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Comment by nemo44x | Hacker News Reader

Exchange rates are killing them. The strong USD is cutting into profits in a major way. With iPad, Mac and now iPhone showing flat (and negative) growth I would expect a fairly flat stock price for the time being. When/If the USD begins to lose value to other currencies I'd call that a good time to consider to build a position in AAPL.

I don't have a position but was hoping for a big win this quarter. AAPL exemplifies a lot of the issues many companies are having because of exchange rates and I do not expect the broader market to do much better for awhile.

Especially with so much foreign debt in USD, a lot of companies are going to have a hard time paying off bonds and loans, hurting their ability to grow.

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> was hoping for a big win this quarter.

The largest quarterly profit ever recorded by any company wasn't enough of a big win? I don't want to soapbox too much, but there is something deeply wrong with capitalism when you can be more profitable than any corporation that has ever existed and it seems like a letdown.

> Especially with so much foreign debt in USD, a lot of companies are going to have a hard time paying off bonds and loans, hurting their ability to grow.

All the tech companies that have had big bond issues recently (Apple, Microsoft, etc.) are doing it because it's literally cheaper than repatriating their actual foreign earnings to the United States. As long as those foreign earnings continue to exist, borrowing money is arguably a better way to finance their day-to-day operations, especially when interest rates don't seem likely to climb much in the intermediate future.

They aren't growing is the problem. But more importantly when you look at their numbers in China you can see the global slowdown. It's bad for all global companies.

As for bonds, I meant by foreign companies. Many bonds have been written with USD which are now becoming painful to payoff as their own currencies are not valued well against the USD.

> As for bonds, I meant by foreign companies.

Ah, I'm sorry, I misunderstood your post. But even so I'm not clear on why the indebtedness of foreign companies affects Apple all that much, except that it's a signal of the health of the global economy.

Growth is a key word; serious investors pay particular attention to current and long-term "prospects"...

Estimation of ROI potential decreases, usually dramatically, when a company is suspected of having plateaued...

> The largest quarterly profit ever recorded by any company wasn't enough of a big win? I don't want to soapbox too much, but there is something deeply wrong with capitalism when you can be more profitable than any corporation that has ever existed and it seems like a letdown.

Of course it can. They didn't meet revenue estimates and advised that the current quarter is going to be much worse than expected. Wall Street [typically] values companies based on future expected earnings and there is constant pressure to increase growth. The same compound math that gives quickly growing companies lofty valuations works in reverse when your revenues are declining.

Revenues aren't declining yet, and their valuation has been significantly depressed for years during rapid growth.

Apple continues to do the smart thing given the situation: buy AAPL.

Are you suggesting that the smart move for Apple is a stock buy back?

As opposed to investing in more R&D? Or, perhaps acquiring start ups with exciting new products or technologies?

When you have $200 billion dollars lying around, you can do multiple things simultaneously.

When you have $200 billion dollars lying around and your business is dramatically undervalued, it would be practically criminal not to buy some of it back, to save on dividend payments if for no other reason.

> When you have $200 billion dollars lying around and your business is dramatically undervalued, it would be practically criminal not to buy some of it back, to save on dividend payments if for no other reason.

Who's to say Apple is undervalued? It's one of the most widely held companies and they have been so for several years. Tim Cook doesn't know what's going to happen in China. Their US sales were down in Q4 2015 and they are forecasting global sales to be down in Q1 2016. They may have been spending billions buying back shares at an all time high.

It's hard to imagine a scenario where Apple has peaked. Even replacement sales would sustain a healthy business, and they have extremely high satisfaction and retention rates.

People value what Apple offers. A global depression could hurt the company badly. Anything short of that should allow them to keep making money. A bad Apple quarter is still lots and lots of money.

> It's hard to imagine a scenario where Apple has peaked. Even replacement sales would sustain a healthy business, and they have extremely high satisfaction and retention rates.

It's not that hard, their largest growth market (by far) is a huge question mark. It's tough to rely on a single product that is expected to be replaced every year. There will be a ton of pressure on the iPhone 7.

Apple's services revenue is growing every year. As long as their installed base keeps growing or even remains stable they can make money off of their existing customers. They aren't in the position of other phone manufacturers or computer manufacturers - with decreasing margins and only being able to make money at the point of sale.

It was reported that the average selling price of iPhones was up by $3 and would have been up by $80 if it weren't for currency fluctuations.

>your business is dramatically undervalued

You must know something that millions of other sophisticated people don't.

2008, Apple was trading at $12 (split-adjusted) and nearly every careful observer of the company knew that was stupidly low based on the trajectory of the iPhone.

Relying on the stock price as a valid indicator of the value of a company is a fool's errand, regardless of the "sophisticated people" trading it.

Well Apple dont need to pay dividends, it never was a dividends stock until recently. The whole notion of buying back stock just to save a few dividends sounds silly to me.

I really wish someone enlighten me why, why spend 183 billion on share buyback and dividends when it has nearly no use for the stock price, and no real use for the company long term etc.

For employees and to take the company private again

Apple bought 10 companies last year mostly small companies. The age of spending money buying large companies and creating non focused conglomerates is dead.

GE, for example, has been busy making itself smaller over the past couple of years. Google split itself up to become more focused and Sony just announced the creation of a separate PlayStation division.

GE is imploding from what I can tell. Their medical imaging and drug systems are an absolute shambles. Staff are walking out and not coming back. They aren't controlling what's happening, they are in some sort of death spiral as far as I can tell. Australasian former GE customer here.

They said today that revenues are going to be down in Q1 2016 and they haven't done that since 2003.

Buybacks may or may not be smart. They bought a ton of stock last year when the shares were 20% higher than today. That's a rather expensive way to make your EPS.

Revenue estimates are made by people who don't actually know how the business works or what the facts are. Why do you put such faith in their meaning?

For not knowing how Apple's business works they sure got close! It was on the low-end of Apple's guidance as well, are you sure Apple knows how Apple works? What about the downgraded estimates for Q1?

I put faith in their meaning because Apple is valued based on them.

Apple's value is not based on them. Apple's short term stock price is affected by them, but you only have to look back over the past couple of years to see that the price doesn't reflect the value.

> They didn't meet revenue estimates and advised that the current quarter is going to be much worse than expected.

I do find it fascinating how the market works to adjust to new knowledge. The expectation or estimates of someone may not even have a bearing on what actually will happen.

You could almost see it as a delusion suffered by someone to have an estimate/expectation - as it will never be exactly reality - but it turns into an actual market event.

The largest quarterly profit ever recorded by any company wasn't enough of a big win?

I used to think the same thing, but realized I was looking at it incorrectly.

A companies stock prices has a certain level of earnings growth built in. If future sales don't hit those assumptions, then stock falls.

Yes, the biggest quarterly profit is great, but that's yesterday's news. The market is always looking forward.

>I don't want to soapbox too much, but there is something deeply wrong with capitalism when you can be more profitable than any corporation that has ever existed and it seems like a letdown.

Why is this a surprise, let alone a knock against capitalism?

Share price at any given moment is based on available information, meaning the current price is based on expected phone sales, exchange rates, revenue, profits, etc. Those expectations were high going into earnings.

>there is something deeply wrong with capitalism

Really?

Current stock prices reflect the expected future cash flows and the cost of capital.

When new information changes the expectation of future cash flows -- like, say, a quarterly report that indicates growth is slower than estimated -- you'd expect the price to drop.

No one is saying that Apple didn't make a lot of money. No one said they aren't a great company. They're saying "the picture of the future just changed a bit."

So, what's wrong with capitalism? What's irrational here?

The iPhone 6 lists at 459 British pounds which even with the historically low exchange rate is still $100 premium over the US version. Ditto the euro, Australian dollar, etc. It's not such a surprise that they were able to make loads of $$ in foreign markets back when the exchange rates vs USD were much less even.

US shelf prices don't include the sales tax, but UK prices for consumers include VAT. At the current VAT rate of 20%, that's 16⅔% of the price, or about £76.50, which in US currency is… $109.

The entire price difference is VAT.

This is such a horror when shopping in the US. Why bother putting a price tag on things when the price you pay is different. How would a tourist know what the tax is when it changes multiple times over a car journey? It seems archaic.

Because it's the right thing to do you know exactly what you pay in tax which means you are more likely to hold the government accountable for that money as well as being able to actually lobby for lower taxation.

Since sales tax is applied on both state and local government levels it also simplifies pricing both nation wide and even state wide.

Walmart for example sets a price for product A that price is the same across all states (for this example I don't know if Walmart has regional prices to adjust for cost of living but I don't think so).

45 states have sales taxes these come at different rates, about 40 states also allow for local sale taxes meaning that local county can set up it's own additional sales tax this means that the end price is different between states and even within states with local sales tax collection.

As a consumer you know exactly what you are paying if the product costs 100$ then you pay 100$ for that product and you pay additional tax for the sale when you know your state taxes you 8% and your local county taxes you additional 4% you can hold them responsible for what your taxes are being used for, you can lobby for lower sale taxes and you can always move to a jurisdiction with lower sales tax.

The way the sales tax is collected also allows for more convenient exemption from sales tax especially in non B2B purchases a sales tax exemption certificate can be filled at any purchase and they will not charge you sales tax.

You can literally go online print the exemption certificate for your state e.g. http://www.tax.ohio.gov/portals/0/forms/fill-in/sales_and_us... go to a shop pay the sticker price and fill it out and the store will not collect the sales tax on that sale. Compared to how annoying it is to get VAT refunded and just how many caveats there are for getting your VAT back it's 100 times better.

I get how it would be extremely difficult for the US to have the true pricing on items, with sales tax being different even within the same state!!!

In countries, where sales tax is federal and it's a flat 10% everywhere, I'm eternally grateful that I don't have to do mental gymnastics to figure how how much something will actually cost.

There aren't that many countries with sales tax, most of them use VAT which is considerably worse than sales tax as far as tax burden distribution goes.

VAT is added to the price of the goods and is an intrinsic part of their price which means when they are resold VAT affects the final resell price even tho it's only collected on the initial sale. Say a car costs 50K, US uses sales tax Atlantia uses VAT both countries tax at 10% in the US one buys a car pays 50K for the car and 5K in additional sales taxes, a person in Atlantia pays 55K "sticker price" which includes VAT both paid 55K.

Both of them decide to sell the car after 2 years the resell price in both countries is calculated based on 50% of the original sticker price so in the US the car is sold for 25K and in Atlantia the car is sold for 27.5K.

Additionally since sales tax in most us states (iirc all but like 2 or 3) is only applied to tangible goods this means that most services tend also be considerably cheaper to the end consumer than in countries with VAT/GST.

That situation has never really affected me - but then the most expensive thing I've resold is my Macbook.

But when I'm reselling something, I'm looking to capture as much as my cost (how much I paid for it) as possible, including the GST. You could even consider this that I'm just a middleman who is passing on the GST to the 'end consumer'.

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