Impressive, But Not Apple Impressive

Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

This piece is for all the technology guru's out there. Three major tech companies released earnings and you need to know about them. We will see some good, some bad, and some ugly. 

Apple (NASDAQ: AAPL) posted numbers that most companies would kill for in the public market. The company enjoyed profits of $13 billion for the quarter, and sold 28% more iPhones and 48% more iPads - yet shares dropped ten percent after the announcement. Expectations have been so high for Apple after thriving for the past few years and out-performing most other companies that reports would have to be near perfect in order to see the stock react positively. The past few quarters gross margins have decreased, leading to concerns that competitive pressures have caught up. Samsung has released low cost phones, while Apple has not yet matched them (though they might soon). The market is always 'looking forward,' which leads to questions of how innovative Apple can be without Steve Jobs. 

Investors are asking what Apple will do with its excess cash. On the company's call, there was very little talk of anything innovative, which raises concerns about where the money will be spent. $94 billion of the $137.1 billion is held off shore. We know that money won't be brought back into the United States because of taxes.

On Thursday morning, Apple's stock hit one of the lowest points in two years. With arrows being shot at Apple from many different directions, some people believe Apple may be oversold as opposed to overbought a year ago. With as great of a company as Apple is, their stock is tied very closely to people's emotions. Just as quickly as people piled on the band wagon on the way up, they are just as happy to jump off now. Apple seems to be in an expectation league of their own. Being a victim of their own success, reports were impressive - but not Apple impressive.

Kaboom! Did you hear that? It was the sound of Netflix (NASDAQ: NFLX) shooting up with its earnings release. Shares increased nearly 40% shortly after the news. Its been a tough few quarters for Netflix's shareholders watching the stock decrease after earning reports, but not this quarter. With the acquisition deals with Disney and others, this news does nothing but increase the recent momentum the company has built.

Netflix CEO Reed Hastings showed a lot of humility on the call, even referencing recent events as "being out of jail, but on probation." He spent some time trying to make things right for shareholders and customers. Reed built up some credibility with doubters over the process of the call. Netflix hopes to pass the $1 billion in revenues this quarter, with online streaming growing rapidly. If Netflix can become more relevant to its customers, the company should perform very well. Like Apple, Netflix is a very emotional stock - the difference being that Netflix is on the rise.

Nokia (NYSE: NOK) had a mixed day when releasing its earnings. They had some good news, but some devastating news as well. The good news? One year ago's quarter Nokia lost $1 billion, but rebounded this quarter showing a net profit of $270 million. After recent struggles the company is starting to rebound - or is it?

Nokia then announced a 20% decrease in revenues, and they suspended dividends for the first time ever. Steven Elop (Nokia's CEO) said, "We believe we removed the cloud of liquidity concerns." Good for them. Now the only cloud remaining is whether or not the company will be around in five years. 

Jokes aside, Nokia is about a $16 billion dollar company. Happy endings are possible after company's suspend their dividends, but it is certainly not common. For at least the short term, this is not good news. No investor that I know would see this as a good sign for the business. Yes, Ford and GM have done this in the past, and they have lived to tell about it. However, we all knew that the car wasn't going to be phased out by Ford or GM. Those companies just needed to gather their wits and push forward. Nokia, on the other hand, faces the real possibility of having their smart phones phased out. 

The Windows operating system isn't as compelling after seeing what the Android and Apple operation systems have developed into. Nokia's stock has become one to trade, not invest in. Traders might find this stock appealing, but investors likely want to stay away. Nokia is one example of how quickly technology changes - not even a decade ago, Nokia was a market leader. 

The Foolish Conclusion...

When companies release their earnings, stock prices often fluctuate. Some news is good and some is bad. Netflix had great news that investors jumped on. Apple, while showing many good things, had investors selling the stock. Nokia showed a dramatic increase in net profits, but then erased the joy from investors very quickly with devastating news. It will be interesting to see how emotions drive these companies' stocks, and how investors react to news moving forward. For now, Netflix looks to boom, Apple may now be over sold, and Nokia is struggling in some major ways. 


tlwofford has no position in any stocks mentioned. The Motley Fool recommends Apple and Netflix. The Motley Fool owns shares of Apple and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus