Apple, Inc. (NASDAQ:AAPL) reported first-quarter earnings and revenue Thursday that increased year-over-year and beat Street expectations. With this, the company managed to break its four-quarter-long streak of declining revenue. The strong performance came on the back of Services revenue rising to an all-time record. The stock slid in after-hours trading, apparently in reaction to a revenue decline in China.
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00:00 Give the Apple numbers here, Chait, and down 578.
00:04 That's over 3%.
00:05 So just before we go to the Apple numbers here, and if you keep them on the screen,
00:10 we saw Amazon rip higher.
00:13 We saw Meta rip higher.
00:15 And I'm like, holy mackerel, Apple is going to have to do something very special to go
00:20 higher.
00:21 So I tweeted out, and I did tweet this out before 430, because I already had the feeling
00:26 that they probably weren't going to be able to do a special thing as they were going to
00:31 need.
00:32 I can get my exact tweet here, but this was right before 430.
00:34 So follow me on Twitter, folks.
00:36 I'm giving out information after hours too before it, but you knew it.
00:40 So I said, "Meta Amazon rip higher.
00:43 Not good news for Apple.
00:45 It reports at 430 ETF effects."
00:48 So what was going to have to happen is Apple was going to absolutely have to blow it away
00:53 to go higher because the market makers don't like to take the cues up 10 bucks.
00:59 You know, it's up four right now.
01:01 If Apple blows it away, it was going to have to be up just extraordinary amount.
01:05 In all likelihood, they were going to look at Meta blowing it away and at Amazon blowing
01:09 away and Apple really need to blow away.
01:11 If they came in and they absolutely blew it away, announced more buybacks, announced an
01:15 increase to the dividend, all that stuff, it could have went higher.
01:19 But if they were just coming in and just beating, it wasn't going to be good enough because
01:23 of Amazon and Meta and this is the ETF effects at play, folks.
01:27 So give us those numbers.
01:28 All right.
01:29 So for Apple, you had sales come in at 119 billion, beat the 118 billion estimate.
01:35 EPS, two bucks and 18 cents, beat the $2.10 estimate.
01:39 So Apple did beat on both EPS and sales top line.
01:43 But right here is, oh, I don't know what's going on with my screen, but right here, Apple
01:48 greater China sales, 20.8 billion down from 20, we'll call it 24 billion year over year.
01:54 So that's a very significant move.
01:56 You're talking 24 billion to around 21.
01:59 That's more than 10% of Apple sales in China down year over year, which I mean, if you're
02:05 Apple, Tesla, whatever, there's always talk about China.
02:08 At the end of the day, China is still one of their biggest markets.
02:12 So they don't like to see that.
02:15 Let's almost look, America sales, 50 billion, China 20.
02:18 So China sales are almost half of what they do in America, a little bit less.
02:23 And you're seeing a big 10% decrease year over year.
02:27 And the market doesn't like that.
02:29 And I think, you know, so outside of just the ETF effect, if you're wondering why is
02:33 Apple trading down this morning.
02:34 There's some fundamental reasons here, too.
02:36 It's not all ETF effects here.
02:38 We're going to get into what else is getting affected by ETF effects as well.
02:41 It's more than Apple, but it was going to have to really blow it away.
02:44 They were going to try to find a reason to sell Apple is what I was saying, even going
02:49 into the report.
02:50 Gene Munster, who we've got on the show a million times, we're good friends with Gene
02:54 Munster.
02:55 I always love when he does a commentary because he digs right in there and he's got this.
02:59 I'm just going to read this tweet from Gene.
03:01 He says, now that I've had time to process Apple guidance, I expect revenue to be down
03:06 5% year over year in March 2024.
03:09 That's not good news.
03:10 If not for FX, revenue would be down 3%.
03:13 Previously, the street had expected revenue to be up 1%.
03:17 They're having a revenue problem here.
03:18 They are not growing right now.
03:21 We know Vision Pro, they've got some stuff coming, but again, the iPhone, you got one
03:26 right here.
03:27 It's just, it is what it is.
03:29 It's a cash cow.
03:30 People go in there, but it's not growing.
03:32 People aren't going and buying two iPhones.
03:34 It's hard to grow that business.
03:35 Everybody who has an iPhone has an iPhone and everybody doesn't upgrade every single
03:39 cycle.
03:40 People try to get an upgrade, but it's like, I get a little better camera.
03:43 You know, I upgrade every like six cycles.
03:45 Most people probably upgrade every two or three.
03:47 Continuing this commentary though, what Apple is saying is last year's March 23 quarter
03:52 had a $5 billion benefit from sales that got pushed from December 22 into March 23 because
03:59 of iPhone COVID production shutdowns.
04:02 So I checked, and this is from Gene, I checked the March 23 transcript and the positive impact
04:07 was not mentioned.
04:09 Lucas suggests adjusting for last year, revenue will be flat year over year this March.
