May 2, 2024 • 20 mins
Apple shares jumped in late trading after the company posted stronger-than-expected sales last quarter and predicted a return to growth in the current period, sparking optimism that a slowdown is easing. The results came as a relief to investors, who have been waiting for the iPhone maker to pull out of a long slump.
Bloomberg TV and Radio hosts Carol Massar and Tim Stenovec speak with Bloomberg Intelligence Senior Technology Analyst Anurag Rana, Bloomberg News Chief Technology Correspondent Mark Gurman and Synovus Trust Senior Portfolio Manager Dan Morgan for analysis and reaction.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Apple second quarter revenue
ninety point seventy five billion. That's slightly better than the
forecast of ninety point three to three billion. iPhone revenue
forty five point ninety six billions, slightly above the estimate
of forty five point seventy six billion. The company here's
a big one to buy back additional one hundred and
(00:23):
ten billion dollars worth of shares and boosting its quarterly dividend.
That's the Apple playbook, and it is now up two
point three percent. Initial reaction here in the after mark, Yeah.
Speaker 2 (00:33):
I was going to say, who cares about those other numbers.
It's that buyback of additional one hundred and ten billion
dollars of shares and boosting that quarterly dividend that certainly
has investors expected. Some additional color here. Second quarter Greater
China revenue Carol sixteen point three seven billion. Even though
that was a decline of over eight percent year over year,
it still did beat estimates of fifteen point eight seven
billion dollars. Second quarter revenue coming in above estimates at
(00:56):
ninety point seventy five billion. Estimates are for ninety point
three to three iPhone revenue also coming in above estimates
forty five point nine to six billion. Estimates were forty
five point seven six billion dollars.
Speaker 1 (01:07):
Apple raising that dividend to twenty five cents a share
from the previous dividend of twenty four cents a share.
So just to keep in mind that we start, you know, slowly.
We've seen all of these big tech companies, the Magnificent
seven offering up things like a dividend and so on.
Speaker 2 (01:21):
Our own Mark German all over this story. Here's his take. Initially,
Apple sales decline less sharply than feared last quarter, held
by stronger than expected demand in China, sparking optimism that
the company slow down, maybe easing. Apple also set it
expects three turned sales growth in the current period, with
revenue climbing by a percentage in the low single digits.
That's according to Luka Maistri, the company's CFO. He told
(01:43):
ut Bloomberg Television's Emily Chang in an interview.
Speaker 1 (01:45):
All right, so let's get some analysis right now. Our
own Ana Agrana is standing by of our Bloomberg intelligence
team on RAG. You've got the numbers, and of course
the additional big buy back of one hundred and ten
billion dollars worth of share, boosting its quarterly dividend. But
it looks like, you know, they came in either online
or better than expected. But what's your smart take on this?
Speaker 3 (02:05):
Yeah, I would say anything. The number that stands out
really is that the decline in China was not as
bad as I guess it was communicated before, so slightly
better than before, but it's still overall still a negative number.
There is no and then you know, we will find
out on the conference call whether they make a comment
or not, or what kind of guidance they give for
next quarter. But overall, I would say the results were
(02:27):
okay compared to I'd say going into the quarter when
the pessimism is very high.
Speaker 2 (02:33):
What's the big headline here? Is it the boarder proving
plans to buy back an additional one hundred and ten
billion dollars worth of company stocks? Is it Apple increasing
its dividend four percent to twenty five cents a share?
Are those the numbers that investors should be focused on
right now?
Speaker 3 (02:46):
I would have been expecting, you know, them to buy
at least one hundred million dollars of stock every year.
So that's you know, to me at a table stake
ten billion. Yeah, it's just it's just normal. I really
need to know where the growth is going to come from,
and you know, how our things shaping up for the
second half of the year. And but most importantly, what
are they doing in the AI of you know, arena
at this point and what kind of features should we
(03:08):
expect going forward.
Speaker 1 (03:10):
So remind us to Honora, this company typically doesn't release
the outlook in their call. I forget. I mean you
talk about it on the call, but not in the release, correct.
Speaker 3 (03:18):
Yeah, that's not in the release. They're going to give
some indication about each of the product lines on the call.
So when we look at these results, you know, services
is good, you know, iPhone modestly better, you know overall,
I would say, in line to slightly better quarter. But
it all boils down to the commentary on the conference
call about how the things shaping up in the current quarter.
Speaker 1 (03:39):
So if they are talking down China in particular, or
revenues or overall, that is going to get you concerned.
Speaker 3 (03:46):
Yeah, I mean that is going to you know all
the all the you know, the current you would say,
the minor beat will be all offset by if there
are any comments negative comments about you know, continued weakness
of the iPhone in the third quarter, because remember, if
we consensus right now, iPhone revenue for next quarter is
supposed to be down two percent. Now, remember in this
quarter was down ten percent, So we need to know
(04:08):
whether that two minus two percent holds true or are
we going to see better than that in line or worse.
Speaker 2 (04:14):
Shear's higher in the after hours right now by about
four percent. Fair to say, we're seeing this reaction as
a result of just expectations being so low going into
this exactly.
Speaker 3 (04:22):
Yeah, yeah, absolutely, this is this is a true game
of where pessimism has been so high and they go
out and you know, beat by a slight amount. But
again I will give you my final verdict after the call.
Speaker 1 (04:34):
Yeah, and we're also seeing where we said Greater China
revenue better than expected, it was still about a billion
and a half low a year ago. Sales are down considerably.
Also in Japan, the rest of Asia Pacific, and in
the Americas. The lone bright spot seems to be some
minor growth in Europe. You know, it's interesting on surveillance
this morning, Ana Rag Tom Keane asking one of his guests,
(04:54):
is this a growth stock? Is this a value stock?
How do you think about it? I know you don't
give stock recommendations, but in terms of the growth metrics,
it's always big numbers. But is it big growth numbers
anymore when it comes to Apple.
Speaker 3 (05:06):
No, we don't think it's good growth numbers for Apple
at all, only because I think the big spike we
saw during the pandemic, people buying a lot of iPads,
computers or AirPods, all of that is now, you know,
basically you could say haunting them. We are coming into
a world where Apple's growth rate is going to hover
somewhere between zero to five percent for at least the
next two to three years. Now that's a good case.
(05:28):
We really need to get make sure that the China
situation is handled, even if even before we can make
that claim. Otherwise it's going to be closer to that
zero to two percent rather than closer to five percent.
Speaker 2 (05:40):
Honor Ragaran Mark German on the lifeblog, making the point
that the company declined nearly across the board on an
annual basis, despite the fact that they beat Wall Street estimates.
So that's overall revenue the iPhone buy a lot, the
iPad buy a lot, Wearables, home and accessories, buy a lot.
The bright spots are growth and services and for the
Mac to the M three due to the M three
(06:02):
Mac book care. Let's talk services. This is a category
that was fair to say, was really created under Tim
Cook and it's just been an incredible growth over the
last few years. What are the bright spots within services?
Speaker 3 (06:14):
So in our view, services is really what's holding Apple
together only because it gives you in the ecosystem field.
It's not easy to get out of the ecosystem and
leave Apple for another product. And which is why you know,
the numbers over here are truly important because you know
this time they grew around close to fourteen percent if
I remember correctly, that's that's better than what the company
(06:35):
had initially you know indicated. So this is this is
a growth driver. This is what provides value to the ecosystem,
and we are hoping that they're going to come out
and you know, talk good things about the next quatter
also from services, because this is the only growth drivate
left of this point.
Speaker 1 (06:49):
Hey Anna rok, how much of now it's just under
a four percent gain here in the aftermarket for shares
of Apple. How much of it is at a relief
that it wasn't worse than expected, especially when it comes
to what's going on in China, but also that big
boost in terms of buyback and the dividend.
Speaker 3 (07:04):
Yeah, it is a big relief, frankly, because again, this
is the one company everybody has been concerned about over
the last twelve months. Now, that's why I'm saying, this
is not like you know, Amazon or Microsoft beating their
cloud numbers by a big amount. It's just you know,
somebody saying, oh my god, it's not bad enough, It's
just okay. So it's a very different sentiment. But again
that's the way market behaves, Frankly, it's a game of expectations.
Speaker 1 (07:27):
But I mean, how much of the jump in the
aftermarket is it mostly just that it wasn't worse than
is expected? Or is it also a big check of
the buyback.
Speaker 3 (07:34):
Now, the buybacks, as I said, they do about one
hundred million dollars a year, so one hundred and ten
billion is not a big deal.
Speaker 2 (07:39):
Go to quarterly dividend increasing penny.
Speaker 3 (07:42):
Yeah, But once again, you know, this is a technology stock.
We really need to see the growth for this company
to actually see their valuation go up.
Speaker 2 (07:49):
Okay, so what has you concerned here?
Speaker 3 (07:53):
I mean, I just want to know what's happening in China.
Frankly we don't. This report has not has told me
that the things in China are not as bad as
what the street was looking at. But that doesn't mean
it's still a decline.
Speaker 2 (08:03):
How much of an issue is it? And again Mark
Krman pointing this out, Wearable's Home and Accessories a big decline,
dipping nearly a billion dollars. He says it's shocking because
it's the same quarter that Apple launched the Vision Pro,
which is included in that category, its first major new
product in nearly a decade. Bad news for Vision Pro.
Speaker 3 (08:20):
Yeah, we were never expecting any major contribution from that device.
Think about it, three five hundred dollars. Even if you
sell four hundred thousand units the entire year, which is
very big, you're not going to get that much revenue
boost from it. So it's not really a needle mover.
The thing that actually surprised me more was that the
IPID decline was very sharp. Now, this is something that
(08:41):
I think they're going to have to explain on the call,
and they're launching a new series next week. So seventeen
percent decline is what I remember, you know, briefly from
a couple of minutes ago. That's a big decline in iPads. Also,
all right, gonna lead there.
Speaker 1 (08:54):
We know you've got lots going on, so appreciate your
immediate response to Apple earnings. Our own Ragrana, who follows
Apple for a Bloomberg Intelligence team. Apple shares, by the way,
continuing to move up in the aftermarket, up about three
and a half percent. We've got another great voice for
us on this, Dan Morgan, senior portfolio manager at Sonova's Trust, Dan,
which jumps out for you here.
Speaker 4 (09:16):
Well, I'm trying to come up with some great ideas
different than what you've already talked about. Again, it was
kind of a mixed report, I think. You know, as
you were talking about earlier. The big things that stood
out to me were obviously the better than better than
expected numbers in China. You know, obviously iPhone a slight beat,
which is a positive. But you know, Carol Timo, it's
(09:38):
kind of interesting. I've been following Apple stock for about
thirty years, and I can remember back in twenty fourteen,
they had a very similar situation where everybody was very negative.
