second-quarter earnings report seems to bear out Wall Street's growth concerns. The company had a phenomenal 2012, a year that was way beyond expectations, setting 2013 up to be remarkably difficult. CEO Tim Cook acknowledged as much on the earnings call. "
UBS analyst Steven Milunovich wrote that Cook talked about new products and new product categories, but that they would be later than Wall Street analysts and the media were expecting, with launches in the fall and throughout 2014.
"Apple is ramping R&D and marketing in the June quarter, which may mean Sep announcement of the 5S and low-end phone," Milunovich wrote in his note. "We assume the Sep quarter will look much like the June quarter with Dec showing strong improvement." Milunovich rates shares "buy," but cut his price target to $500 from $560.June guidance was exceptionally weak, much weaker than anyone on Wall Street thought. For the fiscal third-quarter, Apple expects revenue will be between $33.5 billion and $35.5 billion, with gross margins between 36% and 37%. Prior to the announcement, analysts polled by Thomson Reuters were expecting $38.2 billion in sales.
Competition is clearly affecting Apple, judging by the guidance. Cook acknowledged as much on the call, saying Samsung, married with Google (GOOG), was Apple's toughest competitor on the hardware side. This demonstrates that Apple is seeing weaker year-over-year growth, and 2013 is essentially a lost year for Apple. Topeka Capital Markets analyst Brian White believes Apple "represents an attractive stock heading into a new product cycle in FY14." While this may be true, shareholders are getting antsy with the drastic sell-off in the stock, down more than 40% since the launch of the iPhone 5. The company assuaged some of those fears with a huge capital return program, giving back $100 billion to shareholders in the form of buybacks and dividends over the next three years. That's extraordinarily generous, but it does show that Apple's cash hoard is outweighing its innovation and product pipeline right now, which is not something shareholders ever want to see, no matter how short-term in nature Apple might want to spin it. At the very least, it should buy Cook and his team time as Apple tries to restart the growth engine.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV