Apple Misses; Intel and Yahoo beat

Yesterday Apple missed analysts’ earnings estimates for the first time in 6 years. Apple’s shares fell $28.00 or 6.68% in after hour trading. Revenues were $6.62 billion or $7.05 a share in the fiscal fourth quarter compared to $4.31 billion or $4.64 a share one year earlier. Apple missed analysts’ estimates of $7.31 a share. However, their profits rose 53% or 6.7 billion in Q3. Sales were impressively up 21% YOY.

I-Phone sales estimates were 20 million and Apple sold just 17 million, a disappointing number. During the last quarter, many Apple consumers were reluctant to update and purchase an I-Phone 4 due to the widely anticipated release of I-Phone 5 which failed to materialized. In place of I-Phone 5, Apple recently unveiled the I-Phone 4S with many new updated features. Sales of the new I-Phone 4S are looking very strong thus far. Another positive for Apple is that their Mac sales are up 28% in 4Q from last year.

Apple’s miss will likely weigh on tech shares tomorrow even though other tech companies such as Yahoo and Intel beat with their earnings. Intel had their best quarter ever and said that demand is growing significantly for their chips around the world. Intel sold higher volumes of notebook PC’s in emerging markets. Intel also cited strength in their data center generated by growth in mobile and cloud computing.

Future for Apple

Apple’s earnings still look impressive. Clearly, the bar is set extremely high for Apple whose stock is priced to absolute perfection. Analysts’ projected 18 percent more in revenues and 33 percent more in earnings. Those are strong numbers. Apple beat their own estimates but missed analysts’ extremely bullish estimates.

Guidance for next quarter from CEO Cook was surprisingly higher than analysts’ estimates. CEO Cook guided much higher to $9.3 per share which is rather unusual for Apple with their proven track record of providing conservative guidance.  Many analysts issued lower guidance estimates for next quarter at $8.5.

CEO Cook said that demand is extremely high right now for I-Phone 4S. He made a bullish prediction that an all time record will be reached. CEO Cook is setting the bar high for Apple next quarter which is a somewhat risky move as Apple’s new CEO, especially with looming uncertainty about macro activity in Europe and other regions of the world. But it is crystal clear that CEO Cook is quite confident about Apple’s prospects moving forward to next quarter with the holiday season approaching.

China is the world’s largest mobile phone market. CEO Cook said that sales in China, Taiwan, and Hong Kong rose to 12 percent of the company’s total last fiscal year compared to 2 percent in 2009. China accounted for 16 percent of fourth-quarter sales, or about $4.5 billion. Quarterly sales in China were up nearly four times from last year.

Alex Gauna from JMP Securities issued a hold for Apple. He cited Apple’s growing competition from Android compared to Apple’s IOS and and he noted some problems with vertical integration.

Undoubtedly, Apple will continue to face strong competition from Android which is the dominant operating system and reaches to Samsung, HTC, Motorola, and Rimm. Nokia uses Symbian OS and plans to utilize Microsoft’s Windows OS after launching a new smart phone in coming weeks. Meanwhile, Amazon is releasing their Kindle Fire tablet in mid November and their pre-order sales are looking strong thus far.

Apple remains well positioned to keep growing significantly in mobile and computer technology throughout the rest of the year and into 2012. Apple will likely find some buyers tomorrow who will take advantage of yesterday’s pullback following their earnings miss.

 

About Johnathan Schweitzer 1532 Articles
Welcome to Schweitz Finance. I hope that my financial website will provide you with relevant market information to help you manage your investments with greater clarity and insight.
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