Once Again, Apple Walks the Walk

AAPL nearly doubles its earnings for its fiscal second quarter

   
Once Again, Apple Walks the Walk

AppleLogo Once Again, Apple Walks the WalkFacebook could learn a thing or two from Apple (NASDAQ:AAPL) — specifically, how to back up the hype.

A day after the social network revealed a disappointing quarterly performance in its S-1, Apple turned on the afterburners with its Q2 report.

Earnings of $11.6 billion were almost double last year’s profits and, at $12.30 per share, crushed Wall Street estimates of $10.04 per share. Revenues of $39.2 billion were up almost 60% (note: Facebook’s growth rate was just 45%) from the year-ago period and also cleared estimates for $36.8 billion.

Once again, Apple looks more like a hot startup than most startups — and certainly not like a company that has been around since the ’70s.

Going into the earnings report, there was lots of trepidation on the part of investors. Since a peak at $636 on April 9, the stock fell by 11% — good for a whopping drop of $71 billion in market cap — and even dropped an even 2% Tuesday before the report.

Investors clearly aren’t worried now. AAPL shares were up about 7% in early after-hours trading.

One of the previous concerns about Apple was the possibility that AT&T (NYSE:T) and Verizon (NYSE:VZ) were moving away from the iPhone. While this might be true, it didn’t make much of an impact in Q2 — Apple sold a whopping 35.1 million iPhones in the quarter, 88% better than a year ago.

Of course, the company also saw strength in the iPad, which saw unit sales of 11.8 million — a growth rate of 151%. And consider that the iPad 3 was sold for only a couple weeks in the quarter.

Apple’s pricing and negotiating powers have translated into impressive gross margins, which have increased from 41.4% to 47.4% in the past year. Apple also generated $14 billion in cash flows from operations, so now the company has a fat $110 billion — with a “B” — in the bank.

And despite the growth, Apple still has a valuation of just 15 times earnings, which is pretty cheap in light of the company’s sizzling growth rate. Consider that blue chips like McDonald’s (NYSE:MCD) and Coca-Cola (NYSE:KO) have heftier valuations — and while they’re successful, their growth rates aren’t even in the same universe as Apple’s.

Looking ahead, Apple is expected to launch the iPhone 5 in the fall, which is sure to go gangbusters. The company should continue to get traction in burgeoning China, too, and its deal with China Mobile (NYSE:CHL) is likely to provide lots of room for growth.

And don’t forget — Apple soon will sport a roughly 1.7% dividend (based on current valuations).

Tech is never a sure thing. But Apple comes as close as you can get.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”“All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2012/04/once-again-apple-walks-the-walk/.

©2014 InvestorPlace Media, LLC

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