Less than 24 hours after releasing its second straight earnings miss, Apple (AAPL) stock has now dropped below $600 for the first time in three months.
Apple’s mixed quarterly results, which came in under Wall Street estimates, have sparked some concerns that the tech giant’s growth rates could be poised to slow. The world’s most valuable tech company reported earning $8.2 billion in net profits during its Q4’12 that ended Sept. 29, with $36 billion in revenue and diluted earnings per share of $8.67. That compares to an average of about 15.5 million iPads versus reduced estimates of 15 million expected, earnings per share of $8.75 versus $8.81 expected, and $36 billion in revenue versus $35.51 billion expected by the analysts. Q4 iPhone sales — generally a mix of iPhone 4S and iPhone 5 handsets — came in at 26.9 million versus 25.3 million expected, a 58% improvement over Q4 2011.
Overall, the company’s results were still impressive, but “unfortunately there were some wrinkles to it,” Alex Gauna, managing director of technology research at JMP Securities was quotes as saying to LA Times.
“They’ve missed expectations for the third time in the last year and a half; that’s uncharacteristic of Apple and it’s something we’re going to have to get used to,” Gauna said. “It’s not a bulletproof story anymore. Not to make too much of missing expectations — the Street does have a way of getting ahead of itself — but it does point out that it is getting harder and harder for Apple to surprise on the upside.”
While Apple ‘s earnings report was mixed, if not bad, on several metrics, and as a result, Apple shares are down about 14% since printing the tape above $700 last month, the co.’s future guidance was very strong. For Q1 Apple now projects earnings-per-share of $11.75 vs. consensus of $15.53 with revenues of $52 billion — 12% more than the same quarter a year ago — vs. consensus of $55 billion.
A $52 billion quarter would be the highest quarterly sales ever reported by a tech company.
The point is the positives in Apple’s results still outweigh the negatives, and more importantly, not much has changed in terms of the company’s economic fundamentals, which remain intact, to justify the current PPS drop. Apple is trading at a trailing12 forward PE of 12.50 — which when excluding the co.’s $117 billion in cash reduces its T12 fw P/E ratio under 10 at 9.90 —- below Google’s T12 forward PE of 15.30. The key question, therefore, for the long-term AAPL holders isn’t how solid its fundamentals are, but whether they will get better.
“The investment community tends to get ‘wrapped around the axle’ on tertiary details and fails to forget the ‘big picture,’” Brian Marshall, a technology analyst at ISI Group told The Journal. “Demand for Apple products is much greater than current supply.”
During Apple’s Q4 results conference call yesterday, CEO Tim Cook reiterated the company’s iPhone 5 supply constraint. According to Cook, production is increasing but the company is still in a “significant state of backlog.” Cook also said that in terms of production, Apple’s “output has improved significantly since earlier this month” and that he was pleased with the progress they have made. “I’m pleased with the current level of output. This is the largest volume ramp in our history,” Cook said who also confirmed Apple still plans to roll out the device to a total of 100 countries by the end of the current fiscal year.
As of publication, Apple’s stock was trading at about $595 a share, extending a downward trend for the ticker, which hit an all-time high of $705.07 a month ago. The stock declined in early trading and dropped intraday to as low as $591.80 a share.
AAPL is still up more than 50% for the year.
Disclosure: No Position
Cash is actually now over $123 Billion, as a correction.