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Re: Apple and Thunderbolt 3

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Tim Wilson
Re: Apple and Thunderbolt 3
on Apr 29, 2016 at 6:34:11 pm

[Darren Roark] "Agreed, but calculating the raw parts minus the GPUs the 'dollars to donuts' profit margin is huge.
"


I just looked it up: 69%. Compare that to 40%-ish company wide and it's clear who's carrying the freight, which is why declining iPhone sales dropped Apple's stock value by $40 billion in a single day.

I'm not sure that counting margins against list prices is fair. Somebody's paying Apple for the iPhone you got "for free," but I'm paying $7/month as thanks for my long standing VZW account -- going back to roughly 1987, before the name Verizon even existed!!!! -- so the whole of it ain't coming directly out of my pocket. Not even close.

(This is why I have no interest in changing carriers, btw. On top of the best coverage, when I ask for something, they JUMP, even though it's just 2 phones on the account, and we're by no means massive data users or anything. I think once you get your 25 year pin and are staring hard at the 30 year pin, they've already bled you pretty well dry. LOL)

Anyway, Apple is reporting these as gross margins, which they are, so that's all good -- my point being that there might be a bigger gap between gross and net than they're letting on to anyone who's not sitting in front of a spreadsheet.

Whereas I am sitting under a bedsheet. LOL Big difference.

But the fact is that even gross margin is down. Check this chart from the Fool, who a) I don't trust as far as I can throw, and b) is insanely on bullish on Apple even after posting this chart:



Apple's not in trouble or anything like it, but pretty much everything is down, except for a $6 billion first year for Apple Watch. (Not bad for a first year, not bad.)

Here's what's crazy: it costs $81 to build an Apple Watch, and the entry level model goes for $349...for a profit margin of....drumroll please....SEVENTY SEVEN PERCENT.

But wait! There's more! The average Apple Watch sale is north of $500! So $81 into $500, and we get....brumpumpump....EIGHTY FOUR PERCENT!!!!

Dude. 84% is in the neighborhood of like, movie concession stand soda pop. That's INSANE.

So, yeah, $6 billion is a nice start...but a little better than $5 billion is NET PROFIT. Dollahs in the pocket.

This is well on its way to becoming the success I predicted it would be. I feel obliged to mention this because it happens so rarely. LOL

But it's sobering that iPhone at 69% and the watch at 80%+/- isn't enough to pull company-wide margins over 40%.

Well, "sobering" is relative. Most companies would do, uhm, even worse things than they're already doing for a 40% margin.

BTW, how's Sammy doing? Samsung's clocking 39% gross margins with a business that includes a much more diverse product line. Hardly the slam-dunk for Apple typically proclaimed, especially with the new Galaxy phones up YoY, exceeding projections for both sales and profits. They're in no danger of passing Apple, but still.

Any guesses the gross margin over there at Alphabet? Bueller? Bueller?

22%.

TWENTY TWO PERCENT.

Which is why I hate Wall Street, and refuse to invest in individual stocks. U ppl are kvetching because Apple didn't meet ur expectations? Boo-pooping-hoo. Go back to counting your billions and stop picking on those poor babies at AAPL.

That's why I'm not trying to spread my risk with mutual funds. I'm trying to insulate myself from jackasses to the extent I can. And it's not easy, I assure you.

Of course, one could have been holding Adobe where all the kvetching hasn't pumped the brakes any at all, trading about a buck under its all-time high. A kvetch-proof stock? Hmmm, tempting, tempting, but I'd still be betting head to head against idiots with knives out. No thanks. LOL

Say, what's Adobe's gross profit margin? 85%.

Well alrighty then. LOL You could say, "Well hey, oranges to AAPL. Adobe is software only," and you'd be right...but with a profit margin that looks more like Facebook (also 85%) than the GOOG's mommy and daddy at 22%, that there looks like WATERMELONS to oranges, three of 'em right in a row across the middle of the dial.

ANYWAY....I think it's very easy to overstate Apple's margin-heaviness...but even at "ONLY" 40%, it's so weak that it should be dropping 9% in a day and down over 30% from its 52 week high? Srsly?

You know what'd fix this molto pronto? Thunderbolt 3. LOL All AAPL's troubles would vanish in a poof of butterflies and rainbows.


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