Wall Street has never really understood Apple. Is that Wall Street's problem or Apple's? Depends how you look at it and what you want. It's in everyone's best interests, though, for Apple and Wall Street to get on the same page. Not the short-sighted, gambler's paradox, always doomed narrative Wall Street seems fixated on. And not the leave-us-alone-and-just-count-your-money reality Apple would probably prefer. But, a reasonable narrative everyone can get behind.
With Apple recently announcing it was going to stop reporting unit sales, and the tizzy that was set off around that, Neil Cybart thinks it will set up a new way forward:
From Above Avalon:
Apple's narrative problem was relatively straightforward: The key variables management focused on in earnings releases and conference calls weren't sustainable. By placing an emphasis on unit sales, the inevitable slowdown in unit sales growth for its largest product categories posed a problem for Apple.Forcing Wall Street to move beyond unit sales and focus on revenue and gross margins isn't about driving home a Services narrative for AAPL shares. Instead, it's a big step in elevating a capital allocation narrative. Compelling tools will lead to strong revenue trends and margins, which support attractive free cash flow and consequently more cash for buyback and cash dividends. The opposite is true as well with weaker product sales leading to a reduction in cash flow and less cash for share repurchases and cash dividends.
Neil's just about the best in the business at understanding this stuff, so give the whole thing a read.
