Today, Apple announced quarterly profit of $13.1 billion along with 28% sales growth in iPhones and 48% more iPads, its two biggest products. And in return, the market punished their stock with a 12.4% drop.
Apple announced that it has sold 47.8 million iPhones, but the market wanted 50 million, triggering analysts and news media alike to yet again question whether Apple could make it without Steve Jobs.
Do the Math
Problem is Apple, who plays in the highly competitive technology space with only $150 Billion in revenues is somehow valued higher than Exxon, a company with $486 Billion in revenues in a recession proof, almost monopolistic business. That’s not right folks.
If Steve Jobs were alive today:
- He wouldn’t have launched any new earth shattering products
- He wouldn’t have been able to talk his way out of this hit
In order for Apple to continue its sales growth for the next 5 years it would need to grow 47%! That is their historical 5 year growth. It happened because they literally invented new markets, and capitalized on them.
Without inventing something else revolutionary, they will continue to build boring, loveable products. But they can’t possibly grow that much again.
Bring the Pain
Assuming an average iPhone earned Apple $500, and rounding up sales to 48 million, that means they were short about $1 Billion in revenues from the shortfall in sales. But Apple’s 12.4% drop equated to a $60 Billion valuation hit.
Make no mistake, today’s adjustment had nothing to do with this quarter’s earnings. It had everything to do with the market realizing there is no quick fix for Apple’s change from a market creation machine to a normal technology company that once had a few good ideas.