One thing is certain with Apple (AAPL) earnings: It doesn’t matter how good they are; if they don’t meet or exceed expectations, the world collapses.
Such is the case for its most recent earnings report.
Apple posted earnings of $10.7 billion on $49.6 billion in revenue, edging past analyst projections of $10.3 billion in profit and $49 billion in revenue. Apple also beat its own guidance from April, which placed revenue at $46 billion to $48 billion and gross margins at 38.5% to 39.5%.
The problem was, those figures didn’t beat the Street’s estimates.
And in the last 3 minutes of trading on Tuesday, after announcing the news, the stock lost $60 billion in value. On Wednesday, it was down another 5% or so.
Now, AAPL has a history of serially trouncing earnings, especially when Steve Jobs was running the show. In CEO Tim Cook’s tenure this pattern has continued, although with less consistency. Yet this year has seen the launching AAPL in China, the Apple Watch, and the new music store. So, it may be slightly understandable that analysts didn’t really buy what AAPL was selling regarding its estimates.
But the company grew its revenue 33% for the quarter, saw profits increase 38% and built up a record $202 billion cash account. Do those results sound like a company that is on the ropes or one that made some kind of self-immolating strategic blunder?
Apple Isn’t Blameless
There are some points to be made regarding some of the criticisms. While China is the iPhone 6 growth driver — 40 new stores are set to open in China this year — AAPL can’t keep leaning on the phone for its growth, forever. And phone sales are topping out other major markets.
Also, Cook was vague about Apple Watch sales. The company said it was because they didn’t want to provide sensitive information to the competition. But some have noted that Jobs released the original iPhone sales a month after the phone launched and also presented iPad sales the first quarter it was on the market.
This kind of coyness doesn’t play well on the Street. Wall Street assumes that no one hides numbers worth bragging about; if Apple is hiding numbers, it’s because they won’t make investors happy.
There is also talk of AAPL getting Intel’s (INTC) latest chips for upgrading Macbooks. INTC has apparently having quality production problems ramping their newest chip production lines, which makes it tough for AAPL products to maintain their edge on the performance vanguard.
Bottom Line for AAPL Stock
All that being said, none of it substantiates a flight from AAPL, other than profit-taking from traders who have bid it up in recent days.
Yes, APPL, like all companies faces long-term challenges. But those challenges are navigated over quarters and years, not months.
AAPL has had some major launches this year and it will take some time to see how well those new products are adopted. And there’s no doubt that, at some point, AAPL will need to find a new and compelling revenue source beyond its phones, since the mobile phone industry has humbled many industry leaders very quickly in its short existence.
But for now, AAPL’s “bad” news reinforces its strong position now and for coming quarters. This is a blip that represents a buying opportunity rather than the time to cash out and run.
Louis Navellier is the editor of Blue Chip Growth.