Apple Earnings

After stellar results Apple Inc. (NASDAQ:AAPL) is up to 600 again in after hours trading. At time of writing the firm is trading at 600.10, a rise of near 7.11% in the couple of hours since the announcement was made. But, as noted in a previous article, the problems besieging Apple Inc.’s (NASDAQ:AAPL) stock price were not really due to anxiety over the firms earnings. The report this evening has offered temporary relief but how long will it last? The company’s conference call, sheds some light on the matter.

First the good stuff. The company announced earnings per share of $12.30 for the second quarter of 2012 on revenues of $39.3 billion. Analysts had expected much lower, EPS of just $9.99 on revenue of $36.7 billion. It’s own estimates were even further off. Apple’s guidance suggested an EPS of $8.50 with revenue of $32.5 billion. Sales of iPhones were 35.1 million worldwide including a five fold year on year increase in China. The iPad sold 11.8 million iPads in the period.

During the call The company’s CEO Tim Cook replied to a question from Goldman Sachs on the sustainability of subsidies on the iPhone remaining at their current level. That question is one of the main reasons given to explain Apple’s recent volatility. Cook responded that a 24 month contract was a “golden goose” for carriers far outweighing the $400 subsidy on the handset. That comment will do little to allay worries over the handset’s future. A lowering of the subsidy could result in a revenue fall of $1 billion below expectations in the next quarter according to one analyst.

So Apple Inc.’s (NASDAQ:AAPL) shares rise in after market trading though seem sticky around 600. The company continues to excel in all product areas, bar the obsolete iPod range down to 7.7 million last year. Cook gave little away about the company’s future in the conference call preferring to talk earnings report rather than waxing lyrical on the company’s future. This is not what was needed in order to take away the angst of Apple holders.

There is an existential angst to sitting on a frontier. Sight across the boundary between everything and nothing is anathema to some. It is a lawless place. Apple’s market cap has investors feeling something similar. How long can the company’s fortunes last? Most of them won’t get their answer until it’s too late. But surely the firm cannot grow forever and a fall, or it seems more likely, a stabilizing process will take place some time in the future.

In the short term the company will prosper from today’s results despite the lack of executives addressing investor worries. If the share price continues to rise the fears evident in recent weeks will undoubtedly raise their heads again. Apple needs to publicize assurances from carriers on the subject of subsidies or introduce a new product in order to allay the fears. A Barclays analyst discovered that the company’s stock rises by about 31% in the six month leading up to the release of a new iPhone. With the iPhone 5 expected some time later this year that will certainly stabilize the company’s value growth.