Great Quarter Not Good Enough at Apple

Updated from 12:23 p.m. EDT

Apple's (AAPL Quote) sweet earnings report left a bad taste in the mouths of some analysts and investors, sending the company's shares lower on Thursday.

Apple's shares were recently off $3.39, or 8.3%, to $37.65.

On Wednesday afternoon, the computer and electronics maker topped Wall Street's earnings estimates by 10 cents a share and offered better-than-expected guidance for its current quarter.

Despite the blowout numbers, some analysts still found room to quibble. On a conference call after the earnings release Wednesday, Apple CFO Peter Oppenheimer warned that the company's revenue growth -- which hit a 70% year-over-year rate in the quarter -- will likely slow to closer to 15%.

Oppenheimer didn't predict how soon Apple's revenue growth will reach that rate, but in a report issued Thursday, American Technology Research analyst Shaw Wu warns that the slowdown could happen as soon as the company's next fiscal year. That possibility is in stark contrast with investors' expectations, Wu says.

Adding to Wu's concern: the average sales price of the company's Macintosh computers and iPod digital music players dropped significantly in its second quarter compared with its first quarter. Apple introduced bargain-priced products in each of those segments in the quarter that are probably cutting into sales of its premium products, warns Wu, whose firm does not do investment banking.

"We are growing more concerned with slowing top-line growth," says Wu, downgrading Apple's shares to a hold from a buy. "In our view, investors do not believe AAPL's guidance and have much higher unpublished expectations."

Of course, any nitpicking with Apple occurs in the context of the tremendous run in its stock. Even after trading down on Thursday, Apple's shares are up 21% in the year to date after more than tripling last year.

That rise has led some investors and analysts to argue that the company is overvalued. The company is trading at 43 times its trailing 12-month earnings, which is well-above that of a hardware maker like Dell (DELL Quote).

On a forward looking basis, the company is valued at about 35 times its projected earnings for this fiscal year and 29 times its projected profits for its next fiscal year. Those multiples will likely come down as analysts ratchet up their estimates following the company's report.

Goldman Sachs analyst David Bailey had little but praise for Apple's quarter. He nevertheless maintains his in-line rating on the stock, worrying that investors might misread Apple's comments on its inventory.

At the end of its second quarter, Apple had four to six weeks of iPod inventory in its distribution channel, Bailey notes. But company officials were unclear about how much inventory they had going into the quarter. That probably led some investors to conclude that much of the gain in iPod sales in the quarter over the first quarter had to do with inventory build, Bailey says. Bailey disagrees with that conclusion, arguing that the bulk of Apple's iPod growth likely came from real sales, rather than channel fill.