Apple Goes 4-for-4 When It Matters Most

Well, that wasn't so bad, Apple (NASDAQ: AAPL  ) investors. Shares of the consumer-tech giant are climbing higher after the company posted reasonable quarterly results.

Let's not give the Cupertino giant a free pass here, though. Guidance for the current quarter is a disaster. Apple's revenue outlook is a lot worse than the already substantial sequential dip that analysts were forecasting. If we go by the fresh top-line guidance and Apple's call for continued margin contraction, we're eyeing earnings in the vicinity of $7 a share for the new quarter, well short of both the $9.08 a share Wall Street was targeting and the $9.32 it posted a year earlier.

Apple has problems -- and they're not getting any better. However, the market is generally relieved that the company's fiscal second quarter that ended last month wasn't as bad as it could've been.

On Monday, I noted four things that could go right with this quarterly report. Apple went 4-for-4 on the day. Let's quickly review.

1. Earnings can beat expectations -- for a change
Pessimism got the better of analysts who were whittling down their bottom-line estimates leading up to the report. Apple's net income of $10.09 a share would've missed a week earlier, but it was just enough to land the tech bellwether ahead of where the pros were parked this week.

2. Revenue growth can beat expectations
Apple's revenue climbed 11% to $43.6 million. This kind of growth would've been embarrassing in previous years, but Wall Street was bracing for a top-line uptick of less than 9%. It's easy to see why the market wasn't hopeful. Related companies that reported in recent days had some unsettling news.

  • Verizon (NYSE: VZ  ) revealed that just half of the 4 million iPhones it sold during the first three months of this year were iPhone 5s. The balance were cheaper iPhone 4 and iPhone 4S models that naturally reduce Apple's average selling price.
  • Cirrus Logic (NASDAQ: CRUS  ) took a hit after posting uninspiring financials, warning of a net inventory reserve. Cirrus Logic provides audio chips for Apple products, so weakness at Cirrus Logic was parlayed into concerns for Apple.
  • Nokia (NYSE: NOK  ) also tumbled after posting weak sales of wireless products. Yes, Nokia can be rightfully identified as the competition, but the fear was that folks just weren't buying any smartphones. That didn't apply to Apple and the 37.4 million iPhones it did sell.

3. Apple can raise its dividend
Finally! For the first time since initiating a payout policy last March, Apple is boosting its payouts. The new rate of $3.05 a share is a 15% improvement, pushing the stock's yield up to 3% based on Tuesday night's close.

Apple also increased its share-repurchase authorization from $10 billion to $60 billion. Good luck getting in Apple's way when it hits the open market to buy back its battered stock.

4. You can't spell "innovation" without an ovation
Apple naturally didn't "one more thing" its way into introducing new products during the quarterly report. No one was expecting that.

"If there has ever been a time for Apple to tease about its future products, it would have to be at a time when the world is ready to write off Apple as it cranks out its quarterly financials on Tuesday afternoon," I wrote on Monday.

Well, Apple's earnings release did offer a glimmer of hope without specifics.

"Our teams are hard at work on some amazing new hardware, software, and services, and we are very excited about the products in our pipeline," CEO Tim Cook said.

To keep this long-overdue rally in the shares going, let's hope that Cook's pipeline is close to the point where it can begin gushing.

Apple of your eye
There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (4) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 23, 2013, at 6:04 PM, DrGoldin wrote:

    Thanks for this overview. The proof is still going to be in the pudding. If Apple does follow through with those "amazing new" products, then a share price of $407 (as it stands right now in after-hours trading) is going to look like a bargain. If it doesn't ... then not.

    You don't see $60 billion buyback authorizations every day. Trying to get a handle on how much that represents. About 15-16% of the current market cap, of course, or something like 14-15 million shares. That has to put at least some kind of floor under the share price.

  • Report this Comment On April 24, 2013, at 8:55 AM, TimKnows wrote:

    This site loses a ton of money for investors and this week is no different. You pump Apple all the time and it goes straight down. Can you guys ever get it right? Let's try pumping a stock that isn't such a dog.

  • Report this Comment On April 24, 2013, at 9:09 AM, Jjkiam wrote:

    The stock repurchase plan at current prices below 400 takes out almost 150 million shares. I hope if Apple truly does have "amazing " new products in this pipeline that TC keeps referring to and never pulling the proverbial rabbit out of the hat that they act aggressively with the buy back. If so and management also has a couple more aces up it 's sleeves like a CM deal that they buy as much under 400 that they can get and not allocate the repurchase evenly per qtr. This makes the most sense to me. The market is clearly going to continue to punish this stock until Apple actually takes SOMETHING out of this very long and tiresome "pipeline"

  • Report this Comment On April 26, 2013, at 1:43 PM, RockyTopBob wrote:

    "However, there is a debate raging as to whether Apple remains a buy."

    Well, both of the owners of your company and the people actually representing TMF think it is still a buy. Maybe you should listen to them. Of course you need to generate more clicks on provided links so TMF can pull more ad money off these articles.

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