Apple Inc. Dives After Hours on Disappointing iPhone Sales

After two quarters of delivering better-than-expected results, Apple's (NASDAQ: AAPL  ) fiscal first-quarter revenue and iPhone sales figures came in well short of targets. An after-hours sell-off drove the stock down more than 5% in the minutes following the report's release.

But is the dumping merited? Let's review the numbers. Apple reported $14.50 a share in profits on $57.6 billion in revenue. Analysts were expecting $14.09 a share and $57.46 billion, respectively, according to Yahoo! Finance. The real challenge becomes clear when you look at Apple's product-by-product results:

Product
Actual
Median Projected
Last Year
Y-o-Y Growth

iPhones sold

51.025 million

55.39 million

47.789 million

6.8%

iPads sold

26.035 million

24.87 million

22.860 million

13.9%

Macs sold

4.837 million

4.61 million

4.061 million

19.1%

Sources: Fortune, Apple SEC filings.

Analysts were looking for at least 4 million more iPhone handset sales. Not unreasonable when you consider the initial enthusiasm for the 5s, though, to be fair, some analysts (presciently, it seems) were cutting their estimates of iPhone sales ahead of this afternoon's report.

Could the iPhone 5c be part of the problem? As early as October, we began hearing reports that Apple was cutting production on the 5c after a series of retailers lowered prices on the device. Offering a cheapskate edition of its signature product may not have had the effect Apple CEO Tim Cook intended.

Unfortunately, the problems don't end there. Apple estimates just $42 billion to $44 billion in fiscal second-quarter revenue. That's essentially flat year-over-year growth at the midpoint, and well short of the $46.05 billion analysts had been calling for. Anyone else wondering if Apple isn't expecting nearly as much from the China Mobile (NYSE: CHL  ) deal as some would like to believe?

On the plus side, Apple appears to have two hits on its hands in the iPad Air and the iPad Mini With Retina Display. Surging Mac sales are also a good sign, as is the company's ever-improving cash position:

Metric
Fiscal Q1 2014
Fiscal Q4 2013
Fiscal Q3 2013
Fiscal Q2 2013

Cash and investments

$158.842 billion

$146.761 billion

$146.620 billion

$144.687 billion

Debt

$16.961 billion

$16.960 billion

$16.958 billion

$0

Free Cash Flow

$20.685 billion

$7.853 billion

$5.943 billion

$10.496 billion

Sources: Apple SEC filings, S&P Capital IQ.

Expect Carl Icahn to use those figures -- and the Mac maker's top-line miss and weak revenue estimate -- to further his argument in favor of having Apple return at least $50 billion to shareholders in the way of stock repurchases. Do you agree? What do you think of Apple's fiscal first-quarter report and disappointing iPhone sales? Leave a comment below to let us know where you stand.

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Read/Post Comments (18) | Recommend This Article (12)

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 January 27, 2014, at 5:43 PM, rucce81 wrote:

    i thought they reported 57.6 billion in revenue. that would be right on, not a 3 billion miss.

  • Report this Comment On January 27, 2014, at 5:48 PM, Ostrowsr wrote:

    $13 more Billion in the bank, a dividend, a whole quarter of China sales coming, new upgrades and new products coming. As soon as a bunch of investors sell, the company will probably announce something that will send the shares back up again. It's still a low PE for a company the size of a small country.

  • Report this Comment On January 27, 2014, at 5:54 PM, thethreestooges wrote:

    Weak hands selling. Load them up, you will be glad tomorrow!

  • Report this Comment On January 27, 2014, at 6:04 PM, TMFMileHigh wrote:

    @rucce81,

    >>i thought they reported 57.6 billion in revenue. that would be right on, not a 3 billion miss.

    Dammit. Yes, that's my mistake. Forwarding proposed changes to editors now.

    My apologies!

    Tim

    --

    TMFMileHigh in CAPS and on the boards

    @milehighfool on Twitter

    http://about.me/timbeyers

    http://timbeyers.me

  • Report this Comment On January 27, 2014, at 6:13 PM, PDM wrote:

    @rucce81 - agree, Apple reported 57.6 Billion for this quarter.

    Unfortunately their guidance for Q2 2014 is potentially negative compared to last year Q2 (say 43B as the midpoint which is lower than reported actual for Q2 2013) and analysts were looking for growth.

    I tend to agree with the author that Q2 guidance which doesn't show growth is not indicative of confidence in growing sales. Others obviously picked up on this as well.

  • Report this Comment On January 27, 2014, at 6:16 PM, cobwebstocks wrote:

    Disappointing IPhone sales? CNBC said it was a record. So it did not meet analysts estimates. Big deal. Y'all know what Peter Lynch said about analysts.

  • Report this Comment On January 27, 2014, at 6:44 PM, buddyglee wrote:

    larger screen iphones will boost sales huge

    also

    iwatch or any new device will boost investors interest

    loads of cash this drops any more and ill buy more

  • Report this Comment On January 27, 2014, at 6:46 PM, csqrd wrote:

    The value of Apple is really not dependent on how well analysts can guess. Holding 22.7% Net Profit and 23.2% return on Assets with good cash cycle management just doesn't match with the current market valuation. I am a little concerned about the sales growth settling in around 6% but I don't think we've really heard from China sales yet. My evaluation is that the shares I own will be more valuable in the coming years than they are now. They will be little affected by a bunch of analysts trying to prove how fearful they can be. Carl Icahn should be ignored. His history is short term raids on company coffers, not as a contributor to long term value.

