: Third Time Isn’t the Charm as $AAPL Shows More Signs of Overheating

Was there a shooting star sighting on AAPL’s daily chart today?

Of course, a candle is only a type of trailing indicator, not a crystal ball, and there’s nothing bearish about the intermediate timeframe. And I’m the not the type of person who’s qualified to make calls on a stock, much less give anything resembling “advice”. ¹ But never hurts to check the charts to see if more of those bearish trailing indicators show up – and see if over the past couple of days, they’ve been adding up.

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AAPLTalk Weekend, 4/25/14 Market Close: Of Course the Technicals are ‘Bullish’, but is That the End of the Story?

Earnings were pretty good overall. The news of the increased buyback authorization and 7-for-1 share split seemed well-received.

And AAPL had its best open-to-closing price week in dollar terms … probably ever.

This is the part where technical traders, starting Wednesday after-hours or sometime Thursday, start saying stuff like “AAPL technicals are bullish on higher volume” and non-technical types scratch their heads, roll their eyes, or both. Way to make your bold call after the fact, they might scoff. Hey, how about you send me a text that it’s raining five minutes after it already happened, Carnac the Magnificent.

I sympathize with their skepticism. I should know – I used to be a non-technical type. And hey, I still do fundamentals, more than ever!

My grand blog post on why I think technicals matter may never happen, but here’s a much shorter version of why I employ them (despite being an absolute amateur who probably won’t claim any market expertise other than Portfolio Self-Flagellation in the coming years):

Technicals provide context to price action, and replace emotion with measurements, trendlines and statistics.

How’s that relevant to this post? Well, now we have a case where technicals can replace bullish emotion with a more objective look at the price action and a timeframe or two. Call it a check against overenthusiasm. The funny thing? Technicals could be hinting at something even more bullish than just this week’s post-earnings jump.***

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Q2 2014 Earnings, Before & After: Apple Peals of Thunder


Bad pun levels approaching critical. ¹

In ways loud and clear and also more subtle, Apple showed Wall Street – and skeptics – that it’s sick and tired of the forced-upon narrative of a company fading between holiday quarters at best, and flat out running out of ideas and the allegedly indispensable “new product categories” at worst.


– Analysts had adjusted expectations to approximately $43.5B in revenues and $10.18 in EPS.  Prior to the Q1 2014 earnings release, the EPS expectation was $10.93.

– Wall Street was expecting iPhone sales of about 38 million units.

– Gross margin, that ever-present concern, was guided to 37-38%.

– Apple’s capital return program was capped at $100B, with its $60B buyback authorization to be fully exercised, at Apple’s option, by the end of 2015.

– Apple’s diluted share count stood at slightly under 900 million – with a then-current authorization to issue 1.8 billion shares, was a 2-for-1 split in the cards?

& After:

– Apple reports revenues of $45.65B and $11.62 diluted EPS, comfortably exceeding the higher consensus EPS as from mid-January this year. An undeniable beat based on EPS, and an overall solid top-line beat considering original and adjusted revenue expectations.

– Apple rung up unit sales of 43.7 million iPhones, 15% higher than the average analyst expectation.

– Gross margin increased to 39.3% – net of deferrals.

– Apple effectively increased its buyback authorization from $60B to $90B – without changing the end-of-2015 timeframe.

– And of course, Apple announced a 7-for-1 share split (which, of course, has no impact on holdings for current investors except number of shares afterward, but still) without any hint beforehand of the Apple board’s decision.

You could say Apple made athunderous statement following today’s regular session trading. (I’ll be here all week.)

There’s more – so much more – to it than that, of course. Many of the highlights have already been well-covered, such as by Macworld. Some points that caught my attention:

“Unpredictable” Guidance

Guidance is back to being an “or better” proposition under the current methodology. More then ever, really. Oppenheimer issues new range guidance…seems to hew pretty closely to it…issues an 8-K for iPhone 5S season for a fairly modest rev beat…is silent for Q1 and Q2 2014…and suddenly announces results substantially over rev guidance and way over implied EPS guidance.

Call it a “parting gift” of sorts to Luca Maestri? Apple has gone back to being somewhat unpredictable when it comes to the classic “guidance vs. actual” guessing game. Analysts are kept on their toes and have to adjust their predictive models yet again just as Oppenheimer flies off into the sunset (after getting his pilot’s license, anyway).²

A measure of sport has returned to the AAPL estimates game (not that I was ever any good at it in the first place).

