Updated from 12:45 p.m. ESTA stellar first-quarter earnings report wasn't enough to prevent a pullback in Apple ( AAPL) shares on Thursday, as the company's traditional conservative guidance prompted traders to take profits on a stock that had climbed 25% in three weeks. The stock was recently off 5.5% to $89.68. "I thought it was a terrific quarter," says Standard & Poor's equity analyst Richard Stice. "Obviously, the iPod numbers were off the charts. I thought you could see
Apple's stock woes Thursday mirrored much of the tech sector; the Investors also avoided tech stocks on Thursday, which didn't help. The Nasdaq was off 1% in recent trading. Historically conservative, the company said sales for the March quarter should range between $4.8 billion to $4.9 billion, short of the $5.24 billion expected by analysts. Profit estimates of 54 cents to 56 cents also missed the 60 cents a share targeted by analysts. "I think (traders) are trying to resolve the fact that they crushed estimates but issued lower guidance," says Jim Grossman, an equity analyst with Thrivent Asset Management, which holds Apple shares. But he's not concerned about the outlook: "They're going to put numbers out there that they can beat." Mac shipments grew 28% year over year in the December quarter, and some had expected the number to grow sequentially, but it was essentially flat at 1.6 million. "I don't think it was negative, but I can see some people looking at it and saying, 'Maybe they should have done 1.7,'" Stice says. "I thought those numbers were good." In the September quarter, investors were "giddy with excitement" over the Mac share gains, Grossman says, so there was some disappointment that they didn't sell more computers over the holidays. "The Mac number was impressive in isolation. I think Wall Street had gotten a little ahead of itself in terms of (expectations)," Grossman says.
Even with the lower guidance, some analysts raised estimates. Stice, who has a strong buy on the stock, upped his EPS forecast to 66 cents from 61 cents and raised his price target to $119 from $110. UBS analyst Benjamin Reitzes added a penny to his EPS estimate, to 61 cents for the second quarter. For fiscal year 2007, he raised his EPS forecast to $3.20 from $2.87 and moved his target price to $124 from $118. Reitzes has a long common stock position in Apple, and his firm has provided nonsecurities services to Apple. "Our estimates are above the company's guidance for the March quarter, with revenue of $5.2 billion and EPS of 64 cents," Prudential Equity analyst Jesse Tortora wrote in a Thursday note. He raised his price target to $100 from $90 and has a hold on shares. His firm owns more than 1% of Apple stock. Still, it can be hard for analysts to accurately model profitability when the company is reluctant to give too many details on future products such as the newly-revealed iPhone and Apple TV, Thrivent's Grossman says. "While they give us some information (on the quarterly conference call), there isn't a lot to chew on," he says. "That adds to some confusion." Apple
steamrolled over earnings and revenue estimates late Wednesday, reporting a profit of $1 billion, or $1.14 a share, for the first quarter compared with $565 million, or 65 cents a share, in the same quarter last year. Thomson First Call analysts had projected an EPS of 78 cents. Sales added up to $7.1 billion, growing from $5.7 billion in the comparable quarter a year ago and easily topping the average analyst forecast of $6.42 billion. "It's tough to quibble with anything they did during the quarter," Stice says.