04:14 I understand he's trying to give investors a true look at what the underlying growth
04:17 of the business is, flat March.
04:19 That said, if he's asking us to back it out this March, he should have called it out a
04:24 year ago when it was a $5 billion positive benefit.
04:28 I'm okay with calling out FX and pent up demand.
04:30 My ask to be consistent when it's positive and negative.
04:33 So last year, they're saying they got a $5 billion, just to sum up, you know, what Gene
04:38 is saying here, a $5 billion benefit in the 23 sales.
04:44 And that's why the sales were higher.
04:46 And this year, they're not going to get that benefit.
04:48 So that's why the sales are going to be down.
04:50 Well, it is, you can't have your cake and eat it too.
04:53 So you didn't really point out you were getting this huge benefit when you were given the
04:56 numbers last year.
04:58 But now you're saying, well, it's only down because we had this huge benefit the previous
05:02 year.
05:03 So I mean, none of this really makes me feel warm and fuzzy as an Apple shareholder that
05:07 they're kind of, they're saying all true here, but they're highlighting, you know, different
05:12 pieces at different times here to make the revenue not look like it's declining.
05:17 I don't like that at all either.
05:19 So I don't like the perception of this.
05:23 And you know, I don't own Apple, but I'll tell you, as of this point right now here,
05:28 Apple is the Apple and Tesla are the two magnificent seven stocks that are out of favor.
05:34 What Google I guess now too, because it fell the other day.
05:36 We're going to get separation here in this magnificent seven.
05:38 It might not be the year where they all go higher.
05:41 So I don't know if they said anything on Vision Pro specifically, but Tim Cook did tease something
05:47 when it comes to AI.
05:49 He said, expect, you know, some big things from Apple when it comes to AI later this
05:53 year.
05:54 So when Dennis and I, we talked about this yesterday, how just secretive Apple is.
05:57 So you got, you got kind of a little tease there from, from Tim Cook.
06:02 Tim Cook mentions AI for the first time in prepare remarks on earnings call.
06:05 Munster says, welcome Apple to generative AI steamroller.
06:09 So again, nothing on the, on the horizon, or I guess in the short term for Apple and
06:13 AI right now, but something a little bit down the road, maybe six months later this year,
06:18 we'll hear more from Apple when it comes to what they're doing on AI.
06:21 Joel, looking at the chart right here.
06:24 I mean, it looks like we're in a very, very, very important area.
06:28 I was going to say that.
06:29 Are you proud of me looking at the chart like this?
06:31 Because if it jumps out to you right away, the longer you have to look at a chart that,
06:35 that, that the more, more complicated it could be.
06:39 I just want to say the street, except for yesterday was leading the right way into this
06:43 report with, I believe with five or six down days in a row.
06:47 But just one 80, I mean, that just jumps out to you.
06:50 That was the area of a bunch of lows back in January, pre-market low, right in that
06:56 area.
06:57 So not only a good number for today, but I think moving forward, really important
07:02 for Apple to hold the 180.
07:05 And I just asked about the Vision Pro because that, you know, that's something that's supposed
07:09 to be adding to it.
07:12 But when you get negative comments out of Gene Munster like that, we'll dial up Gene
07:16 at right after the earnings season, he's busy crunching numbers, but it's been a trend of
07:22 declining revenues and you know, the street right now, when you have companies going in
07:27 the opposite direction, it's fallen out of favor.
07:30 Microsoft is already overtaken.
07:31 It is the biggest component in the S&P.
07:34 Microsoft is in favor because they see Microsoft as an AI play and they're not putting Apple
07:40 as an AI play right now.
07:41 And that's the biggest problem for Tesla and Apple right now, because these are not like,
07:47 you know, jumping in and you know, I do believe Tesla is going to be a huge AI play and in
07:51 the humanoid aspect, but it's stories a little further down the line.
07:55 The Apple story with this Vision Pro is a little further down the line.
07:57 The story is not here today.
08:00 And that's the problem for Tesla and Apple the most is that the Microsoft story is here
08:04 today.
08:05 Nvidia story is here today.
08:08 Amazon story, a meta story, well the meta story is just here today because of what,
08:13 you know, they did on that earnings report.
08:15 But I mean, the stories that are here and now is obviously, you know, SMCI.
08:19 I mean, just take it back to that here too.
08:21 Does the stock go up every day?
08:23 I mean, it's gone just crazy now.
08:27 I didn't even see that it was above $600.
08:29 It pulls back for one day.
08:31 One day it pulls back hard.
08:33 I mean, I look like I had the best sale in the world at $547.
08:37 I sold half my position because I was just like, wow, you know, I've doubled my money
08:40 and it's gone a long way.
08:41 It's doubled, the stock's doubled in a month.
08:43 Feels like it's like a little bit overdone.
08:45 Pulls back to $501 and then rallies 100 points in the next 24 hours.
08:49 I mean, this wasn't another earnings report, folks.
08:52 This is just people that can't stop buying the stock.
08:55 And like I said, the valuation might be able to support this.
08:59 And, you know, obviously, you know, we had T3 on and they were talking about the stock
09:02 as well and just saying, hey, if you believe these numbers and, you know, unless it's a
09:07 complete sham was what the T3 was saying, David was the one saying that, wasn't it?
09:12 Yeah, David Prince.
09:13 It was David Prince.
09:14 He was saying, if you believe these numbers, if these numbers are real and he thinks they
09:18 are, this stock's going to revalue higher and that's what you're seeing happen.
09:23 I still have half my SMCI position, which is more than I originally put into it because
09:28 the stocks went up so damn much.
09:30 But I mean, Nvidia too, I bought more Nvidia two days ago and people were just throwing
09:34 it at me on Twitter saying, you just bought the top, Dennis.
09:37 You just bought the top.
09:38 Hey, you know what?
09:39 I didn't buy the top.
09:40 It's making a new high again.
09:41 Wow.
09:42 The strong gets stronger.
09:43 The weak get weaker, folks.
09:45 That's the market we've been in for a long time.
09:47 That continues to be the market.
09:49 You have to be a little concerned too that Apple threw in the AI plug.
09:54 I mean, that's always good for some kind of boost.
09:57 So they even pulled the stop out on that.
10:01 Well, I think it's like Dennis said, and we were looking at the numbers, there's clearly
10:06 a growth problem for Apple right now, a slight revenue problem.
10:10 And if you don't have an AI story that's working for you right now and you're not showing growth,
10:16 well, the market's just going to say, hey, well, let's go to the stocks that are.
10:20 Let's go to the Metas and the Microsofts and the Nvidias of the world, because they are
10:24 making money off AI right now and have that growth, whereas Apple doesn't.
10:28 And then you got to wait longer.
10:30 So again, I have no doubt that eventually we will see that AI story come in from Apple.
10:35 And if the growth slows down, which it's showing it is, and the stock gets hammered, we'll
10:41 probably see something similar to what we saw with Meta.
10:44 Maybe not as pronounced, we saw an 80% drawdown with Meta, but you'll see people say, okay,
10:49 we don't want to own Apple stock anymore.
10:51 And then you'll see the share price get down to a point where it becomes valuable, even
10:56 if there is no growth, saying that, okay, if Apple stock is at say $120 a share, and
11:02 I don't think it'll actually get down there.
11:03 No, I don't think so either.
11:05 And you're saying, okay, they have a growth problem, but they're still bringing in X amount
11:08 of billions of dollars a quarter, then there will be value in there at a certain point.
11:13 So I'm just going to sit back and watch Apple if it becomes more out of favor based on this
11:19 then.
11:20 I think, and Brian Shannon maybe says it the best on Twitter.
11:23 If you don't follow Brian, I'm friends with Brian, great follow.
11:27 He says, when these stocks are dipping, don't buy the initial dip, buy the strength after
11:33 the dip.
11:34 And that's the greatest advice that I can think of on Twitter here is like, that's so
11:39 true.
11:40 Don't just blindly buy the dip on the initial dip and say, yep, this is it, I'm buying,
11:45 it's going to bounce here eventually.
11:46 And what happens is, you know, that continues to leak a lot of times.
11:49 You need like an analyst, a vote of confidence, something to come in to turn the story around
11:54 a lot of times, or you need the entire market just to keep ripping higher.
11:58 But I think that's the best thing you can do is sometimes just wait, don't get so hungry.
12:03 I got to buy Apple at $180 because it's support there and it's going to bounce there.
12:07 Well, what happens when it doesn't bounce?
12:08 Are you going to sell it at $179?
12:10 It's okay.
12:11 You want to buy it at $181 and say it's going to bounce at $180.
12:13 That's a good way to define it.
12:14 You better put it at $179 though when it doesn't bounce, because if your thesis is it's bounced
12:20 at $180 and it goes to $179, that's not a bounce at $180.
12:24 That's a failure to bounce at $180 and that changes everything.
12:27 So you can put that out for a trade.
12:29 But from a long-term investing perspective here, there's stocks that are in favor right
12:33 now and there's stocks that are out of favor.
12:34 I don't know.
12:35 It's going to change and maybe it does, but this AI story folks isn't going away and people
12:39 aren't all over the Apple saying AI, AI, AI.
12:42 They're saying iPhone, iPhone, iPhone.
12:45 So until the Apple story starts to actually talk more about, you know, and the Vision
12:49 Pro takes off, maybe Vision Pro is a game changer, but it is big and clunky folks.
12:55 I like the technology, but it doesn't look like I want to go buy it and put this on my
12:59 head.
13:00 I'm not going scuba diving.
13:01 Apple's out of favor until further notice.