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Instant View: Apple shares slide, Netflix jump after profit reports
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(Reuters) – Apple Inc narrowly missed Wall Street’s targets for sales of its iPhone, denting investors’ faith in the tech leader’s capacity for boundless growth and sending its stock down 5 percent after hours.
Meanwhile, online movie rental firm Netflix Inc posted an unexpected quarterly profit on the back of a surge in subscribers, helping its stock up more than 25 percent.
The following are immediate comments from analysts and investors.
SHANNON CROSS, ANALYST, CROSS RESEARCH
“Any time a company does $54.5 billion worth of revenue in a quarter it can’t all be bad.”
“The reaction in the stock is iPads were a little bit lighter, and you would have thought given what Macs did, that you would have had higher iPad results. So to some extent it shows that people are taking their available dollars and putting them towards smartphones.”
“Gross margin trajectory looks fine so that’s a positive and cash continues to grow. But I think investors are going to want to know what Apple plans to do with a growing cash balance.”
“And other questions going to be around innovation and where the next product’s coming from and what does (CEO) Tim Cook see in the next 12 to 18 months.”
“These results were OK, but they definitely raised a few questions. I think what investors are going to watch for is commentary on gross margin progression and how much in the year on year decline in gross margin had to do with startup costs in the refresh cycle they’re doing.”
TRIP CHOWDHRY, ANALYST, GLOBAL EQUITIES RESEARCH
“Apple will need to innovate. It has two or three product lines that are doing OK. But they need to come up with new phones and get the innovation going. The iPhone is coming toward the end of its life and they need a completely new device soon – in months not years.”
“For Apple to renew growth they need to come up with new devices and form factors and completely amaze the world again. That’s what’s missing. You need a very compelling phone to replace your current iPhone.”
“Their strategy has to be more user-centric. They had a few missteps with software, for instance maps. They also launched the Mountain Lion operating system with bugs. Apple cannot afford to have those missteps.”
“But the quarter was very good. They guided at $52 billion and came in at $54 billion. They also beat on EPS and guided higher. I think the stock is over-reacting on the downside. But they need to reinvent.”
MICHAEL CORTY, ANALYST, MORNINGSTAR
“The fourth quarter numbers were stronger than I expected. They beat in a big way on the EPS line. The shorts are getting squeezed. If you’re betting the stock’s going down you’re getting your head handed to you today.”
“In some of these (content) deals they’re overpaying. I’d say Disney is part of that.”
“For now the domestic margins have improved. Looking out longer term my fear is that greater competition is going to put a cap on the margins in the domestic business.”
BARTON CROCKETT, ANALYST, LAZARD CAPITAL MARKETS
“They did surprisingly well with subscriber growth and profitability. It was a very good quarter.”
“The guidance is for flat sequential net income. That’s OK. They’ve been guiding for breakeven now they’re talking about continuing the profit they had in the fourth quarter.”
“They’re making money but they’re still a growth company so they’re burning cash. If you were going to be skeptical that’s the one thing that you could be skeptical about.”
“I think their plan is to spend more on content. I don’t think they need to spend more on content domestically. I think they’re spending enough to have a good service.”
BRETT HARRISS, ANALYST, GABELLI & CO
“The results were very good, they beat expectations across the board. There was margin expansion on the domestic and international streaming side and the domestic DVD business was more profitable than expected. Overall it was a great quarter and guidance was very strong.”
“Moving forward, they can continue to grow subscribers at the rate they’re going, and they should be strong enough to support the Disney contract. At worst they should be able to cancel other contracts if they can’t support it moving forward.”
(Reporting By Sinead Carew, Atossa Abrahamian, Alexei Oreskovic, Alistair Barr.)
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