http://www.bloomberg.com/news/2012-10-25/amazon-posts-loss-as-livingsocial-stake-loses-value.html?cmpid=yhoo
( Amazon had a bad day..... )
For a company that recently had a $600 billion market cap, for which scale is everything, and for which every sentence begins with "if you exclude its cash, its multiple is" two things have to be consistent: it has to keep growing its cash, and said growth has to be proportional to the firm's scale. For Apple, in Q3 the first condition was satisfied... but just barely. Total cash and equivalents did rise from $117.2 billion to $121.3 billion, but the rate of sequential increase, which was only $4.1 billion, was the slowest increase in cash and equivalents since March 2010, when Apple's total cash load was a far more modest $41.7 billion, as was its market cap. While AAPL continues to be a growth juggernaut, in its pursuit to appease Wall Street with dividends and other gimmicks, is it starting to lose the big picture, which is and always has been about generating cash flow? And how long until the organic growth to cash generation is not even enough to cover the dividend outflow? What happens if and when AAPL actually has cash decline in one quarter? Finally, is it time for the infamous Braeburn Capital to show Simon Potter who truly is boss?
After some significantly volatile after-hours action, the wunderkinds of the Nasdaq have reverted back up to their VWAPs as all is well once again and the media narrative can play out... AAPL volume is not heavy (remember we said option-skews were near-record levels - implying everyone and their mum owns downside protection and will be unloading into the open tomorrow). QQQs are suffering more than AAPL for now - implying that's where the hedges went. AMZN's move was even more impressive wrigging back up to VWAP. Who is the marginal buyer here? As we post, both are leaking back from VWAP's safe harbor...
Submitted by Tyler Durden on 10/21/2012 21:05 -0400
( Amazon had a bad day..... )
Amazon.com Inc. (AMZN), the world’s largest online retailer, reported revenue that missed analysts’ estimates and posted the first quarterly net loss since 2003, hurt by higher expenses and its investment in LivingSocial.com.
The third-quarter net loss was $274 million, or 60 cents a share, compared with net income of $63 million, or 14 cents, a year earlier, the Seattle-based company said in a statement. Sales rose 27 percent to $13.8 billion, compared with the $13.9 billion average analyst projection compiled by Bloomberg.
Chief Executive Officer Jeff Bezos is opening 19 fulfillment centers worldwide to offer speedier delivery to customers during the holiday shopping season, contributing to a 28 percent increase in operating expenses. Amazon also boosted spending on technology and content by 55 percent as it added video streaming and released new Kindles.
“Amazon is spending a lot to gain market share,” saidSucharita Mulpuru, an analyst at Forrester Research Inc. (FORR) “They’re obviously, as they call it, investing in the business -- everyone else would call it losing money.”
Amazon shares slipped 1.3 percent to $220 in extended trading following the report. Before the announcement, the stock had lost 2.4 percent to $222.92 at the close in New York, and has gained 29 percent so far this year.
LivingSocial Loss
Amazon’s third-quarter loss includes a charge of $169 million, or 37 cents a share, related to its stake in daily-deal website LivingSocial, which lost value as consumers and retailers soured on Internet coupons. Amazon invested $175 million in the coupon service in 2010, which means it has since lost 95 percent of its value, data compiled by Bloomberg show.
“Daily deals has been struggling,” said Daniel Kurnos, an analyst at Benchmark Co. in Boca Raton, Florida. “LivingSocial is going to need to re-accelerate their marketing expenses to keep the status quo.”
Excluding the impact of LivingSocial, Amazon had a loss of 23 cents, exceeding the 8-cent loss predicted by analysts, according to data compiled by Bloomberg. On an operating basis, the third-quarter loss was $28 million, less than the average analysts’ estimate for a $42.1 million loss.
Fourth-quarter operating income will range from a loss of $490 million to a profit of $310 million, compared with analysts’ projections for $354.1 million in profit. Sales will be $20.3 billion to $22.8 billion, while the average estimate is $22.8 billion.
Broad Investment
Amazon is investing across the company to support a larger volume of products sold on its site, Tom Szkutak, Amazon’s chief financial officer, said on a call. That includes technology, such as the new Kindle devices it rolled out last month, and content deals -- like the one with pay-television channel Epix in September -- for its streaming video service. Fulfillment and server maintenance for its Web services business are also factors, he said.
“Those fulfillment centers don’t have the productivity until sometime in the future,” he said. “Two of the primary drivers of both are capacity-related. We’re adding a lot of infrastructure-related costs -- our fast-growing web services business, also to support the growth of our retail business.”
Amazon has reported an operating margin of less than 2 percent for the last five quarters, according to data compiled by Bloomberg. The company is valued at 254.5 times earnings, the highest of any in the Standard and Poor’s 500 Index, the data show.
“Amazon has the lowest operating margin and the highest valuation in our technology company coverage,” Colin Gillis, an analyst at BGC Partners LP in New York, said in a note to clients today. “The company is not likely to achieve material leverage off its revenue growth as costs associated with investments into its digital platforms build.”
Kindle Push
Amazon unveiled a line of bigger and faster Kindles that range in price from a $69 ad-supported reader to the $599 top- of-the-line Kindle Fire HD tablet. The new devices are competing in a tablet market expected to reach $63.2 billion this year, according to researcher NPD DisplaySearch.
The e-commerce company is facing escalating competition from competing devices. Google Inc. announced the Nexus 7 in June, Apple Inc. unveiled the iPad mini, a tablet with a 7.9- inch screen, this week, and Microsoft Corp. began selling its Surface tablet today.
and Apple had a worse day and the outlook is grim....
Apple Cash Balance Rises At Slowest Pace In 30 Months
Submitted by Tyler Durden on 10/25/2012 - 17:27Apple
For a company that recently had a $600 billion market cap, for which scale is everything, and for which every sentence begins with "if you exclude its cash, its multiple is" two things have to be consistent: it has to keep growing its cash, and said growth has to be proportional to the firm's scale. For Apple, in Q3 the first condition was satisfied... but just barely. Total cash and equivalents did rise from $117.2 billion to $121.3 billion, but the rate of sequential increase, which was only $4.1 billion, was the slowest increase in cash and equivalents since March 2010, when Apple's total cash load was a far more modest $41.7 billion, as was its market cap. While AAPL continues to be a growth juggernaut, in its pursuit to appease Wall Street with dividends and other gimmicks, is it starting to lose the big picture, which is and always has been about generating cash flow? And how long until the organic growth to cash generation is not even enough to cover the dividend outflow? What happens if and when AAPL actually has cash decline in one quarter? Finally, is it time for the infamous Braeburn Capital to show Simon Potter who truly is boss?Apple Disappoints
Submitted by Tyler Durden on 10/25/2012 - 16:33Apple
And so the behemoth misses... again:
- APPLE 4Q EPS $8.67, EST. $8.75 - miss
- APPLE 4Q SALES $36.0B - slight beat
- APPLE SOLD 14.0 MILLION IPADS DURING QTR, UNIT EST. 15.3M
But the uglyness is in the forecast. And this time it is not a low-ball:
- APPLE SEES 1Q EEPS $11.75, , EST. $15.49
- APPLE SEES 1Q REV. ABOUT $52B, EST. $55.07B
Stock halted so keep an eye on the QQQ as a proxy - QQQs imply AAPL $590 here (200DMA is $587)... AAPL will resume trading at 4:50ET
After Retracing All After Hour Losses, AAPL And AMZN Resume Downward Direction
Submitted by Tyler Durden on 10/25/2012 - 17:10NASDAQAfter some significantly volatile after-hours action, the wunderkinds of the Nasdaq have reverted back up to their VWAPs as all is well once again and the media narrative can play out... AAPL volume is not heavy (remember we said option-skews were near-record levels - implying everyone and their mum owns downside protection and will be unloading into the open tomorrow). QQQs are suffering more than AAPL for now - implying that's where the hedges went. AMZN's move was even more impressive wrigging back up to VWAP. Who is the marginal buyer here? As we post, both are leaking back from VWAP's safe harbor...230 Hedge Funds Suddenly Cried Out In Terror And Were Suddenly Silenced
Submitted by Tyler Durden on 10/25/2012 - 16:46Google
A week after the second most populous hedge fund hotel, Google, blew up, it is now time for good ole' Hotel Caaplefornia itself. The HF holders table below is presented without comment (as we have said all there is to say many times).Remember: orderly, cool, calm, collected single file procession through the tight exit: and nobody panic!
and Google and IBM ( BTW , recall when Microsoft , Intel and Oracle were part of the wondrous four horsemen ) .....
http://www.zerohedge.com/news/2012-10-21/q3-earnings-season-date-summary-ugly-and-getting-worse
Q3 Earnings Season To Date Summary: Ugly... And Getting Worse
Roughly one third of the S&P has reported earnings so far, with another third reporting in the next five days and almighty AAPL on deck Thursday evening, and if there is one word to describe what has happened so far, that word would be "ugly." The same word would be used to describe how Q4 is shaping up to be. And that word will be very a optimistic prediction of what 2013 will bring unless a major catalyst develops that pushes Congress to resolve the fiscal cliff situation. So far that catalyst is missing. But going back to Q3 earnings, here is how Goldman's David Kostin summarizes events to date: "3Q reporting season is roughly one third finished. Two early conclusions: (1)Information Technology results have been startlingly weak with high-profile revenue disappointments by the four horsemen: MSFT, GOOG, IBM, and ORCL. (2) EPS guidance for 4Q has been overwhelmingly negative across all S&P 500 sectors with 18 of 20 firms lowering 4Q earnings guidance by a median of 5%.Analysts have lowered 4Q EPS estimates for stocks already reported by 0.4%. We expect further EPS cuts of 6% loom ahead. Firms reporting next week: AAPL, T, PG, MRK, CMCSA, AMZN, COP, AMGN, OXY, MO, UTX, MMM, CAT, DD, and FCX." Sorry Bob Pisani, better luck spinning earnings favorably next QE.
