Strong earnings should halt Apple's stock slide
iPhone maker reports 94% increase in net profit for Q2
If Tuesday's extended trading session on Wall Street is any indication, Apple (NASDAQ: AAPL) may have halted its recent steep slide in share price thanks to outstanding second-quarter results.
The personal electronics giant reported a 94% increase in Q2 earnings to $11.6 billion, or $12.30 per diluted share, from $6.0 billion, or $6.40 a share, in the year-ago quarter.
Apple shares were up as high as 604.22 in Tuesday after-hours trading, a gain of 7.8% over the regular session closing price of 560.28. Expect similar gains after the opening trading bell rings on Wednesday.
After reaching an all-time high of $644 a share on April 10, Apple's stock fell to as low as $555 earlier Tuesday, a drop of 13.8% in just two weeks. The dip sparked plenty of talk about Apple's stock peaking and slight trepidation about the upcoming Q2 numbers.
Turns out any concerns were unwarranted. For the quarter ended March 31, Apple's earnings easily topped analysts' average estimates of $10.07 a share. The company's quarterly revenue of $39.2 billion -- 58.9% higher than last year's $24.7 billion -- also topped estimates of $36.7 billion. And iPhone shipments (35.1 million units) came in above the high estimated guess (let's face it) of 33 million.
Apple's guidance for the current quarter -- which includes no major product releases -- is lower than Q2's results as well as analyst forecasts. The company said it expects net profit of $8.68 a share on revenue of "about $34 billion." Analyst forecasts call for earnings of $10.02 on revenue of $37.7 billion.
Apple got a big boost in mid-March with the release of the third-generation iPad, selling more than 3 million units in the first weekend of sales. Still, the total shipments of 11.8 million were "on the low side of analysts’ targets," according to MarketWatch.
Whether Apple shares can get back up over $600 in the short-term depends, I'd say, on which way the economy goes. Recent economic data indicate that the recovery is sputtering; if consumer confidence slumps, current iPhone and iPad owners may delay upgrading their devices, while first-time smartphone buyers -- who pretty much by definition aren't Apple fanboys -- may opt for a cheaper Android. Some might even choose a Lumia or BlackBerry. (Stranger things have happened.) And even, it would just mean Apple might struggle a bit to beat its own low guidance.
The truth is, other than those who bought the stock in recent weeks, near its peak, Apple shareholders have little to worry about for now. The company retains a dominant position in the personal mobile computing market, is making in-roads into the corporate world, has tens of billions in cash, along with top executive, development and design talent.
If you bought Apple shares any time before this year -- say just 12 months ago, when the stock was at $310 -- and you're looking at those strategic and competitive assets listed above, you should sleep well at night.