Earnings miss from Apple Inc. (NASDAQ:AAPL), and a 5% cut in its share price may make tech investing aficionados sit up and take notice.
The juggernaut reported third quarter sales of $35 billion, which was significantly off analysts’ expectations of $37 billion. So were earnings – at $8.8 billion or $9.32 per share, it missed expectations of $10.36 a share.
ValueWalk's Raul Panganiban interviews Amit Anand, Co-Founder of INDF, and discusses his approach to investing and why India Financials are very attractive today. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with INDF's Amit Anand
But taken in the context of its performance last year in the same quarter, this quarter was a huge improvement over that year’s revenues of $28.6 billion and earnings of $7.3 billion, i.e. $7.79 per share.
So what went wrong? Or did it?
Apart from the current whipping dogs, Europe and a strong dollar, the real culprit for the quarter is actually the downdraft in the sales of the iPhone. At 26 million units sold, this was way below the 35 million sold last quarter. And it all has to do with people holding back on buying the current model because, not surprisingly, they’d rather spend their hard earned dollars to buy the latest model, the iPhone 5, which is expected in the fall, according to persistent rumours.
Sales could be slow, even during the current quarter, due to the same reason. Peter Oppenheimer, Apple’s CFO said, “Looking ahead to the fourth fiscal quarter, we expect revenue of about $34 billion and diluted earnings per share of about $7.65.” But this could all be a distant memory when iPhone5 launches – rumoured to be one of the biggest consumer-electronics ever, says Brian Marshall, analyst, ISI Group.
That said, and taking this quarter as a temporary blip on Apple Inc. (NASDAQ:AAPL)’s earnings radar, it’s also interesting to hear CEO Tim Cook take on the quarter: “We’re thrilled with record sales of 17 million iPads in the June quarter. We’ve also just updated the entire MacBook line, will release Mountain Lion tomorrow, and will be launching iOS 6 this fall. We are also really looking forward to the amazing new products we’ve got in the pipeline.”
There are other positives too. The company’s phones are making a steady inroad into the enterprise market. The iPad has a stranglehold on the tablet market, and its sales have jumped 84% over last year. It has started to make an entry into schools. Brian Marshall predicts that Apple could sell a record 50 million iPhones in the December quarter, and little-known set-top box, Apple TV, tripled its sales. Gross margins rose to 42.8% from 41.7% last year. Apple has also declared a cash dividend of $2.65 per share, payable to holders as of August 13.
In the net analysis, there appears to definitely be a case for using the post-results fall as a useful buying opportunity, given the product prospects.