They were having issues in China and the stock was
really floundering.
Speaker 3 (09:52):
And then they came out and.
Speaker 4 (09:53):
They did a seven for one stock split, they raised
a dividend, and they started buying more shares and everybody
went crazy. So it's kind of interesting in this scenario,
we see the dividend going up, and we see, as
you were talking about before, an announcement of one hundred
and ten a billion dollars are going to purchase at stock.
It'd be interesting to see if they call up thing
else on the conference call in terms of, you know,
(10:15):
financial engineering to try to kind of reinvigorate interest back
into Apple.
Speaker 1 (10:19):
Well, you know, I'm kind of glad you went there
because I mean, and this maybe just gets to how
do we classify Apple. I mean, this is a behemoth,
and I feel like whenever the numbers come across, maybe
the growth rate isn't there, but I mean, revenue above
ninety billion dollars every time, we have to kind of
dissect these numbers, Dan, and we've done it a lot
of times with you. I mean, this is a company
(10:40):
that's very entrenched globally, kind of in the consumer space,
and I just I think is that enough to continue
just by selling a lot of stuff? As long as
they continue to sell a lot of stuff, even if
the growth trajectory isn't there, still makes it an interesting
and engaging company for investors.
Speaker 4 (11:00):
Did on the button, Carroll, I mean, just think about
the new vision pro I mean, they're supposed to do
four hundred million dollars in revenue alone just on that product.
And I heard you just mentioned that the wearables missed,
so it's kind of itching. That's more than some companies
generate toil a revenue. And you're right. I mean, they
have what one point five billion users you put together
(11:21):
the whole house, it's close to two billion when you
look at all the different services that they have, and
it's just a tremendous cash generator. I'm sure you've talked before,
what one hundred and seventy two billion dollars with marketable
securities and cash. They generate free cash flow about one
hundred and five hundred and seven billion. So those numbers
are kind of going back to the Warrant Buffett school
(11:42):
kind of the old security analysis they teach out to
your Chicago and you know there's value in that, and
even though we want to see an incredible new AI
product that's just going to be like the next iPhone,
it's probably not.
Speaker 3 (11:55):
Going to happen.
Speaker 4 (11:55):
And I think we just have to kind of accept
that and look at the company just for what it
is is and it doesn't mean they can increase your
stock price through these other avenues. Does that make sense?
Speaker 2 (12:04):
Yeah, that makes sense. Dan, Hey, I want to keep
you because I also want to bring in Markerman, Bloomberg
News chief technology correspondent, who was fresh off the live blog,
has the write up that you need to read about
these earnings. But I do want to start at the top.
Mark big picture, what sticks out to you. We've been
discussing this NonStop for the past twelve minutes.
Speaker 5 (12:23):
Yeah, so a big picture here is that Apple's doing
a little bit better than feared. Right, you still see
declines across all of their segments other than the MAC
and services, but a little bit better than what we
had anticipated, or not what we had anticipated, but what
had some it anticipated. In China, certainly a lot of
optimism around artificial intelligence. But you know, the big picture
(12:44):
here is that Apple is no longer in growth mode.
They're a stable company generating as much revenue as they
did the past year and the year before that and
the year before that. So nothing is necessarily broken here,
but they do need to figure out a way to
grow in the future, and just it's very unclear how
that's going to happen.
Speaker 2 (12:59):
Okay, that was next question for you, Mark, What is
going to return Apple to growth mode? And give us
a little Apple history here, like when was the last
time Apple found itself in this position and what did
they do to get themselves out of it.
Speaker 5 (13:10):
Yeah, so I'm gonna answer this question this way. The
scariest line that you're going to see in Apple's press
release is the wearables, home and Accessories number. That's about
an eight hundred nine hundred million dollar annual decline, pretty considerable,
about a ten percent decline there for that business that
covers Airpod's, Apple Watch, appel TV, HomePod, you name it.
Why is that so concerning? Because this is the launch
(13:32):
quarter of the Apple Vision pro which is supposedly their
future and their savior for growth. And if you're going
to have that category of the Vision pros and have
one of its biggest declines ever in the launch quarter
of your new product. Clearly things are not going so
hot in what you're betting your future on. The last
time that Apple was sort of stuck in terms of
(13:53):
lack of growth was really before the iPhone came out.
So it has the company has been growing for a very, very,
very long time. Right at some point momentum runs out.
The momentum has run out. The good news is that
it's not like they're you know, creating.
Speaker 2 (14:07):
Hey, Mark, real quick, I did bring that up. I
saw you wrote wrote that about that in the our
great live blog. Everybody should check that out as they're
listening to this. And I brought that up to Honor
rog and he made he made the point that, you know,
the Vision pro is still very expensive, and even if
they sold a ton of them, then it wouldn't have
a huge impact just because it's still relatively early in
(14:29):
the product life cycle. Why is it still so scary
to you though?
Speaker 5 (14:32):
Oh well, I mean I look at it differently. It
is so expensive, and so if they do sell a
ton of them, that should generate you know, a good
amount of revenue. Right and we're talking We're not talking
hundreds of billions of dollars here, We're talking about an
eight nine billion dollar category, So an eight hundred million
dollars percent is actually quite a lot. And so if
they're if they're if they want to bet a lot
on this product, it's just going to have to start
(14:54):
creating some momentum. But it's done nothing to date, and
sales for these types of devices, especially at this price point,
you're getting the bulk of those sales very early on
in the process. You're getting them this quarter. So it
only really goes down here downhill from here for the
Vision Pro until they make major improvements on price.