Hey, OpEx guidance is exactly the same for fiscal Q3 as it was for Q1!


Apple affirmatively set the tone for future cash updates. Many probably suspected Apple would provide a cash update annually – so Apple decided to “fix” the schedule officially, and put Wall Street on notice that if there were any changes (to buybacks, anyway – dividend increases seem to have been set to “automatic”), they would be reported in the following year. Something to look forward around each April.

Also, Apple is apparently entering new product categories…of debt instruments. No more “regular ol’ US-based Apple bonds”. Now Apple will look into the international debt market as well as commercial paper. I’m no economist, but I suppose the benefits of this diversification (aside from the cited additional capital flexibility) include the ability to “shop around the globe” for the most favorable debt terms/interest rates/demand conditions.


Apple reported “broad-based” strength in iPhone. And as to what seems like the greatest sequential drop in iPhone ASP, Luca Maestri explained that half of it had to do with the iPhone 4S emerging markets (such that lower ASP isn’t of much concern up to a point, as long as growth continues?). All three iPhone lines, even the media-maligned 5C, are reported as selling better than their year-ago counterparts.

Tim Cook used his “teachable moment” of relative iPhone strength to remind analysts about the varying sales cadences around the world – and how North America was something of an outlier that can be considerably outweighed by strength in other geographies. A refresher in International Sales 101.


Cook was thoroughly unconcerned by iPad’s 3% YOY decline in unit sales – it seemed both anticipated, and was reported as better-than-expected. The explanation almost didn’t matter, because the very solid Q2 2014 results represented a validation of the company’s strategy (via beating analyst expectations) and reinforced Cook’s credibility. Leaving Wall Street more likely to believe what Cook and his team have to say about the business and its prospects. Great timing, too, heading into the June quarter.


Apple has now turned in two consecutive quarters of genuine year-over-year net income growth – something it was utterly incapable of in fiscal 2013 as its poorly communicated (but largely premeditated) margin adjustment strategy played itself out.

Turns out the only mild disappointment from the entire day (aside from maybe iPad) was Q3 guidance. But it was easily outweighed by all of the other positive news, and was likely treated as a case of UPOD, given Q2 guidance vs. actual. Almost reminiscent of the good old days.

Changing of the CFO Guard, Explaining the Numbers

Luca Maestri seamlessly took over for Peter “The Sandbag” Oppenheimer (who never guided to a miss in all his years as Apple CFO). Maestri immediately set about carefully and clearly pointing out the finer details of Apple’s results, most importantly sellthrough – though shrewdly. It was needed to provide context for the sell-in YOY decline in iPad, but not for iPhone, which did relatively well – so like any good close-to-the-vest CFO(-elect), Maestri let the sell-in data speak for itself.

As Apple enters its seasonally slowest quarter, those rumbling, crashing noises may fade a bit in the ears of the competition. But they shouldn’t be complacent. They’ll need as much time as possible to prepare in the relative calm before the storm. That is, if WWDC doesn’t ionize the skies a few weeks early.


1 Photo credit the indicated website/puzzle generator – seems benign, but of course, visit at your own risk. Please don’t sue me, Wheel of Fortune, not like you guys even know I exist. (Big fan of the show!)

2 I wonder if Oppenheimer and Maestri shared a giddy CFO-nerd high-five over this.




UPDATED 4/22/14: The RGB of ESP: Revisiting Deferred Revenue at the Individual Product Line Level (With a Possible Surprise Lying in Wait)

(Please refer to the raft of cautions and caveats in the previous deferred revenue article. You can also click the link for background in case you missed it. Also: UPDATED commentary at the end of the fifth chart.)

Don’t blame me – (faded) red, blue and green are the default colors Excel chose.

I just decided to run with it. 😀

We conclude our home gamer’s look at “ESP revenue” and the AAPL earnings preview series in general by drilling down just one more level – breaking out and visualizing estimated deferrals per product family (which of course are iPhone, iPad and Mac). Looking at the data in one or two more ways than the last time. Still, it’s a reasonably quick trip through the charts this time around.

Will there be any new insights from looking at the data in more detail? Care to join me for one last trip down the rabbit hole for this fiscal quarter?

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I Don’t Have ESP, But I Do Have Estimates and Charts: A Home Gamer’s Attempt at the Daunting Task of Tracking iPad, iPhone and Mac Deferred Revenue

Ah, deferred revenue.

Just one of many, many pieces of the puzzle that is Apple earnings. And yet, an important one.

As a little background/potentially annoying meandering aside, one of the “problems” with Apple has always been its culture of secrecy. It’s not that big an issue for products at the end of the day (I mean, it’s making over $150B in revenues per year “despite everything”) and Apple is actually quite transparent relative to the tech industry when it comes to reporting GAAP sell-in-basis unit sales of key products, such as iPhones, iPads and Macs.

– Samsung, giving quarterly information about smartphone units sold? Amazon, giving any information ever about Kindle Fire sales? Yeahhh.

– As for guidance? Apple makes you guess share count, but c’mon, it’s not that hard to hazard a reasonable guess. Google and guidance? Exactly.

None of that is relevant to how great Apple is or isn’t – it’s just fact. Here’s another basically-fact: Apple isn’t great about non-GAAP context. Sure, it provides a few important data points here and there, along with commentary. But Apple doesn’t tend to spell out things like iPhone and iPad sellthrough, which hinders Wall Street/analyst/investor understanding of the company, nor does it help explain the main topic of this post as well as it could:

ESP. No, not the psychic thing or whatever. This (page 7 of Q1 2014 10-Q SEC filing):

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The Oppenheimer Code, March Quarter (Q2 2014) $AAPL Home Game Earnings Preview: Consolidated Links

I’ve consolidated all of the links for my recently-completed March 2014 quarter AAPL earnings preview series right here:

Part 1 – Net income guidance

Part 2 – Potential revenue scenario + “bonus” home game estimate

Part 3 – Operating expenses preview

Part 4 – Operating margin and gross margin preview

Part 5 – Analyst expectations for fiscal Q4 2013 earnings and fiscal Q1 2014 earnings, bonus wild guess on management guidance (TL;DR advisory)

The links are also up in the “AAPL Earnings Previews + Archive” section, where you can also find my Oppenheimer Code articles for the past three quarters. Yep, that’s one fiscal year’s worth of earnings previews!

Feedback, comments, links, shares, retweets, etc. are all appreciated! Best of luck to all this earnings season, bull, bear, or otherwise.

The Oppenheimer Code, Fiscal Q2 2014, Part 5: “It’s a Trap!” (?) Analyst Expectations for Fiscal Q2/Q3 2014



NOTE:  In case you’d like to refer back, click the following links for Part 1Part 2Part 3 and Part 4 of the current, fiscal Q1 2014 edition of my Oppenheimer Code home gamer earnings preview series.

My Oppenheimer Code posts for the prior three fiscal quarters are now collected in the Earnings Previews + Archive section.

NOTE:  As a friendly reminder/disclaimer, this isn’t treatise-level or expert-level stuff.  Just one person’s exceedingly humble attempt to gain a bit more insight into Apple’s fundamentals. This isn’t “forest from the trees” – it’s even higher up in the iClouds. More expert AAPL fundamentals types need not read on.


(Advance TL;DR warning.)  (Sorry I couldn’t give an advance bad pun warning. 😉 )

For the fourth quarter in a row, we reach the final part of my Oppenheimer Code series – the Wall Street expectations game.  Time to consult Yahoo! Finance once again to get an idea of analyst expectations, which seem “in-line” for the March quarter. As for the one after that…?

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The Oppenheimer Code, Fiscal Q2 2014, Part 4: Revenue Geography Lessons (or Hints, Anyway) + Gross Margin Update

I think I know what some of the 50-60 of you1 may be thinking after reading the post title and likely groaning at the 120th bad pun I’ve inflicted tried.

“Man, I just knew that home gamer AAPL blogger was gonna make a terrible pun based on revenue geography.”

No? Tsk. You’re missing out on a primary mission of this blog, which is to challenge the boundaries of kindergarten-level fundamentals and bad jokes –

Y’know, let’s just move onto the recently expanded margin discussion 😉

As you might have seen last quarter, this part of the earnings preview now includes a surface-level look at the operating margins of Apple’s five revenue geographies (of which Retail doesn’t really belong, for reasons I set out back then). Good news on the TL;DR front once again – since this quarter’s post is also more of a continuation/update, it’ll be a much quicker read. (Though if you’re a first-time reader or “need” a refresher, you can always read last quarter’s post on your own time if desired.)

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