WASHINGTON, January 28, 2015 – Those who tuned into Apple’s conference call after Tuesday’s market close were flabbergasted by the company’s profit and sales figures for the December quarter. Even the relatively staid Financial Times of London (FT) couldn’t restrain itself from describing the numbers, which it characterized as “the largest net income of any public company in history.”
“Apple’s net profit grew 37 per cent to $18bn, topping ExxonMobil’s previous quarterly record of $15.9bn in 2012, according to S&P Dow Jones Indices,” noted the FT.
As generally expected, pent-up demand for the new iPhone 6 models—particularly the larger screen version—was largely the driving force behind Apple’s phenomenal numbers. According to company CEO Tim Cook, “Demand for iPhone has been staggering, shattering our high expectations. This volume is hard to comprehend.”
But, with the modest exception of the iPad, numbers were also outstanding across the board, with Macintosh sales up nicely again, adding to the last quarter’s sales gains. So much for the death of the PC.
While we don’t have P&L statements from the cave dude who invented the wheel for comparison, Apple’s numbers exceeded expectations by an order of magnitude, putting to rest, for at least a day, the legion of aging Apple-hating financial journalist naysayers who began their successful careers in the late 1980s by sucking up to Microsoft and trashing the Macintosh. They’ll be at it again until they shake off Apple’s recent quarterly blowout.
As for those numbers, “record iPhone sales of 74.5m units beat even the most bullish Wall Street forecasts,” trumpeted FT, adding “Apple has now shipped more than 1bn iPhones, iPads and iPods running its iOS operating system that launched in 2007.”
BusinessInsider pinched in on those sales numbers further:
Apple sold 74.5 million iPhones, up 46% compared to the year prior, its biggest ever quarter by 23.4 million units. Analysts were only expecting 65 million units sold.
This growth is truly phenomenal. At this time last year, the iPhone business was 6.7%. People believed that the iPhone business was set to be in single digit growth for a long time to come.
Again, so much for those learned prognosticators. Apple’s stock has been under almost continuous attack from these clowns for well over two years now, and you’d think they’d learn. But they never do.
It’s a problem that’s replicated across the boards in today’s increasingly irrelevant traditional media whether the topic is finance, fashion or politics. Someone, somewhere, with some alleged measure of authority—like the New York Times or the now-deep underground members of Journolist—establishes an official narrative line. Then the same story is cribbed, written and rewritten to become a part of the official “narrative,” whether that narrative is true or not.
In Apple’s case, given the history of large companies under capitalism, the time will almost inevitably come when this phenomenal business goes the way of IBM or Microsoft: boring, fairly reliable, dividend-paying behemoths that largely live on legacy products while allowing the next generation’s garage gangs to run circles around them on the innovation front.
But clearly, that time has not yet come for Apple, which is slated to put its long-awaited Apple Watch line on sale sometime in April 2015. We are, frankly, somewhat dubious about that product. Yet when introduced, it will still be light years ahead of its current, unsuccessful predecessors marketed by other makers.
Innovation continues at Apple, at least for now, which is essentially what makes its staggering earnings beats possible. We suspect we’d long ago have seen Apple TV and an entirely different way of dealing with audio-visual entertainment. But Apple’s problem in putting a precedent-breaking product on the market here is more an issue of breaking through the greedy, vastly overpriced entertainment monopoly—particularly cable and network TV—than it is a matter of technical skill.
That’s where Apple likely will make its next move, while continuing to move into the electronic banking arena where efforts have just begun with Apple Pay. But for now, the company can afford to bask in its Q1 2015 profit glory, as well they should.
After yesterday’s pasting on Wall Street, following Friday’s feeble last minute stick-save on the Dow and Monday’s dim numbers, Apple’s profit numbers have goosed averages modestly this morning, countering yesterday’s miserable numbers from Microsoft (MSFT) in particular, but from Proctor & Gamble (PG), Pfizer (PFE) et. al., as well.
Moving ahead, the market is likely to remain volatile for “an indefinite period of time” as the Fed loves to say. Markets—particularly institutional traders—are still being weaned off the Fed’s now nonexistent QE free money regimen, which allowed them to bid up stocks endlessly with taxpayer money. But that’s over now.
As a result, stocks are likely to remain static to down in the near future, and the reason is simple. Now companies will have to rise and fall on the basis of P&L statements, earnings figures and the venerable price-earnings (PE) ratio. We may eventually get back to the day when we can rely on earnings numbers and technical analysis to evaluate individual stocks, something this old fashioned Market Maven would welcome with open arms.
With volatility this high, we’ll once again refrain from trading tips, although we still suggest traders with a small pile of mad money cash consider picking up a few shares of this week’s likeliest-to-succeed IPO, Shake Shack (SHAK), which is set to price Thursday and open for trading sometime Friday morning.
At this point, the Maven’s brokerage either has not obtained shares or has decided not to participate in the offering—likely the former. So the Maven can’t get in on the offer and won’t chase it after Friday’s opening. But for those who can get some—aside from the 1%, who have already gotten as much as they want—this should be at least a nifty short-term trade.
After that…well, how many burger chains can make obscene profits indefinitely?
See you tomorrow.