Street Finds a Few Worms in Apple

The company sold 1.1 million of its Macintosh computers in its second quarter, for $1.49 billion in sales. That compared favorably with the year-ago period, when the company sold 749,000 computers worth $1.16 billion.

But stock options did skew some of Apple's results in the quarter. The growth in earnings per share trailed significantly behind overall earnings growth because of the added shares.

Meanwhile, the company ended the quarter with $7.06 billion in cash and short-term investments, which was up $609 million from the end of the first quarter. While much of that gain was the result of the company's operations, some $287 million of it -- or 47% -- came from stock options exercises and the tax benefit associated with them, Oppenheimer said.

When employees exercise their options, they typically use the proceeds from the sale on the open market of the underlying stock to pay the company for the shares. The IRS considers the gains employees see from their options sales to be a payroll expense that counts as a business deduction.

Even if you factor in the options issue and the flat guidance, Apple's results were "incredible," says Scott Rothbort, president of LakeView Asset Management and a contributor to TheStreet.com's sister Web site Street Insight. Analysts are going to have to raise their earnings estimates, which means that with the level of cash the company now has, its shares are undervalued, says Rothbort, who is long Apple.

Rothbort says the after-hours selloff was "perplexing."

"The stock should not be where it is now," he says. "This is going to be an easy $50 stock. No doubt about it. The only question is whether [the market] allows it to get there."