Wednesday, April 23, 2008

Apple Beats the Street, Tempers Outlook

So, what else is new? Apple reports outstanding growth, but provides conservative earnings guidance for the third-quarter. The market reacted to every word in after hours trading. The stock hit an initial high just north of 170 and then the report of lowered margins (-10%) sent it free falling just south of 155! Traders settled down as the report continued, to where it closed today 2.69 (1.68%) around 162 and change. The big news is that the Macintosh is a principal driver, with a whopping 51% increase in sales, equating to nearly 2.3 million units! Apple also sold over 10.6 million iPods, up only 1% from a year ago, and 1.7 million iPhones, putting them in line with meeting their 10 million iPhones sold by the end of 2008.

Now for the numbers: Apple posted a net income of $1.05 billion, or $1.16 per share, that's up 36% from a year ago. Analysts average expectation was $1.06, although in recent days, many analysts were inching that estimate up, some as high as $1.23. Apple had originally provided guidance of $0.94. Sales were $7.51 billion, up 43% from the same quarter last year. Analysts on average projected revenue of $7.01 billion.

Apple's forecast for its fiscal third-quarter was sales of $7.16 billion, roughly in line with consensus estimates of $7.2 billion. But the real knock was the very conservative forecast for earnings of about $1.00 per share, this is significantly below expectations of $1.10 per share. It's a wonder why investors react so violently, this is a well known pattern by Apple. Kind of like sneezing, where you can't stop from blinking your eyes.

Brilliance, or Manipulation?

Whatever you call Apple's pattern of blowout earnings, followed by conservative guidance, one thing is for sure, they are managing their stock price just fine, with it up 30% over the past weeks. Apple keeps the Wall Street analysts in check, making sure they don't get crazy.

Economy? Apple don't care bout no stinkin Economy!

Apple's CFO, Peter Oppenheimer didn't appear phased by the economic slowdown when asked in a conference call with analysts, saying that the traffic in their retail stores continues to grow. In fact, Apple plans on opening 45 more stores this year alone. Many of these new stores will be overseas. International sales accounted for 44% of Apple's overall revenue. This is going to be a key components as the US economy will likely move sideways in the coming months.

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