Apple Inc. (NASDAQ:AAPL) is expected to start its fiscal 2014 with product innovations. According to Topeka Capital Markets, fiscal 2013 is a year to forget and investors can now focus their attention on the new product cycle of the iPhone and iPad maker, which is expected to start by September.
Brian White, an analyst at Topeka Capital Markets believes that Apple Inc. (NASDAQ:AAPL) “represents an extraordinary value” heading into product launches over the next several months.
Apple still an extraordinary value
For its fiscal third quarter financial results, Apple Inc. (NASDAQ:AAPL) reported $35.32 billion sales and a pro forma earnings per share of $7.47. According to the research firm, the earnings results of the company met its revenue and EPS estimates at $35.28 billion and $7.37, respectively. The financial performance of the tech giant exceeds the consensus estimates of Wall Street analysts at $35.02 billion revenue and $7.31 EPS.
White also noted that Apple Inc. (NASDAQ:AAPL) achieved a gross margin of 36.9% for the quarter, which is lower than its 37.5% gross margin in the previous quarter. The analysts said Apple Inc. (NASDAQ:AAPL)’s current gross margin is slightly higher than Topeka’s estimate at 36.8%. Its operating margin of 26% is above the 25.8% estimate of the research firm. However, it is lower than the 28.8% operating margin in the second quarter.
Its operating profit was $9.2 billion, slightly higher than Topeka’s $9.1 billion estimate. During the period, Apple Inc. (NASDAQ:AAPL) generated $7.8 billion operating cash flow and ended the quarter with $129.7 billion net cash.
Apple’s iPhone sales still “a significant driver”
In addition, Topeka observed that Apple Inc. (NASDAQ:AAPL)’s iPhone sales remained healthy. The product is still a significant driver for the company’s profit. Sales of the iPhone delivered a strong upside on the estimate of the research firm, while iPad and Mac met its lowered expectations. Apple sold 31.2 million units of iPhone, a decline of 16.5% quarter-over-quarter. The company sold 3.75 million Mac units, a decline of 5% and 14.6 million iPads, down by 25%.
White also observed that the iPhone and iPad maker is experiencing a slowdown in China due to economic weakness in mainland China and strong competition in the smartphone market in the country.
White said the outlook provided by Apple Inc. (NASDAQ:AAPL) is acceptable and urged investors to focus on fiscal 2014. The company expects to achieve a revenue of around $34 billion to $37 billion for the fourth quarter. The research firm increased its revenue estimate for 4Q FY13 to $34.45 billion and EPS to $7.20.
Topeka Capital Markets recommended a Buy rating with $888 price target for the shares of Apple Inc. (NASDAQ:AAPL).
