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Wall Street Got Apple Wrong -- Again

Stocks in this article: AAPL


BALTIMORE (Stockpickr) -- Yesterday, Apple (AAPL) announced that it had sold 51 million iPhones and 26 million iPads in the fourth quarter -- a record result. Shares reacted by selling off almost 8% in yesterday's session.

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But if Apple's move surprised you, you just haven't been paying attention lately.

Yes, Wall Street did get Apple wrong this week -- again, I should add. But Main Street got it wrong too. And, as I'll show you, neither of those screw-ups changes the fact that there's still a big opportunity in shares right now.

Just like the last time I wrote a column about Apple, I want to be clear about one thing from the beginning: I own the stock. I'm not an "unbiased" journalist -- I'm an investment professional who's talking his book. But that still doesn't make anything I'm about to say any less true.

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I also have an admission to make: I don't know when the iWatch is coming out. I don't know when the iPhone 6 is coming out or how big it will be. I don't even have a revenue forecast for Apple's next fiscal quarter (set for release on April 21). Wall Street didn't get Apple wrong this week for any of those flaky reasons -- it got the facts wrong.

So I'm sticking with facts today.

For instance, the $39 billion in market value that Apple lost yesterday came after the company announced the highest sales in its history: $57.6 billion. Of that, the firm converted 22.7% of every dollar it generated into profit.

If we lived in a vacuum, those results would be staggering -- they mean that the company "too big to grow materially anymore" grew another 5.7% in the last 12 months. They also mean that there's still ample margin in one of the most competitive industries on Earth.

And remember, this was the quarter of the iPhone 5s and iPhone 5c, devices that initial reactions literally called "the most disappointing in the company's history."

Apple took a product launch approach that's been extremely successful in the past and managed to sell a record 51 million iPhones in a quarter with it. No surprise there.

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But yesterday's selloff in Apple shouldn't have been surprising either. Apple is a perennial earnings disappointer. In the eight of the last nine consecutive quarters, Apple has reacted to earnings releases by trading the next session either flat or steeply down. Only one of those nine quarters gave investors an earnings-induced pop. Over that period, revenue at Apple increased by 24%.

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