  • Report this Comment On January 27, 2014, at 7:03 PM, dpoolem3 wrote:

    Wow..I wondered why I got a text message this afternoon(around 3pm eastern) saying I qualified for a UPGRADED SMARTPHONE(didn't mention iphone but that is what I have) at $0 cost.

    Gotta get them phones moving!!!

    Weird story about Apple and AT&T...I recently upgraded my old iphone to the 4(I think), anyway the saleswoman brought it out from the back, opened the box, removed the plastic(I think, I can't remember exactly and wasn't paying attention) does everything to it to transfer my old stuff to the new phone. 3 months later my phone goes crazy so I take it back to at&t, they tell me to go 4 doors down to apple store because it is under warranty. I take it to apple store and the tech opens the back of the phone and tells me he cannot honor the warranty because there are 2 stickers missing with serial #'s(meaning parts had been replaced) and he even said 2 things were replaced in the phone. I take it back to AT&T, they call apple and after 30 minutes apple tells me to ship the phone to them and they will go ahead and have my new phone on the way.

    So what happened? Is Apple or At&t selling used phones repackaged as new iphones? Is this where the phones people send to those companies that have commercials paying you for your old iphone? Are those phones being refurbished and sold as new?

    I got a weird feeling from that whole experience.

  • Report this Comment On January 27, 2014, at 7:05 PM, Mathman6577 wrote:

    Did you mean a miss of overall revenue or just iPhone revenue? According to what I read the company grew overall revenue by 5%.

    Last quater was an iPad miss.

    I getting really tired of the so-called analysts estimates.

  • Report this Comment On January 27, 2014, at 7:29 PM, ScottAtlanta wrote:

    Other business models with 6% growth:

    Sears, Kmart, JCP, & lemonade stands.

  • Report this Comment On January 27, 2014, at 7:55 PM, SyGuy wrote:

    If it is temporarily a slower growing company than they should be rewarding the shareholders with a higher dividend.

    This will at least draw some dividend investors which will in turn enhance the stock price.

    That would be a balm until the next growth spurt of new products begins.

  • Report this Comment On January 27, 2014, at 8:18 PM, jdmeck wrote:

    Investors are idiots. Profit is the most important metric. And Apple excels at profit, without cost cutting, without layoffs. The investing community is filled with a bunch of idiots. This stock is still way underpriced.

  • Report this Comment On January 27, 2014, at 10:40 PM, Renee wrote:

    What those of you calling analysts idiots are missing is that the analysts did not say "oh, Apple is doomed"/"Apple is losing money"/"Apple is making less than last year", and that's why the stock is worth less. They were expecting a lot more than Apple actually made, that's all. This was based on all the optimism that Apple and producers were hinting at, and various analysts (who now turned out to be liars now) that kept spewing lies in order to boost their AAPL stock (before dumping it).

    Honestly, anyone who got caught holding the bag (or holding AAPL stock in this case) have only themselves to blame. Any rudimentary analysis of the news from China manufacturers tied to Apple, and analysts who actually brought forward facts (not to mention technology blogs, for those who wants to spend extra time researching) all showed rather disapointing products from Apple, and the manufacturing numbers and hints coming from China were 80% negative.

    P/E is also too high (compare it to Samsung, Apple's direct competitor), and you'll realize that all those analysts who tout the "low P/E ratio" and keep yammering about all the cash in the bank (essentially just an asset) really have some vested interest in getting you to buy the stock.

    Those who got burnt because clung to some analysts' "reports" that had no objective numbers or reason behind them, and to the occasional optimistic tidbit from China have only themselves to blame for believing these.

  • Report this Comment On January 28, 2014, at 2:11 AM, ashleyjames389 wrote:

    im fairly optimistic about apple, they can recover, especially china mobile deal will have a long term impact. Im expecting a rise in dividends

    http://bit.ly/AppleDividends

  • Report this Comment On January 28, 2014, at 4:04 AM, SPARTANBURG wrote:

    @rucce81

    I don't understand your statement" i thought they reported 57.6 billion in revenue. that would be right on, not a 3 billion miss."

    Can only find the 57.6 B in revenue. would you be kind enough to explain?

    thanks

  • Report this Comment On January 28, 2014, at 8:09 AM, pondee619 wrote:

    Spartanburg:

    Read all of the comments:

    @rucce81,

    >>i thought they reported 57.6 billion in revenue. that would be right on, not a 3 billion miss.

    Dammit. Yes, that's my mistake. Forwarding proposed changes to editors now.

    My apologies!

    Tim

    --

  • Report this Comment On January 31, 2014, at 12:55 PM, WriterGal95 wrote:

    Just an observation: when I was in Beijing three years ago everyone we saw wanted to see/talk about my iPhone and they could not wait to get one when it would be possible to get them. For that reason, I just picked up a couple more shares.

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