More detail on what is shaping up as the ugliest earnings season (even with DVA and loan loss-reserves included) in years:
Two early conclusions from 3Q earnings season: (1) Information Technology top-line sales results have been weak lead by MSFT, GOOG, IBM, and ORCL. Since the start of 3Q reporting season, analysts have cut 4Q sales forecasts for those Information Technology firms reporting results by 70 bp, lowered margin forecast by 43 bp and cut expected EPS growth by 260 bp. (2) Earnings guidance for 4Q has been overwhelmingly negative across the S&P 500 with 18 of 20 firms lowering 4Q earnings guidance by a median of 5%. Analysts have lowered 4Q EPS estimates for stocks already reported by 0.4%. We expect reductions of perhaps 6% still need to take place.The distribution of 3Q results has been lower than the historical average. 117 firms in the index have now reported 3Q results (34% of total cap). 37% of companies beat earnings estimates and 21% missed. In a typical quarter, 41% of companies exceed EPS expectations and 13% miss.The bar for 3Q earnings season is very low. First, 2Q results disappointed with twice as many revenue misses and one half as many beats compared with a typical quarter. Second, guidance heading into reporting season was more pessimistic than usual with 80% of firms guiding below consensus compared with prior quarters when the midpoint of guidance falls below the average analyst estimate roughly 67% of the time. Third, analysts slashed 3Q earnings estimates by 5% during the quarter, leading to the expectation that 3Q 2012 would witness a 1% year-over-year decline in EPS versus 3Q 2011.
Sales are disappointing again in 3Q with year/year growth of just 2% and negative surprises of 30 bp. 15% of firms beat consensus sales expectations by more than one standard deviation (below the historical average of 35%). In addition, 36% of firms have missed sales estimates by that magnitude, versus 19% historically. Revenue estimates for 4Q have declined by 30 bp.
Margin of 8.6% is slightly below the expectation at the start of earnings season (8.7%) and represents a
year-over-year decline of roughly 33 bp. Information Technology results have been particularly disappointing. Microsoft (MSFT) and Google (GOOG) missed revenue and earnings estimates and IBM and Oracle (ORCL) missed sales estimates. The sector actually posted a nearly 1% positive surprise in revenue relative to analyst expectations. However, analyst methodology for forecasting financial results for certain Information Technology companies differs from the Standard and Poor’s definition of revenues and operating earnings.
Apple reports on Thursday evening. Consensus expects the company will grow 3Q EPS by 28% versus last year. AAPL sales are forecast to rise by 31%. Consensus expects margins will fall by 46 bp to a still stellar level of nearly 23%. Analysts expect AAPL will be the second largest contributor to S&P 500 earnings representing 3.7% of 3Q 2012 EPS and 20% of Information Technology earnings. AAPL represents 4.5% of S&P 500 equity cap and 24% of the Information Technology sector. While Apple’s share of 3Q EPS is not in proportion to its share of market cap, this appears to be a seasonal issue. Next quarter, consensus expects AAPL will contribute 6% of S&P 500 EPS. Information Technology sector is expected to grow 3Q earnings by 7% year/year. However, the sector earnings growth is just 3% excluding AAPL.
Managements are lowering guidance, indicating downside to 4Q EPS. Fully 20 companies have provided 4Q guidance following their 3Q earnings announcements and 18 of these firms have reduced 4Q profit guidance. The midpoint of guidance was below the mean consensus estimate in all but two cases. Although guidance tends to be downbeat, this is especially negative.
4Q EPS estimates for reported companies are down by just 40 bp. We expect further negative 4Q EPS revisions will occur most likely as a result of reduced margin estimates. We forecast full-year 2012 S&P 500 earnings of $100 per share. Assuming no change in 3Q EPS, 4Q estimates would have to fall by 6% to reach our full-year estimate.
Next week 160 firms representing 31% of S&P 500 market cap will report results. At the sector level, 41% of Health Care, 39% of Industrials, and 35% of Information Technology as measured by market cap will release results. Large companies reporting include: AAPL, T, PG, MRK, CMCSA, AMZN, COP, AMGN, OXY, MO, UTX, MMM, CAT, DD, and FCX.
And the purdy charts to go along with the narrative:
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