This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple Didn't Really 'Miss' on Sales

Jason Schwarz is the author of The Apple Revolution, an e-book.

One of the reasons why Apple's stock was relatively flat after hours Monday was because Wall Street didn't know what to do with the GAAP accounting change. Too many analysts who should have been ready to interpret the data for their clients were left dumbfounded by the huge earnings beat.

Apple begins the day Tuesday with its lowest price-to-earnings ratio in years and as revised 2010 estimates come in, the company will have its lowest forward P/E of the Steve Jobs era. This disconnect won't last long. Over the next year, traders will price Apple stock back up towards its historical norm of a 32.7 P/E.

Philip Elmer Dewitt offers up an easy to understand year-over-year comparison of the numbers:
  • Total sales: $15.68 billion, up 32% from last year's non-GAAP revenue.
  • Earnings: $3.67 a share, up 46.8% from last year's non-GAAP EPS.
  • Profit: $3.38 billion, up 49.6% from last year.
  • Mac sales: 3.36 million units, up 33% year over year.
  • iPhone sales: 8.74 million units, up 100% from last year.
  • iPod sales: 21 million, down 7.6% from a year ago.
  • iPod touch sales up 55% over last year.
  • 50.9 million visitors to Apple's 283 stores, up 9% over last year.
  • Gross margin: 40.9%, up from 37.9% last year.

The only negative in the report was the weak iPhone unit numbers. But were they really that weak? Apple sold 8.7 million iPhones while investors were looking for something in the range of 9.2 million. The iPhone still grew by over 99% year over year.

When you have this kind of growth rate and still fail to meet expectations it tells you a little something about the expectations -- they got too high.

It's like my son running into the house after his basketball game yelling with excitement, "Dad! Guess how many points I scored?" And I respond, "43?" He then says, "Ummmm, actually I scored 26."

There is nothing more deflating than expectations that are too high. The analysts who were way too low last quarter got way too high this quarter. They really have no way of measuring sales so it ends up being complete guesswork.

Investors will quickly overlook the short-term miss because in reality it wasn't a miss at all.
At the time of publication, Schwarz was long Apple.

Jason Schwarz is an option strategist for Lone Peak Asset Management in Westlake Village, Calif. He is also the founder of the popular investment newsletter available at www.economictiming.com. Over the past few years, Schwarz has gained acclaim for his market calls on the price of oil, Bank of America, Apple, E*Trade, and his precision investing in S&P 500 option LEAPS. His book, The Alpha Hunter, is set to be released by McGraw Hill in December 2009.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $126.44 0.00%
FB $87.28 0.00%
GOOG $523.40 0.00%
TSLA $280.02 0.00%
YHOO $39.38 0.00%

Markets

DOW 17,730.11 -27.80 -0.16%
S&P 500 2,076.78 -0.64 -0.03%
NASDAQ 5,009.2140 -3.9090 -0.08%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs