The Long Term Investor

To continue the bad news.

Apple sales miss expectations, Tim Cook says supply issues cost company $6 billion

https://www.cnbc.com/2021/10/28/apple-aapl-q4-2021-earnings.html

(BOLD is my opinion OR what I consider important content)

"Key Points

• Apple revenue fell short of Wall Street expectations in its fiscal fourth quarter on Thursday, which Apple CEO Tim Cook attributed to larger-than-expected supply constraints.
• Apple’s overall revenue was still up 29% on an annual basis and each of its product categories grew on an annual basis.
• Apple hasn’t provided official guidance since the start of the pandemic, but Cook said Apple expects “solid year-over-year revenue growth” in the December quarter despite the fact Apple will face worse supply constraints.

Apple revenue fell short of Wall Street expectations in its fiscal fourth quarter on Thursday, which Apple CEO Tim Cook attributed to larger-than-expected supply constraints on iPhones, iPads, and Macs.

Apple fell over 4% at one point in extended trading.

“We had a very strong performance despite larger than expected supply constraints, which we estimate to be around $6 billion,” Cook told CNBC’s Josh Lipton. “The supply constraints were driven by the industry wide chip shortages that have been talked about a lot, and COVID-related manufacturing disruptions in Southeast Asia.”

However, Apple’s overall revenue was still up 29% and each of its product categories grew on an annual basis.

Here’s how Apple did versus Refinitiv consensus estimates:

• EPS: $1.24 vs. $1.24 estimated
• Revenue: $83.36 billion vs. $84.85 billion estimated, up 29% year-over-year
• iPhone revenue: $38.87 billion vs. $41.51 billion estimated, up 47% year-over-year
• Services revenue: $18.28 billion vs. $17.64 billion estimated, up 25.6% year-over-year
• Other Products revenue: $8.79 billion vs. $9.33 billion estimated, up 11.5% year-over-year
• Mac revenue: $9.18 billion vs. $9.23 billion estimated, up 1.6% year-over-year
• iPad revenue: $8.25 billion vs. $7.23 billion estimated, up 21.4% year-over-year
• Gross margin: 42.2% vs. 42.0% estimated

iPhone sales were up 47% year-over-year, but still came in under Wall Street estimates.

Apple hasn’t provided official guidance since the start of the pandemic, but Cook said Apple expects “solid year-over-year revenue growth” in the December quarter despite the fact Cook said Apple will face worse supply constraints in the current quarter.

“So we’ve finished about a month of the quarter. The Covid related manufacturing disruptions have improved greatly. The chip shortages linger on,” Cook said.

Cook said that the supply issues were with chips on “legacy nodes,” or older chips, instead of the technologically advanced processors at the heart of Apple’s devices.

The expectation of year-over-year sales growth suggests that Apple sees significantly more demand for its new iPhone 13 models than it can supply. Apple’s fourth quarter only included a few days of iPhone 13 sales as it ended on Sept. 25.

Apple is currently in the middle of massive growth as sales of iPhones, iPads and Macs exploded during the pandemic. Apple’s annual revenue for its fiscal 2021 was up 33% from 2020 to $366 billion.

The strongest growth in Apple product categories aside from iPhones was in its services business, which includes sales from the App Store, music and video subscription services, advertising, extended warranties, and licensing. Apple’s services grew 26% annually, which Cook said was higher than the company expected.

Cook said that Apple has 745 million paid subscriptions, which not only includes first-party services like Apple Music but also subscriptions through Apple’s App Store.

“That’s up 160 million year on year, which is up five times in five years. So it’s been quite the growth cycle,” Cook said.

Apple’s Macs did not grow strongly, only increasing 1.6% annually, but the quarter did not include sales of new MacBook Pro models that were announced in October. Apple’s iPads grew 21% year-over-year, although they were supply constrained. Apple’s Other Products category, which includes Apple Watch and AirPods models, grew 11% without new products, which went on sale in October.

This quarter marks the first time since April 2016 that Apple has failed to beat earnings estimates, and it’s the first time since May 2017 that Apple’s revenues have missed estimates, according to Refinitiv data. "

MY COMMENT

BUMMER.....not as bad as Amazon.......but close. A nasty miss for Apple. Going to be a tough day for the NASDAQ and SP500 tomorrow. I am glad that I will NOT be following things through the day......I can just hide my head in the sand and pretend the day did not happen.

 

Ok Emmett and Zukodany.....you guys have your work cut out for you tomorrow. I think it is impossible to produce a positive market tomorrow.....but try to limit the losses as much as possible. YOU CAN DO IT.

 

AND.....as long as I am being a BUMMER.
Q3 GDP: Economic activity decelerated to 2.0% annualized rate amid Delta variant, supply concerns

https://finance.yahoo.com/news/gross-domestic-product-gdp-q3-us-2021-181740802.html

(BOLD is my opinion OR what I consider important content)

"The U.S. economy expanded at its slowest clip in over a year in the third quarter, with a reopening surge in activity quickly beginning to fade.

The Bureau of Economic Analysis released its first estimate of third-quarter gross domestic product (GPD) on Wednesday. Here were the main metrics economists from the print, based on consensus estimates compiled by Bloomberg:

• GDP quarter-over-quarter, annualized: 2.0% vs. 2.6% expected, 6.7% in Q2
  
• Personal consumption: 1.6% vs. 0.9% expected, 12.0% in Q2
  
• Core personal consumption expenditures, quarter-over-quarter: 4.5% vs. 4.5% expected, 6.1% in Q2
  

The slowdown in economic activity coincided with the resurgence in Delta variant-related coronavirus cases in the July through September quarter. Positive impacts from stimulus checks and other economic relief delivered by the government earlier this year also dwindled. And supply chain challenges have capped companies' abilities to keep up with consumer demand.

"The deceleration in real GDP in the third quarter was led by a slowdown in consumer spending. A resurgence of COVID-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country," the Bureau of Economic Analysis said in its release on Thursday. "In the third quarter, government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased."

Consumption, the largest component of U.S. GDP comprising about two-thirds of overall economic activity, slowed to a 1.6% rate in the third quarter, also marking the weakest pace since the second quarter of 2020.

Heading into Thursday's report, monthly retail sales data from the Commerce Department came in mixed for the third quarter to already reflect a marked deceleration in consumer spending. Sales dropped much more than expected in July before rebounding in August and September, albeit to monthly growth rates still well below the surges seen earlier this year.

Consumer confidence, which serves as one indicator of consumers' propensity to spend and stoke economic activity, followed a similar trend. The Conference Board's September consumer confidence index, which does not factor into calculations of GDP, declined in each of July, August and September, reflecting a deterioration in consumer optimism amid the Delta variant and rising prices.

Other components of GDP were also tepid for the third quarter. Net exports served as a drag yet again to headline GDP and subtracted 1.1 percentage points from the headline rate, owing to a yawning trade deficit. The goods trade gap widened to a record high in September as exports sank and imports rose, with businesses attempting to bring in goods to keep pace with demand.

Residential fixed investment, which tracks housing market activity, also dragged on GDP for a second straight quarter after contributing to growth earlier this year, with tight inventory levels and record surges in prices deterring would-be homebuyers.

Other components contributed more strongly to GDP, however. Inventories added more than 2 percentage points to headline GDP after back-to-back quarters of declines, suggesting businesses were working to replenish out-of-stocks. Government spending also added about 0.1 percentage points to headline GDP, reversing some declines from the prior quarter."

MY COMMENT

OK....lets get all this stuff out of the way in one day.......tomorrow. We had such great gains in the averages today....it is too bad that we will probably give a lot....if not most.....of it back tomorrow to end the week on a sour note.

BUT.....who knows.....the markets might just shrug it all off and move on anyway. It is impossible to second guess what the markets will do and why.

So.....now we move on from here.....onward and upward.

 

You guys did good.

Emmett told me what happened. He made a few calls and called in a few favors.......owed for past.......ummmm......"accommodations".

Than......BINGO......the markets were off and running. You guys held Amazon and Apple to realistic losses......actually pretty low.....and were able to POWER the rest of the markets forward.

There may have been some mention of a visit from a particular clown........if.....Mr Market did not....ummmm...."comply"....that really made the difference. At least that is what I am hearing on the street.

Bottom line.....no one messes with Emmett.

 

I dont even have to look to know I did very well today. My only losers were Amazon (-2.15%) and Apple (-1.82%) they were way more than offset by my big winners today.....Google +1.47%...Nvidia +2.51%....Nike +1.72%....Microsoft +2.24%.

Definitely a green day for me to end the week. It shows the power of the markets that REFUSE to go down.

 

So.....after Emmett and Zukodany....saved the day today:

DOW year to date +17.03%
DOW for the week +0.40%

SP500 year to date +22.61%
SP500 for the week +22.61%

NASDAQ 100 year to date +22.98%
NASDAQ 100 for the week +3.23%

NASDAQ year to date +20.25%
NASDAQ for the week +2.70%

RUSSELL year to date +16.32%
RUSSELL for the week +0.26%

The NASDAQ 100 has now taken the lead year to date.....thanks to.....a gain this week of 3.23% this week. the markets are BOOMING.

 

I was out fo touch all day.....but see in hindsight that this is what happened. Some of know the truth about what really happened today........thanks to Emmett.

Stock market news live updates: Nasdaq shakes off Amazon, Apple earnings letdown to notch new record, S&P 500 logs best month since Nov. 2020

https://finance.yahoo.com/news/stock-market-news-live-updates-october-29-2021-221746347.html

(BOLD is my opinion OR what I consider important content)

"Stocks ended at records on Friday as investors digested disappointing earnings results from Apple (AAPL) and Amazon (AMZN) that came during an otherwise solid quarterly reporting season from many major companies.

The S&P 500 set record intraday and closing highs. The index posted monthly gain of more than 6.5% in October, or its best single-month advance since November 2020. The consumer discretionary, energy and information technology sectors outperformed during the month.

The Nasdaq also eked out a fresh record level, even as a couple of heavily weighted technology giants saw shares dip.

Amazon shares dropped after the e-commerce juggernaut missed third-quarter expectations and forecasted a jump in expenses in the fourth quarter due to supply chain disruptions and rising costs for labor, materials and freight. These factors are expected to generate "several billion dollars of additional costs" to Amazon in the current quarter, the company said in its earnings statement.

Peer tech giant Apple also disappointed Wall Street in its fiscal first-quarter results, with key iPhone sales missing expectations even following the launch of its latest iPhone 13 handset series. Shares of Apple's suppliers including Taiwan Semiconductor Manufacturing Co. (TSM), Qualcomm (QCOM) and Broadcom (AVGO) also fell immediately following the results.

For Wall Street, the results appeared to vindicate concerns that mounting supply chain disruptions, labor costs and materials shortages were impacting companies of all sizes heading into the holiday season, and were creating challenges for corporations to keep pace with rising demand.

And for Apple, Amazon and some other technology companies, investors have been additionally fearful that these key members of last year's lucrative "stay-at-home" trade would be unable to maintain lofty growth rates following a pandemic-induced surge in their businesses. Amazon's sales grew 15% in the third quarter, slowing down markedly from 27% rate in the second quarter.

“I will agree, they are overvalued," Rebecca Felton, Riverfront Investment Group senior market strategist, told Yahoo Finance Live about technology companies on Thursday. "But remember valuation is a condition, not a catalyst. And the catalyst I think for technology is going to be the consistency both on the top and bottom line.”

Meanwhile, investors continued to digest a mixed batch of economic data results, which included a weaker-than-expected print on third-quarter gross domestic product. The report, while comprehensive in scope, still offered an only backwards-looking view of state of the economy. Some pundits suggested economic activity had already begun to pick up, helping to underpin companies' performance into the final months of the year and equity prices.

“I still think the best is yet to come,” Heritage Capital President Paul Schatz told Yahoo Finance on Thursday. “GDP for Q3 is going to be a trough. We’re going to have much stronger growth in Q4 and Q1 of next year, inflation is going to peak in the next six months, supply chain issues strongly moderate by early Q2 of next year. And this rising tide is going to lift most ships.”

“The economically sensitive trade, whatever you want to call it — reopening, reflation, inflation — that trade is very alive, very well and it’s not over,” he added.

2:39 p.m. ET: Microsoft overtakes Apple as most highly valued stock in the U.S. by market cap
Microsoft (MSFT) shares jumped on Friday, sending the stock's market capitalization above that of Apple and making it the most valuable stock in the U.S.

The Redmond, Washington-based company was the best performer in the Dow on Friday, extending gains after reporting better-than-expected quarterly results earlier this week as its Microsoft Azure cloud unit surged in growth yet again. As of Friday afternoon, Microsoft's market capitalization was hovering at $2.478 trillion, versus Apple's $2.466 trillion, based on Yahoo Finance data."

MY COMMENT

A great day in a STRONG market that REFUSES to go down. The perfect end to a good week....considering the earnings news yesterday.

 

Counting on you....Emmett and Zukodany.....to continue to do your thing with the markets on Monday.

GO OUT THERE AND.......BRING IT ON HOME.

 

I cant disclose all of Emmett's secrets Zukodany......but.....another little rumor I heard is that he uses something called....."The Weirding Way". Some say he picked it up somewhere called.....Arrakis? I dont know.....that is just another thing I heard on THE STREET.