Speaker 3 (15:11):
And wait, hey, still with us.
Speaker 1 (15:12):
We're talking with our own marker and in Bloomberg News,
chief technology correspondent Dan Morgan, still with us, senior portfolio
manager over at Sonovas. As we are looking at Apple
shares up about six and a half or set here
in the aftermarket as their second quarter revenue tops estimates
and they also boost their buyback. Dan Morgan, come on
in on it. You've been listening to the conversation thoughts
when it comes to wearables and the Vision Pro.
Speaker 4 (15:34):
Yeah, I mean that was one of the mark was
mentioning that was kind of one of the catalysts that
people are looking out for that. Potentially Apple could start
to get some momentum back in the stock. We know
they've got a new tablet that's supposed to come out
I guess next week in May. They've got the big
Developers conference in June, and then of course they come
out with iPhone sixteen and the new iOS eighteen in September.
(15:57):
So there are going to be some opportunities down the road, guys.
I know this reports as exciting as we would have
hoped for for Apple to kind of reinvigorate, you know,
interest in what they're doing obviously along that road. Hopefully
they'll lay out some sort of AI roadmap that's a
little more specific than what they have so far on
the conference calls. But again, I think this is just
kind of a quiet period right now for Apple, and
(16:20):
I don't think we have to hit I don't think
you'd hit the panic button if you hold chair. Let's
just see how this thing plays out. Hey, Mark Germott,
not everybody's in video, Mark.
Speaker 1 (16:28):
Germant, I'm wondering if you have a question for from
Dan Morgan, who's been following you know, Apple for thirty years,
seeing times when you know a lot of investors gave
up on this company only to see it come roaring back.
Speaker 3 (16:38):
Do you have a question maybe for Dan?
Speaker 5 (16:41):
That's a good question. I don't have a question for Dan,
but I'd love to engage in a back and forth
with Dan on this. I mean, you know, I agree
with you. There is no reason to panic here, Dan,
especially if you're a shareholder of Apple, right. I mean,
you put money into Apple. It's kind of like a bond.
You're not going to lose all your cash there, right,
But you're also not going to get those in Nvidia
(17:02):
like returns. At this point. The question is how long
our investors willing to wait until there's a next big thing?
And what I will say is I don't anticipate there
being any new next big thing on the horizon anytime soon,
so we'll be looking out for that.
Speaker 2 (17:16):
Dan, do you anticipate any next big thing being on
the horizon?
Speaker 4 (17:20):
I would agree with Mark one hundred percent. I mean,
I remember, guys, Carol, probably I don't want to date us,
but we've been around a while. You've brought up in
the nineteen nineties, when you know, we made the migration
from a client server environment and we went to the
IBM compatibles, and everybody was into Gateway and Dell and
HP and all the big PC makers were going crazy,
(17:40):
and Apple was almost ready to go bankrupt. I mean,
they had a very you know, very niche group of
people that bought Max and then in two thousand and
seven they came out with the iPhone, and a couple
of years before that they came out with the iPod
and the rest is history. So Apple's been down before,
and Apples had setbacks and been through periods of time
with when people kind of film aside and you know,
(18:03):
we'll just see where they are ten years from now.
That's all I can say.
Speaker 2 (18:05):
Hey, I just want to end with Mark on AI,
because ten years from now, I know that Apple would
love to be a leader when it comes to.
Speaker 1 (18:11):
AI, I will be replaced by AI.
Speaker 2 (18:13):
Hey maybe, Mark, what's the vision? What's the vision that
internally they're talking about it Apple when it comes to AI,
lay it out for us.
Speaker 5 (18:20):
The vision of AI is integration, deep integration into hardware,
privacy and security, and really not an Apple designed chapot
like you've seen from Chat, GPT, open AI, Google, Gemini, Microsoft,
you name it. This is about integrated into the phone.
I'll give you an example. We're on this call, my
phone's in my pocket. I probably missed twenty notifications depple
(18:44):
earning season. I'll take my phone out of my pocket
when this is done, and it'll catch me up with
some AI and tell me everything I missed. That's the
type of AI feature to think about if you're when
you're expecting AI features from Apple summaries, useful day to
day tools based on artificial intelligence, not sort of twenty
one questions.
Speaker 2 (19:03):
I mean that's Apple's DNA, right, all about enhancing the
value of the hardware and getting you to buy that
next phone.
Speaker 1 (19:09):
Dan Morgan thirty seconds left here, so something like that.
How does as AI is integrated into the Apple model
and they figure out, you know, how to monetize it.
How important is that in terms of maybe making the
growth trajectory change? And again, just kint about thirty seconds.
Speaker 4 (19:25):
I mean it's huge, Carol. You know, as Mark was
mentioning when they have taken a dive into the chip space,
they're creating their own silicon. They do have a product
they're working on called Ajax, which is kind of like
a chat GPT, but it's on your phone. So there
are things they are doing, but as Mark was saying,
it's all integrated into the iOS, into the phone. It's
not going to be some new product that we've never
(19:46):
heard of that just comes out of left field.
Speaker 1 (19:48):
All right, Well, I know I can't live without my iPhone,
so bring it on, all right, guys, thank you so much.
Mark German, Bloomberg News Chief Technology correspondent, Dan Morgan, senior
portfolio manager at Sonva's trust on Apple stock is up
about six and a half percent here
Bloomberg Audio Studios, podcasts, radio news. Apple second quarter revenue
ninety point seventy five billion. That's slightly better than the
forecast of ninety point three to three billion. iPhone revenue
forty five point ninety six billions, slightly above the estimate
of forty five point seventy six billion. The company here's
a big one to buy back additional one hundred and
(00:23):
ten billion dollars worth of shares and boosting its quarterly dividend.
That's the Apple playbook, and it is now up two
point three percent. Initial reaction here in the after mark, Yeah.
Speaker 2 (00:33):
I was going to say, who cares about those other numbers.
It's that buyback of additional one hundred and ten billion
dollars of shares and boosting that quarterly dividend that certainly
has investors expected. Some additional color here. Second quarter Greater
China revenue Carol sixteen point three seven billion. Even though
that was a decline of over eight percent year over year,
it still did beat estimates of fifteen point eight seven
billion dollars. Second quarter revenue coming in above estimates at
(00:56):
ninety point seventy five billion. Estimates are for ninety point
three to three iPhone revenue also coming in above estimates
forty five point nine to six billion. Estimates were forty
five point seven six billion dollars.
Speaker 1 (01:07):
Apple raising that dividend to twenty five cents a share
from the previous dividend of twenty four cents a share.
So just to keep in mind that we start, you know, slowly.
We've seen all of these big tech companies, the Magnificent
seven offering up things like a dividend and so on.
Speaker 2 (01:21):
Our own Mark German all over this story. Here's his take. Initially,
Apple sales decline less sharply than feared last quarter, held
by stronger than expected demand in China, sparking optimism that
the company slow down, maybe easing. Apple also set it
expects three turned sales growth in the current period, with
revenue climbing by a percentage in the low single digits.
That's according to Luka Maistri, the company's CFO. He told
(01:43):
ut Bloomberg Television's Emily Chang in an interview.
Speaker 1 (01:45):
All right, so let's get some analysis right now. Our
own Ana Agrana is standing by of our Bloomberg intelligence
team on RAG. You've got the numbers, and of course
the additional big buy back of one hundred and ten
billion dollars worth of share, boosting its quarterly dividend. But
it looks like, you know, they came in either online
or better than expected. But what's your smart take on this?
Speaker 3 (02:05):
Yeah, I would say anything. The number that stands out
really is that the decline in China was not as
bad as I guess it was communicated before, so slightly
better than before, but it's still overall still a negative number.
There is no and then you know, we will find
out on the conference call whether they make a comment
or not, or what kind of guidance they give for
next quarter. But overall, I would say the results were
(02:27):
okay compared to I'd say going into the quarter when
the pessimism is very high.
Speaker 2 (02:33):
What's the big headline here? Is it the boarder proving
plans to buy back an additional one hundred and ten
billion dollars worth of company stocks? Is it Apple increasing
its dividend four percent to twenty five cents a share?
Are those the numbers that investors should be focused on
right now?
Speaker 3 (02:46):
I would have been expecting, you know, them to buy
at least one hundred million dollars of stock every year.
So that's you know, to me at a table stake
ten billion. Yeah, it's just it's just normal. I really
need to know where the growth is going to come from,
and you know, how our things shaping up for the
second half of the year. And but most importantly, what
are they doing in the AI of you know, arena
at this point and what kind of features should we
(03:08):
expect going forward.
Speaker 1 (03:10):
So remind us to Honora, this company typically doesn't release
the outlook in their call. I forget. I mean you
talk about it on the call, but not in the release, correct.
Speaker 3 (03:18):
Yeah, that's not in the release. They're going to give
some indication about each of the product lines on the call.
So when we look at these results, you know, services
is good, you know, iPhone modestly better, you know overall,
I would say, in line to slightly better quarter. But
it all boils down to the commentary on the conference
call about how the things shaping up in the current quarter.
Speaker 1 (03:39):
So if they are talking down China in particular, or
revenues or overall, that is going to get you concerned.
Speaker 3 (03:46):
Yeah, I mean that is going to you know all
the all the you know, the current you would say,
the minor beat will be all offset by if there
are any comments negative comments about you know, continued weakness
of the iPhone in the third quarter, because remember, if
we consensus right now, iPhone revenue for next quarter is
supposed to be down two percent. Now, remember in this
quarter was down ten percent, So we need to know
(04:08):
whether that two minus two percent holds true or are
we going to see better than that in line or worse.
Speaker 2 (04:14):
Shear's higher in the after hours right now by about
four percent. Fair to say, we're seeing this reaction as
a result of just expectations being so low going into
this exactly.
Speaker 3 (04:22):
Yeah, yeah, absolutely, this is this is a true game
of where pessimism has been so high and they go
out and you know, beat by a slight amount. But
again I will give you my final verdict after the call.
Speaker 1 (04:34):
Yeah, and we're also seeing where we said Greater China
revenue better than expected, it was still about a billion
and a half low a year ago. Sales are down considerably.
Also in Japan, the rest of Asia Pacific, and in
the Americas. The lone bright spot seems to be some
minor growth in Europe. You know, it's interesting on surveillance
this morning, Ana Rag Tom Keane asking one of his guests,
(04:54):
is this a growth stock? Is this a value stock?
