Investing

Apple Earnings Miss Panic?

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Apple (AAPL) reported its third quarter earnings on Tuesday and was promptly hammered with downgrades and negative financial news articles. This morning, the stock is down nearly five percent. Is it time to sell Apple stock? See here for the Finance Gourmet’s analysis of Microsoft’s first quarterly loss. Apple’s Earnings Facts It seems that Apple has maybe gotten too good at living up to people’s expectations. Last year’s iPhone release of a modestly upgraded iPhone 4S, which basically was a small upgrade that added the voice assistant Siri. That, plus Apple’s track record of releasing a new iPhone roughly once per year, has left many iPhone buyers waiting for the still unannounced iPhone 5. All of those customers not buying iPhones this quarter dented Apple’s earnings. Concerned about whether Credit Karma is a scam? Here is where things get a little weird. Everyone already knew that the demand for iPhone 4 was lessening in the face of increasing belief that the next iPhone was just a few months away. Couple that with the 2-year contracts that the carriers slap on every new iPhone purchase and you get people who don’t want to get “stuck” with the “old” iPhone when the …

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Microsoft’s First Quarterly Loss Facts

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A lot of media have been leading with the headline that Microsoft reported its first ever quarterly loss. This is completely true, and yet, Microsoft didn’t actually lose any money during the quarter. So, what really happened. If the world of accounting had been better known to Mark Twain, he might have altered his famous quote to suggest that there are, “Lies, damn lies, and accounting.” Accounting is one of those things that seems like it should be straightforward enough. The popular notion is that companies and their lawyers and accountants deliberately obfuscate the truth about their company’s finances. That isn’t entirely untrue, but it is also true that accounting for a large corporation is not simple. Writing Down Goodwill One of the most subjective, and yet, completely legit, parts of corporate accounting is something known as goodwill. Essentially, the idea is that when you purchase a company, you are buying not just the tangible assets and liabilities of the company, but also the “good will” that exists toward that company. The acquiring company gets to count this so-called goodwill as an asset on its balance sheet. Although goodwill is a completely recognized, after all, a company is worth more …

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Economy Slowing? Banks Downgraded

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The Dow Jones Industrial Average fell over 250 points today, while the S&P 500 dropped over 30 points. That is the second worst day of the year for the stock market. So, what happened, lots of stuff… or nothing, depending on how you look at things. Weak Economic Data The U.S. economy has been growing very slowly for a while now. However, the markets seem to keep getting ahead of themselves and forgetting the “very slowly” part. Every time new economic data comes out that shows the economy is indeed only growing at a snail’s pace, the markets get hammered. First up, the Federal Reserve announced it was cutting its growth and inflation forecasts for the rest of the year. Part of this is bad news. After all, the Fed’s growth projections weren’t exactly rosy in the first place. The second part, however, is good news. It means that all of that stimulus out there in the form of low interest rates and bond market maneuvers by the Fed are not causing inflation. Banks and insurance companies are big losers are the news of a worse economy. People cancel insurance when they cut back on spending. In addition, a significant …

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Stock Market Greece Recovery

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The stock market is attempting to stage a recovery now that worries about Greece defaulting and abandoning the Euro have taken a back seat. Recent elections gave the political parties that favor adhering to the conditions of Greece’s bailout the majority of seats and a solid chance at putting together a coalition government. However, Greece isn’t the only issue out there. Recent employment numbers have not been stellar and few companies are issuing what would be called “enthusiastic” guidance for the coming year. The result is an odd stutter-step market that today (June 18) gave us a mixed day with the Dow slightly down and the S&P 500 slightly up. In the long run, the last few months of market action have been good. Runs in the straight up direction seldom end well. This period of consolidation even had some new outlets using the term correction, which is enough to scare off the faintest of heart investors that are often the cause of so much volatility. For long-term investors the fundamentals today are no different than they were a few months ago. The economy is growing, but slowly. Europe is being held together, but barely.

Facebook IPO Securities Fraud?

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We talked recently about the Facebook IPO flop. Now, things are starting to maybe look a little bit worse. According to several news websites, including the Wall Street Journal, there may have been some forbidden communications between Facebook, its major bankers, and subsequently, between those banks and their clients. It seems that during the Facebook IPO roadshow, Facebook disclosed, in more detail than in their amended S-1 filed with the SEC, that their earnings were rapidly declining due to the fact that a large part of their user base was shifting to accessing the Facebook service via mobile devices instead of online. The difficulty is that there is no room on most smartphones to put up the ads that populate the right side of the screen on a full desktop computer or laptop computer. As such, Facebook generates almost no revenue from mobile users. If more users access Facebook without generating revenue that is a double whammy. More users equals more expense, but not more revenue. None of this necessarily adds up to trouble for Facebook, other than those disclosures made in private. All material information must be disclosed publicly both about a publicly traded stocks and those about to …

