On January 2, Apple issued a letter to investors that negatively pre-announced its 4Q results. We analyzed the text of the investor letter using our NLP model to help address four specific questions beyond the basic headlines that all market participants surely know by now.
Please note: This in no way represents investment advice. All transcript text provided by S&P Global Market Intelligence.
Applying Amenity Analytics’ NLP model and its hundreds of event classifications, we were able to quantify the tone of the investor letter vs recent earnings calls. The text of the letter registered an Amenity Score of -36, vs the Q4 transcript at 48 and its average over the last 2 years of 60.
"Our business in China was very strong last quarter. We grew 16%, which we’re very happy with. iPhone, in particular, was very strong double-digit growth there."
"China's economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China's smartphone market has been particularly sharp."
We often find cracks in management confidence by looking at our “Deception” analysis, where our text analytics identifies 10 linguistic patterns (“Events”) that may indicate evasive language, attempting to spin a negative, tension with the analyst community, etc.
The Q4 earnings call showed 8 events highlighted in our “Deception” analysis, which was flat compared to the 8 events captured in Q3. Next, we looked at what topics on the Q4 call triggered those events, and found that answers relating to Emerging Markets, Guidance Assumptions, and the removal of iPhone unit disclosures accounted for 7 of the 8 “Deception” events:
Emerging Markets: 3
Guidance Assumptions: 2
iPhone Unit Disclosure: 2
New Product in Health Market: 1
This speaks to the value of the unscripted Q&A sections of the quarterly earnings calls, and we will be focused on the Q1 earnings call when Apple is inevitably posed these types of questions: Was it a coincidence that you decided to withdraw iPhone unit disclosure one quarter before iPhone demand fell off a cliff?
In our December 11th post, we highlighted the disconnect between bullish commentary from the MedTech sector and macro and tariff risks in China. Will the tone be different at next week’s J.P. Morgan Healthcare Conference?
"We’re working through this U.S., China trade disputes. It’s very important to us that be resolved for lots of reasons. But from a market point of view, at least so far, we’re seeing a robust market environment as the government continues to invest in cancer services."
"The Chinese situation possible has some effect linked to the broader trade dynamics in China, but we have a robust overall global franchise in TA and expect that to bounce back in Q4."
"...the overall view of China was very positive for the quarter. And as we look at next year, I think Bob and I were talking about this earlier. We’re guiding – embedded in our guidance assumptions is high single-digit growth in China for next year. And despite all the noise that’s out there, what’s really happening on the ground is a lot different."
"The war on terror between U.S. and China has had minimal impact on our growth in China and we don’t expect that to change"
"Our China BSI order rates in the last 3 quarters have been quite robust. Year-to-date,through the third quarter, we’ve not seen any significant impact from the trade dispute between China and the U.S. on our financial performance."
"You’ve seen tremendous strength in our China business to this point. I mean, China was up double digits in the third quarter, and it was the seventh consecutive quarter of double-digit growth for us. So right now, we feel pretty good about where we are in China, but there’s certainly room for a little bit of caution relative to any, as I said, second derivative impact on growth coming out of those markets."
We used Amenity Viewer’s Query Insights tool to quickly scan for supporting or contrasting comments from other companies in the smartphone ecosystem.
"The thing that is noticeable is that it’s across all regions, so we are seeing weakness in China smartphones, Korea smartphones, North America smartphones."
"Combining TDDI and discrete smartphone driver, our Q4 sales into the smartphone market is expected to grow more than 20% sequentially."
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Transcript text provided by S&P Global Market Intelligence.
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