How do you think about it? I know you don't
give stock recommendations, but in terms of the growth metrics,
it's always big numbers. But is it big growth numbers
anymore when it comes to Apple.
Speaker 3 (05:06):
No, we don't think it's good growth numbers for Apple
at all, only because I think the big spike we
saw during the pandemic, people buying a lot of iPads,
computers or AirPods, all of that is now, you know,
basically you could say haunting them. We are coming into
a world where Apple's growth rate is going to hover
somewhere between zero to five percent for at least the
next two to three years. Now that's a good case.
(05:28):
We really need to get make sure that the China
situation is handled, even if even before we can make
that claim. Otherwise it's going to be closer to that
zero to two percent rather than closer to five percent.
Speaker 2 (05:40):
Honor Ragaran Mark German on the lifeblog, making the point
that the company declined nearly across the board on an
annual basis, despite the fact that they beat Wall Street estimates.
So that's overall revenue the iPhone buy a lot, the
iPad buy a lot, Wearables, home and accessories, buy a lot.
The bright spots are growth and services and for the
Mac to the M three due to the M three
(06:02):
Mac book care. Let's talk services. This is a category
that was fair to say, was really created under Tim
Cook and it's just been an incredible growth over the
last few years. What are the bright spots within services?
Speaker 3 (06:14):
So in our view, services is really what's holding Apple
together only because it gives you in the ecosystem field.
It's not easy to get out of the ecosystem and
leave Apple for another product. And which is why you know,
the numbers over here are truly important because you know
this time they grew around close to fourteen percent if
I remember correctly, that's that's better than what the company
(06:35):
had initially you know indicated. So this is this is
a growth driver. This is what provides value to the ecosystem,
and we are hoping that they're going to come out
and you know, talk good things about the next quatter
also from services, because this is the only growth drivate
left of this point.
Speaker 1 (06:49):
Hey Anna rok, how much of now it's just under
a four percent gain here in the aftermarket for shares
of Apple. How much of it is at a relief
that it wasn't worse than expected, especially when it comes
to what's going on in China, but also that big
boost in terms of buyback and the dividend.
Speaker 3 (07:04):
Yeah, it is a big relief, frankly, because again, this
is the one company everybody has been concerned about over
the last twelve months. Now, that's why I'm saying, this
is not like you know, Amazon or Microsoft beating their
cloud numbers by a big amount. It's just you know,
somebody saying, oh my god, it's not bad enough, It's
just okay. So it's a very different sentiment. But again
that's the way market behaves, Frankly, it's a game of expectations.
Speaker 1 (07:27):
But I mean, how much of the jump in the
aftermarket is it mostly just that it wasn't worse than
is expected? Or is it also a big check of
the buyback.
Speaker 3 (07:34):
Now, the buybacks, as I said, they do about one
hundred million dollars a year, so one hundred and ten
billion is not a big deal.
Speaker 2 (07:39):
Go to quarterly dividend increasing penny.
Speaker 3 (07:42):
Yeah, But once again, you know, this is a technology stock.
We really need to see the growth for this company
to actually see their valuation go up.
Speaker 2 (07:49):
Okay, so what has you concerned here?
Speaker 3 (07:53):
I mean, I just want to know what's happening in China.
Frankly we don't. This report has not has told me
that the things in China are not as bad as
what the street was looking at. But that doesn't mean
it's still a decline.
Speaker 2 (08:03):
How much of an issue is it? And again Mark
Krman pointing this out, Wearable's Home and Accessories a big decline,
dipping nearly a billion dollars. He says it's shocking because
it's the same quarter that Apple launched the Vision Pro,
which is included in that category, its first major new
product in nearly a decade. Bad news for Vision Pro.
Speaker 3 (08:20):
Yeah, we were never expecting any major contribution from that device.
Think about it, three five hundred dollars. Even if you
sell four hundred thousand units the entire year, which is
very big, you're not going to get that much revenue
boost from it. So it's not really a needle mover.
The thing that actually surprised me more was that the
IPID decline was very sharp. Now, this is something that
(08:41):
I think they're going to have to explain on the call,
and they're launching a new series next week. So seventeen
percent decline is what I remember, you know, briefly from
a couple of minutes ago. That's a big decline in iPads. Also,
all right, gonna lead there.
Speaker 1 (08:54):
We know you've got lots going on, so appreciate your
immediate response to Apple earnings. Our own Ragrana, who follows
Apple for a Bloomberg Intelligence team. Apple shares, by the way,
continuing to move up in the aftermarket, up about three
and a half percent. We've got another great voice for
us on this, Dan Morgan, senior portfolio manager at Sonova's Trust, Dan,
which jumps out for you here.
Speaker 4 (09:16):
Well, I'm trying to come up with some great ideas
different than what you've already talked about. Again, it was
kind of a mixed report, I think. You know, as
you were talking about earlier. The big things that stood
out to me were obviously the better than better than
expected numbers in China. You know, obviously iPhone a slight beat,
which is a positive. But you know, Carol Timo, it's
(09:38):
kind of interesting. I've been following Apple stock for about
thirty years, and I can remember back in twenty fourteen,
they had a very similar situation where everybody was very negative.
They were having issues in China and the stock was
really floundering.
Speaker 3 (09:52):
And then they came out and.