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Facebook IPO 2012

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After years of speculation, rumor and guesses as to whether Facebook stock is a good investment at all, the company has finally announced plans to go public. Facebook will trade on the NASDAQ under the ticker symbol FB following its IPO. Like many other technology IPOs of late, this offering will leave CEO and founder Mark Zuckerberg in iron-fisted control of the company. He’ll control approximately 57 percent of the voting power in the company after it goes public, leaving shareholder lawsuits as the only chance for investor control. The company indicated and initial public offering range of $28 to $35 per share. This would value the company somewhere between $77 billion and $96 billion dollars, which is close to many technology pundit’s wishes of a $100 billion valuation. Regardless, of where within that range it prices, Facebook will be the internet IPO ever. With a $100 billion valuation, Facebook would be close in market value to long established technology companies such as Amazon and Cisco. The IPO would raise something in the $11 to $13 billion dollar range, although the company will only get half of that. Investors in the company are cashing in a big pot of chips …

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Apple Earnings Good or Bad?

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Apple reports earnings on April 24. This report is actually for earnings from the 2nd quarter of Apple’s fiscal year, even though corporations on a calendar year are reporting first quarter earnings right now. (Several tech companies reported earnings last week.) After a rough week for the company in the headlines, these earnings will likely be used as a gauge for the short-term future of Apple stock. Recently, Apple has been the subject of legal action from the Justice Department regarding alleged price-fixing for ebooks. Although this makes up a tiny portion of Apple’s revenue, it is a major key in how the Apple store works. If there is a problem with this model for books, there could conceivably be issues in other markets as well. What is not in doubt is that Apple will continue to dominate the tablet computer market and that its prolific iPhone will continue to be a huge player in the smartphone market. There is little doubt among analysts that things in the marketplace look good for Apple in both the short and long-term. In fact, the only real question about Apple stock these days seems to be whether the company’s shares have risen too …

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Tech Earnings Week

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This past week featured the earnings release of several major technology companies, coming closely on the heels of major earnings announcements from other tech companies, including Google and Apple. IBM Earnings First up, IBM reported revenue of $24.7 billion leading to earnings of $2.78 per share. The consensus estimates from analysts were a bit higher for revenue, but a bit lower for earnings per share. The company did raise its full-year earnings guidance, but it wasn’t enough. Investor reaction wasn’t pretty with shares dropping 2.4 percent the following day, and continuing down. The technology giant closed on Tuesday before reporting earnings at 207.31 and closed Friday at just 199.55. IBM’s results have also been blamed for the general downward direction of the markets for the end of the week. Still, IBM has a long history of boosting its share prices, primarily by buying back enormous amount of stock each year. Intel Earnings Intel’s earnings didn’t make investors any happier. The stock has had a pretty good run-up as of late, so anything other than a gangbusters quarter was likely to lead to a poor reaction. Intel shares got it. The stock closed before earnings on Tuesday at 28.48, but finished …

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IBM Share Repurchases Continue

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Just got the 2011 IBM annual report. It never ceases to amaze me how much money this company puts into share repurchases, rather than actual dividends. For 2011, the company boasts that they were “… able to return $18.5 billion to you,” the shareholder. Of course, a paltry $3.5 billion of that was actually returned to shareholders in the form of a dividend. The remaining $15 billion went into buying back shares, which does a lot more to make it easier for executives to meet various per share bonus targets than it does to enrich shareholders. Theoretically, shareholders benefit from fewer outstanding shares, but I bet most shareholders would have benefited more from a triple-size dividend payment. Any way, this is par for the course for IBM which spent $15 billion in 2010 and 2011, and $7.5 billion in 2009 buying back its stock. And, it isn’t done, yet. The board has already authorized the repurchase of $8.66 billion more stock, and there is little doubt the board will approve a new $15 billion or more in share repurchase authorizations for 2012. As a shareholder, you must factor this into your investment. Your dividend will be substantially lower than it should …

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Apple Stock Paying Dividends

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Apple (AAPL) announced that after years of building up a massive pile of cash with its record earnings that it will begin to return some of that money to shareholders. Apple will pay a quarterly dividend of $2.65 per share starting in July. It will also repurchase up to $10 billion in stock over the next three years. So, what does this Apple announcement mean for the stock and for the company? Apple Dividend At first blush, Apple’s announced quarterly dividend seems very large. But, how much is Apple’s dividend? It works out to $10.60 per year. That’s higher than most companies pay out in dividends. However, remember that Apple’s stock price is much higher than most companies. The stock currently trades around $600 per share. That makes the dividend approximately 1.8 percent, which, while respectable, is nothing to write home about. Why did Apple announce a dividend now? There are several reasons that Apple has finally decided to start paying a quarterly dividend after refusing to do so for years. First, and foremost, is that Steve Jobs is no longer around. Apple’s iconic CEO had the street cred to tell people, “No dividend,” no matter how high the companies cash balance got without …

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