You know the drill, Apple posts a record $54.5 billion in revenue…
…and the stock tanks 10 percent in after-hours trading.
I mean. Fifty four and a half billion dollars. I went ahead and did the math: that’s an annual run-rate of $218 billion dollars (yes, I know Q1 is the holiday quarter, so it tends to be much larger than the others — but don’t underestimate the possibility of a new iPhone earlier in the year pushing Apple towards the $200 billion mark). Apple generated more revenue in one quarter than Google did in all of 2012. Hell, Apple is getting close to generating as much revenue in one quarter as Microsoft does in an entire year.
Perhaps even more incredible is that Apple made over a billion dollars in profit a week for the first time ever. Profit is the money you get to keep. You know, the kind Amazon doesn’t make. Or, to look at it another way, Apple generated as much profit in two weeks as Google did in their entire last quarter.
And yet, we are disappoint? Tough crowd, to say the least.
But why?
The reality is that there are many reasons for Wall Street to do what Wall Street does, even in the face of Apple’s fiscal reality. As the most valuable publicly traded company in the world, everyone wants a piece of the action: both buying and shorting. Many analysts aren’t giving guidance on what they actually think as much as what they want their clients to think they think. It’s all a big convoluted game.
But there is a pretty simple way to explain one level of “disappointment” today — just as there was in Q4 of last year. While that was all about a shift in the iPhone release cycle (which led to the perfect storm that was Q1 2012 — which is directly related to this year — more below), this year was all about one week. One. Little. Week.
What Apple tried to alert everyone to multiple times over the past quarter, but few seemed to remember, is that Q1 2012 was an anomaly. It was 14 weeks long, versus the standard 13 weeks Apple uses to calculate a quarter. This year, things were back to normal: 13 weeks.
It may not seem like a lot, but it’s actually a pretty big deal when it comes to breaking down Apple’s quarterly fiscal performance. Apple CFO Peter Oppenheimer apparently addressed this directly today during the call today (I wasn’t on the call as I’m currently on a plane): if you simply break it down by weekly revenue, Apple made $4.2 billion in Q1 2013 versus $3.3 billion in Q1 2012. That is significant.
So let’s do the math. If Apple’s Q1 2013 had been 14 weeks long, Apple’s $54.5 billion in revenue would have been $58.8 billion. Again, that may not look like a big difference, but it is $4.3 billion dollars!
Of course, it’s hard to know if the averages would have held in the hypothetical extra week of Q1 2013. But it doesn’t matter, go the other way. Apple’s $46.3 billion Q1 2012 would have been more like $42.9 billion if only 13 weeks were counted. But hey, what’s $3.4 billion amongst friends?
The real point is that everyone was spoiled by Apple’s Q1 2012. It really was the perfect fiscal storm. As I alluded to above, the iPhone launched that quarter for the first time that year. And the quarter was a week longer — which really matters since the iPhone is by far the largest part of Apple’s overall revenue (over 50 percent). So when we looked back to those gigantic numbers, we expected similar massive gains this year. But it didn’t happen. Quite frankly, I’m surprised Apple saw the gains it did given the “week off”. Clearly, this is a very healthy company.
But what about growth? That’s the latest buzzword that investors and would-be investors want to talk about. And I think that’s fair. A stock price has a lot to do with future potential, after all.
But again, the growth rate is skewed by the extra week. If you equalize Q1 2012 and Q1 2013 (either to be 13 weeks or 14 weeks — they’re very close), revenue growth goes from 18 percent to 27 percent. 27 percent is key because it’s the same growth rate Apple saw last quarter. Again, not huge (as it has been for the past couple of years), but not dropping as 18 percent would suggest.
If you equalize Q1 2012 and Q1 2013 and look at profit, growth goes from 0 percent to 8 percent.
Again, that’s not massive growth, but consider who we’re talking about here. Apple is the biggest public company in the world. Their numbers have been insane for a few years now, and the fact that they’re still growing at all is equally insane. I’ve said it before, and only slightly in jest, but the only way Apple is going to keep growing at those rates is if they get into the oil and gas business. I doubt even a new product, like a TV or watch, would get them there. You can only fly so close to the sun.
Long story short, a lot of people are either playing the market today or being pretty stupid. Not quite as stupid as last year, but stupid nonetheless. As a result, I’m making good on my word and buying Apple stock since it’s below $500 a share. It would be silly not to. Just look at the numbers. And look at the promise of buybacks/dividends. People see the stock tanking and think it’s a company on the downslope, but the numbers simply suggest they’re near the summit of financial nirvana.
I haven’t owned Apple stock since I became a blogger way back when. But since that’s no longer my primary gig and I’m conflicted out the wazoo in so many other ways, why not? As always, transparency will simply be the way forward. Plus, let’s be honest, every single mutual fund and 401k owns AAPL anyway. I’m not buying a lot of Apple stock simply because the return cannot be huge (again, see: flying too close to the sun — Apple is not going to go to $5,000 a share). But I’m putting my money where my mouth is, finally.
Longest. Disclosure. Ever.
[image: flickr/GDS-productions]
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