Speaker 4 (09:53):
They did a seven for one stock split, they raised
a dividend, and they started buying more shares and everybody
went crazy. So it's kind of interesting in this scenario,
we see the dividend going up, and we see, as
you were talking about before, an announcement of one hundred
and ten a billion dollars are going to purchase at stock.
It'd be interesting to see if they call up thing
else on the conference call in terms of, you know,
(10:15):
financial engineering to try to kind of reinvigorate interest back
into Apple.
Speaker 1 (10:19):
Well, you know, I'm kind of glad you went there
because I mean, and this maybe just gets to how
do we classify Apple. I mean, this is a behemoth,
and I feel like whenever the numbers come across, maybe
the growth rate isn't there, but I mean, revenue above
ninety billion dollars every time, we have to kind of
dissect these numbers, Dan, and we've done it a lot
of times with you. I mean, this is a company
(10:40):
that's very entrenched globally, kind of in the consumer space,
and I just I think is that enough to continue
just by selling a lot of stuff? As long as
they continue to sell a lot of stuff, even if
the growth trajectory isn't there, still makes it an interesting
and engaging company for investors.
Speaker 4 (11:00):
Did on the button, Carroll, I mean, just think about
the new vision pro I mean, they're supposed to do
four hundred million dollars in revenue alone just on that product.
And I heard you just mentioned that the wearables missed,
so it's kind of itching. That's more than some companies
generate toil a revenue. And you're right. I mean, they
have what one point five billion users you put together
(11:21):
the whole house, it's close to two billion when you
look at all the different services that they have, and
it's just a tremendous cash generator. I'm sure you've talked before,
what one hundred and seventy two billion dollars with marketable
securities and cash. They generate free cash flow about one
hundred and five hundred and seven billion. So those numbers
are kind of going back to the Warrant Buffett school
(11:42):
kind of the old security analysis they teach out to
your Chicago and you know there's value in that, and
even though we want to see an incredible new AI
product that's just going to be like the next iPhone,
it's probably not.
Speaker 3 (11:55):
Going to happen.
Speaker 4 (11:55):
And I think we just have to kind of accept
that and look at the company just for what it
is is and it doesn't mean they can increase your
stock price through these other avenues. Does that make sense?
Speaker 2 (12:04):
Yeah, that makes sense. Dan, Hey, I want to keep
you because I also want to bring in Markerman, Bloomberg
News chief technology correspondent, who was fresh off the live blog,
has the write up that you need to read about
these earnings. But I do want to start at the top.
Mark big picture, what sticks out to you. We've been
discussing this NonStop for the past twelve minutes.
Speaker 5 (12:23):
Yeah, so a big picture here is that Apple's doing
a little bit better than feared. Right, you still see
declines across all of their segments other than the MAC
and services, but a little bit better than what we
had anticipated, or not what we had anticipated, but what
had some it anticipated. In China, certainly a lot of
optimism around artificial intelligence. But you know, the big picture
(12:44):
here is that Apple is no longer in growth mode.
They're a stable company generating as much revenue as they
did the past year and the year before that and
the year before that. So nothing is necessarily broken here,
but they do need to figure out a way to
grow in the future, and just it's very unclear how
that's going to happen.
Speaker 2 (12:59):
Okay, that was next question for you, Mark, What is
going to return Apple to growth mode? And give us
a little Apple history here, like when was the last
time Apple found itself in this position and what did
they do to get themselves out of it.
Speaker 5 (13:10):
Yeah, so I'm gonna answer this question this way. The
scariest line that you're going to see in Apple's press
release is the wearables, home and Accessories number. That's about
an eight hundred nine hundred million dollar annual decline, pretty considerable,
about a ten percent decline there for that business that
covers Airpod's, Apple Watch, appel TV, HomePod, you name it.
Why is that so concerning? Because this is the launch
(13:32):
quarter of the Apple Vision pro which is supposedly their
future and their savior for growth. And if you're going
to have that category of the Vision pros and have
one of its biggest declines ever in the launch quarter
of your new product. Clearly things are not going so
hot in what you're betting your future on. The last
time that Apple was sort of stuck in terms of
(13:53):
lack of growth was really before the iPhone came out.
So it has the company has been growing for a very, very,
very long time. Right at some point momentum runs out.
The momentum has run out. The good news is that
it's not like they're you know, creating.
Speaker 2 (14:07):
Hey, Mark, real quick, I did bring that up. I
saw you wrote wrote that about that in the our
great live blog. Everybody should check that out as they're
listening to this. And I brought that up to Honor
rog and he made he made the point that, you know,
the Vision pro is still very expensive, and even if
they sold a ton of them, then it wouldn't have
a huge impact just because it's still relatively early in
(14:29):
the product life cycle. Why is it still so scary
to you though?
Speaker 5 (14:32):
Oh well, I mean I look at it differently. It
is so expensive, and so if they do sell a
ton of them, that should generate you know, a good
amount of revenue. Right and we're talking We're not talking
hundreds of billions of dollars here, We're talking about an
eight nine billion dollar category, So an eight hundred million
dollars percent is actually quite a lot. And so if
they're if they're if they want to bet a lot
on this product, it's just going to have to start
(14:54):
creating some momentum. But it's done nothing to date, and
sales for these types of devices, especially at this price point,
you're getting the bulk of those sales very early on
in the process. You're getting them this quarter. So it
only really goes down here downhill from here for the
Vision Pro until they make major improvements on price.
