Apple's Q2 Earnings

Info from CNBC.

Apple (AAPL) has been pummeled lately being down 47% from it's all-time high.  Stock price even went below for the first time since 2011.  With the lack of new product updates, production delays and rumored iOS software redesign, AAPL seemed to have lost it's mojo.  Analysts estimate that AAPL would still beat earnings but it's profit margins would be down year over year.

CEO Tim Cook said that the stock price decline has been very frustrating and that Apple does not control that; it controls product innovation.  That being said, new product releases are now expected towards the end of 2013.

It was not all bad news for the Cupertino company.  Apple sold 37.4 million iPhones in the quarter, compared with 35.1 million in the year-ago quarter. The tech company sold 19.5 million iPads versus 11.9 million a year earlier.  For most companies, those numbers would be awesome.

A little bit more good news for investors, AAPL's shares surged in after-hours trading (currently at $411.39) due to Apple's earnings numbers,  Apple's announcement of a dividend hike of 15% and increase of stock repurchase from $10 billion to $60 billion.  These moves should be enough to keep the stock price afloat while we patiently wait for the new hotness.

Long term, I'm still bullish with Apple and with numbers like these, how can I hate them Apples?

Updates From Previous Post: Mondelez, Altria and Kraft Dividends

First of all, an apology.  I thought Modelez (MDLZ) paid me $8.30 but actually, it was Altria (MO) paying me that dividend.  So here are the dividend payments from last week:

MDLZ paid us a dividend of $3.41 which we reinvested to buy 0.1116 shares @ $30.56.

KRFT  paid us a dividend of $1.98 which we reinvested to buy 0.0388 shares @ $51.03.

MO     paid us a dividend of $8.30 which we reinvested to buy 0.2339 shares @ $35.49.

I was probably tired last week and associated MO with MDLZ.  Oh well. :)

Mondelez (MDLZ) Dividend Payments, LULU Fires Chief Product Officer Over See-Thru Yoga Pants, Ron Johnson Out At JC Penny (JCP) and Has Apple Lost It's Groove?

Now that's weird.

 

Yesterday was dividend pay day for Mondelez (MDLZ).  We got paid $8.30.  Now remember from my previous post that I expected to be paid $3.41 for 26.2504 @ $0.13/share.  Either MDLZ increased their dividend payout (I estimated @ $0.3161/share) or for some reason, they thought we owned 63+ shares of MDLZ.  I know there's an error somewhere and I expect a correction soon. 

 

Now for some news and my opinions:

 

Lululemon has been on the news lately for having a product recall because their black Luon yoga pants appeared to be see-thru.  As you can imagine, female customers would be deeply affected by this product defect which resulted in the recall.

 

Aside from the embarrassingly bad press, future earnings of LULU are expected to drop to offset the estimated $67 million in lost revenue as the cost of the product recall. 

 

Another victim of this product snafu is LULU's Chief Product Officer Sheree Waterson.  LULU announced on April 3 that Ms. Waterson  would leave the company on April 15.  It was obvious that this was a move to help stem the drop of stock price and as the company's atonement for the product recall.  Quite frankly, I wouldn't require someone to lose their job over this and I highly appreciated LULU's quick and fast response towards the issue.  While most companies would spend months with smoke and mirrors denying any fault or even flaws with their product,  LULU faced this challenge head on.  Recalling 17% of your product was very expensive but the possible loss of trust from loyal customers was just too high of a price to risk by LULU.

 

Looking forward, I still think LULU would come back strong and there's always the possibility for a black Luon shortage which may cause a panic buy reaction from the customers (which may increase the price of merchandise - higher margins to offset the loss).  Also, customers may continue to stay loyal to LULU due to the company's fast and effective response and whatever fringe bad experiences that popped up on the internet are just outliers or isolated incidents.

 

If at all, the drop in price is a perfect buying opportunity.

 

In other news, JC Penny (JCP) fired CEO Ron Johnson after almost 2 years on the job.  Johnson oversaw a disastrous drop in earnings for JCP and the Board just had enough of it.  JCP then hired Johnson's predecessor Myron Ullman effective immediately. 

 

Who would have thought that Ron Johnson, the executive behind the highly successful (and profitable) Apple retail stores would fail horribly at JCP?

 

Well, it's easy to see now looking back.  One of the early interviews Mr. Johnson made with CBS Morning News, host Gayle King ask Ron if he was wearing a JC Penny outfit for the interview.  He answered and I quote: "No, it's not, but I will have one on the next time."  Oops.  Back then, it was easy to laugh this off and forget about it but now, I realized it was a big marketing disaster.  Can you imagine the late Steve Jobs being caught with an Android phone?  Even Bill Gates was famously quoted for never touching let alone, own an iPod, iPhone and an iPad.  Ron Johnson getting caught with his pants down figuratively was a sign of him being out of touch with JCP and it's costumers.   How would a CEO know what the customer would want or need if he himself was not a customer?  He ended the promos and coupons and even taken out customer favorite brands.  As a result, Mr. Johnson alienated his loyal customers for the gamble of gaining new "higher-end" customers.  Obviously, discounted jeans and shoes were a foreign language for Johnson who for the most part of the last decade sold premium computers, phones and music players. 

 

Would reinstalling Mr. Ullman be good for JCP? Only time will tell.

 

Finally, we go back to Apple.

 

In recent weeks, stock analysts such Jim Cramer and tech pundits like Leo Laporte have expressed their opinions about AAPL.  Mr. Cramer was not as bullish as he was before and may have implied that AAPL lost it's "cool factor".  As recently as last Sunday, This Week In Tech (TWiT)'s Leo Laporte pretty much waved the white flag for AAPL.  He said that the AAPL has ran out of innovation and that future product releases would pale in comparison to what the Cupertino-based company released in the past five years.  These opinions, for the untrained eye/ear, would seem the death of Apple and would probably push some investors to sell their shares of AAPL.  But then, I remembered a story from Jim Cramer's book Confessions of a Street Addict where Mr. Cramer's Hedge Fund was getting beat on Wall Street in 1998.  Cramer wrote in his book that there was a point during that time that he just gave up on the Market and even wrote an article for theStreet.com to SELL EVERYTHING.  He then said that was the cue for Mrs. Cramer to start buying for the fund which then saved the Hedge Fund and Jim Cramer himself.  Also, Leo Laporte admitted he was wrong about Apple in the late '90s when he pretty predicted the death of Apple.  This was before the then newly design iMac, the iPod and iPhone/iPad. So in short, I'm considering these recent statements by these two people I respect as a sign that AAPL is at (or near) it's bottom.  Plus, Warren Buffet always said: "I buy when people are fearful and I sell when people are happy/greedy." 

 

I believe AAPL still has a few products up it's sleeve.  Recent news about the iPhone 5s and iPhone 6 being designed by Jobs himself give me confidence and with iOS/Software under Jon Ive, I'm optimistic that AAPL would wow us within the next few months.  Also, let's not forget that AAPL still has that over $100 Billion in the bank.

 

Besides, it's nice that our portfolio is no longer dependant on AAPL's stock price to succeed.  And that my friend, is diversification.