Gone are the days when
) would report new quarterly earnings and smash expectations like
so many pumpkins on doorstoops during Halloween. The iBehemoth
brought in $8.26 per share on sales of $37.5 billion in the
quarter, both of which are decent-sized beats from the Zacks
Consensus Estimates. Yet AAPL stock was sold off aggressively in
the first minutes of after-hours trading today. So what gives?
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One word: margins. While a 37% profit margin is certainly nothing
to sneeze at -- especially for such a huge company designing,
creating and mass-producing so many high-tech gadgets -- Apple
investors have seen margins sliding in the smartphone space for
the past few quarters, and that's not great for a company that's
made its name on mind-blowing innovation and products it takes
its competition literally years to catch up to.
And Apple's guidance for its all-important holiday season quarter
(Q1 fiscal 2014)? Expected gross margins of 36.5-37.5% marks the
potential to see this number sink even lower. And with main
competition for all intents and purposes already "caught up" to
Apple -- Samsung,
), heck even
) will have the ability to make snazzy smartphones, too -- it's
going to be tougher and tougher for the Cupertino giant to keep
its big lead in the market, especially without new innovations
coming down the pike to re-invigorate the hopes of investors.
Make no mistake, either: the iPhone is the key to Apple's success
these days. Sales of the iPhone make up over 50% of the company's
business, and when Steve Jobs held the first prototype in his
hand those many years ago now, anyone could see it was
unquestionably a superior product compared to what else was on
the market at the time. But these days people see the iPhone 5s
launch and they start weighing their options -- sometimes to
await a new upgrade or opt for a smartphone elsewhere. And that's
no way to exude dominance in the industry, especially the kind
Apple (and everyone else) had grown used to over time.
Thus, traders in the late session have kept AAPL shares in the
red, though some of the fervor seems to have burned away by now.
Apple shares are down around 3% in the after-market, but they
were encroaching on -4% early in the session. Very curious from a
casual observer's perspective that such a big company with such
well-known brands would post a 3.7% positive surprise and bring
in more than $200 million in sales than analysts expected over
the past three months would wind up selling off on this news.
After all, the U.S. Olympic Team once put the "Dream Team" on the
basketball court. Nobody could even hope to compete with them.
But it was only a matter of time before the U.S. finally wound up
losing that Gold medal.