Speaker 3 (15:11):
And wait, hey, still with us.
Speaker 1 (15:12):
We're talking with our own marker and in Bloomberg News,
chief technology correspondent Dan Morgan, still with us, senior portfolio
manager over at Sonovas. As we are looking at Apple
shares up about six and a half or set here
in the aftermarket as their second quarter revenue tops estimates
and they also boost their buyback. Dan Morgan, come on
in on it. You've been listening to the conversation thoughts
when it comes to wearables and the Vision Pro.
Speaker 4 (15:34):
Yeah, I mean that was one of the mark was
mentioning that was kind of one of the catalysts that
people are looking out for that. Potentially Apple could start
to get some momentum back in the stock. We know
they've got a new tablet that's supposed to come out
I guess next week in May. They've got the big
Developers conference in June, and then of course they come
out with iPhone sixteen and the new iOS eighteen in September.
(15:57):
So there are going to be some opportunities down the road, guys.
I know this reports as exciting as we would have
hoped for for Apple to kind of reinvigorate, you know,
interest in what they're doing obviously along that road. Hopefully
they'll lay out some sort of AI roadmap that's a
little more specific than what they have so far on
the conference calls. But again, I think this is just
kind of a quiet period right now for Apple, and
(16:20):
I don't think we have to hit I don't think
you'd hit the panic button if you hold chair. Let's
just see how this thing plays out. Hey, Mark Germott,
not everybody's in video, Mark.
Speaker 1 (16:28):
Germant, I'm wondering if you have a question for from
Dan Morgan, who's been following you know, Apple for thirty years,
seeing times when you know a lot of investors gave
up on this company only to see it come roaring back.
Speaker 3 (16:38):
Do you have a question maybe for Dan?
Speaker 5 (16:41):
That's a good question. I don't have a question for Dan,
but I'd love to engage in a back and forth
with Dan on this. I mean, you know, I agree
with you. There is no reason to panic here, Dan,
especially if you're a shareholder of Apple, right. I mean,
you put money into Apple. It's kind of like a bond.
You're not going to lose all your cash there, right,
But you're also not going to get those in Nvidia
(17:02):
like returns. At this point. The question is how long
our investors willing to wait until there's a next big thing?
And what I will say is I don't anticipate there
being any new next big thing on the horizon anytime soon,
so we'll be looking out for that.
Speaker 2 (17:16):
Dan, do you anticipate any next big thing being on
the horizon?
Speaker 4 (17:20):
I would agree with Mark one hundred percent. I mean,
I remember, guys, Carol, probably I don't want to date us,
but we've been around a while. You've brought up in
the nineteen nineties, when you know, we made the migration
from a client server environment and we went to the
IBM compatibles, and everybody was into Gateway and Dell and
HP and all the big PC makers were going crazy,
(17:40):
and Apple was almost ready to go bankrupt. I mean,
they had a very you know, very niche group of
people that bought Max and then in two thousand and
seven they came out with the iPhone, and a couple
of years before that they came out with the iPod
and the rest is history. So Apple's been down before,
and Apples had setbacks and been through periods of time
with when people kind of film aside and you know,
(18:03):
we'll just see where they are ten years from now.
That's all I can say.
Speaker 2 (18:05):
Hey, I just want to end with Mark on AI,
because ten years from now, I know that Apple would
love to be a leader when it comes to.
Speaker 1 (18:11):
AI, I will be replaced by AI.
Speaker 2 (18:13):
Hey maybe, Mark, what's the vision? What's the vision that
internally they're talking about it Apple when it comes to AI,
lay it out for us.
Speaker 5 (18:20):
The vision of AI is integration, deep integration into hardware,
privacy and security, and really not an Apple designed chapot
like you've seen from Chat, GPT, open AI, Google, Gemini, Microsoft,
you name it. This is about integrated into the phone.
I'll give you an example. We're on this call, my
phone's in my pocket. I probably missed twenty notifications depple
(18:44):
earning season. I'll take my phone out of my pocket
when this is done, and it'll catch me up with
some AI and tell me everything I missed. That's the
type of AI feature to think about if you're when
you're expecting AI features from Apple summaries, useful day to
day tools based on artificial intelligence, not sort of twenty
one questions.
Speaker 2 (19:03):
I mean that's Apple's DNA, right, all about enhancing the
value of the hardware and getting you to buy that
next phone.
Speaker 1 (19:09):
Dan Morgan thirty seconds left here, so something like that.
How does as AI is integrated into the Apple model
and they figure out, you know, how to monetize it.
How important is that in terms of maybe making the
growth trajectory change? And again, just kint about thirty seconds.
Speaker 4 (19:25):
I mean it's huge, Carol. You know, as Mark was
mentioning when they have taken a dive into the chip space,
they're creating their own silicon. They do have a product
they're working on called Ajax, which is kind of like
a chat GPT, but it's on your phone. So there
are things they are doing, but as Mark was saying,
it's all integrated into the iOS, into the phone. It's
not going to be some new product that we've never
(19:46):
heard of that just comes out of left field.
Speaker 1 (19:48):
All right, Well, I know I can't live without my iPhone,
so bring it on, all right, guys, thank you so much.
Mark German, Bloomberg News Chief Technology correspondent, Dan Morgan, senior
portfolio manager at Sonva's trust on Apple stock is up
about six and a half percent here
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