Apple Earnings: iPhone 6 Can't Come Soon Enough

Apple (NASDAQ: AAPL  ) reported earnings following market close on Tuesday, reporting $37.4 billion in sales, ahead of the midpoint of its guidance of $36 billion to $38 billion, but missing the consensus of $37.99 billion. However, Apple zoomed ahead of its gross margin guidance of 37%-38%, coming in at 39.4%. 

For the fourth quarter, Apple is calling for revenues in the current quarter of between $37 billion and $40 billion, gross margins of 37%-38%, operating expenses of between $4.75 billion and $4.85 billion, other income of $250 million, and a tax rate of 26.1% -- driving a net income range of $6.72 billion and $7.9 billion. 

What does all of this mean for shareholders? 

Not a whole lot
The company beat bottom-line expectations for the most recent quarter and, assuming the midpoint of fourth-quarter guidance, missed expectations in its guidance for the current quarter. However, given that the launch of new products -- probably new iPhone models in late September and new iPads in October -- won't really be felt until the first quarter of the company's fiscal 2015, this doesn't mean that much. 

Of course, it is important that Apple's older products exhibit staying power on a year-over-year growth basis, but this year is a quite a bit different. For the first time, Apple is likely to launch not one, but two new high-end iPhone products. On top of that, weak iPad sales, down yet again year over year, could potentially be due to people who are waiting for iPad models with Touch ID capability, or an iPad Mini with Retina Display, a thinner chassis, and a better quality display.

The point is, Apple's product pipeline is filled with fundamentally game-changing products, and -- though these products aren't official -- consumers and investors alike understand that they're coming. That Apple was still able to generate $7.7 billion in net income (more than chief competitor Samsung Electronics (NASDAQOTH: SSNLF  ) was able to generate in operating income following the launch of its Galaxy S5 flagship) against this backdrop is impressive. 

Any dip may be short-lived
I really blame overzealous analyst estimates for the "miss" here, but although these results may seem disappointing on the surface, any dip in the stock is likely to be short-lived as Apple's large buyback program will happily buy dips. 

Further, given that Apple's guidance is probably once again skewed toward the conservative side, it wouldn't be surprising at all to see Apple do better than what the midpoint of the issued guidance ranges suggests. 

Foolish bottom line
What will really matter in the end is how the iPhone 6 and the refreshed iPad products perform in the fall. If iPhone 6 can outgrow the high end of the smartphone market by taking share from others, like Samsung, and if the next generation of iPad products can compel the installed base to upgrade and attract more new customers, then Apple's sales, profit, and ultimately stock price could move to new highs before the calendar year is out. 

In short, take a deep breath and relax; it's going to be a boring quarter. 

Leaked: Apple's next smart device (warning -- it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee that its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are even claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of these devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and to see Apple's newest smart gizmo, just click here!


Read/Post Comments (0) | Recommend This Article (3)

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.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3039774, ~/Articles/ArticleHandler.aspx, 10/20/2014 9:17:55 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement