Nothing to Fear in Apple Call, but No Need to Rush to Buy

NEW YORK ( TheStreet) -- Apple's ( AAPL) miss of analysts' targets on Tuesday's call was noteworthy.

Given Apple's track record of handily beating expectations, its overall size, and the general nervous market environment we're currently in, it's perhaps understandable that bloggers and market watchers generally freaked out over the results.

There's a perception of a big miss from these results and even bulls like me have to acknowledge there was. It certainly was very unusual.

That said, I don't think it's a big deal. Here's why.

Apple still had 20% growth year-over-year in earnings instead of the 80% to 100% that folks now expect.

And Europe -- especially the sick countries of France, Spain, and Italy -- were flat on their backs. Even Germany was very weak relative to the rest of the world.

I do think it's interesting when Apple blows out earnings the bears say that it's completely disconnected from the rest of the market, but when it misses earnings they shout that it's going to take the whole market down. Guess that's just what happens when you're the biggest company in the world growing at Apple's rate.

But let's clear up one misperception making the rounds after the results came out Tuesday: Apple has never missed estimates before.

Really?

Apple's last big "miss" like this was its fiscal Q4 2011 -- i.e., last October. This isn't unprecedented.

At that time, Apple fell short as folks eased up on the throttle of iPhone buying, waiting for the 4S to be released. When the miss came out, the stock dropped from $422 to $392 a few days later -- a 7% decline.

Yet, five weeks later, the stock got down to $363 amid the general market uncertainty (as well as lots of folks worrying that the quarter was a harbinger of more problems to come for Apple). This drop represented a 14% decline from its pre-earnings level.

A 14% decline from Tuesday's close would take it down to $516.

But, don't forget that, from late November ($363) to early April ($644), Apple's stock increased 77%. At least in this case, it was darkest before the dawn.

The big reason for the miss Tuesday was obviously iPhone sales, which came in at 27 million instead of the 30.5 that was the Wall Street consensus.

As time goes on, it seems like many consumers are being conditioned to bunch their iPhone purchases just after it's released -- especially if Apple stays on its schedule of yearly releases in September or October. It's not good or bad; it's just the way it is now.

Apple shareholders are still set up for big fall-season and holiday sales for iPhone 5.

It's notable that the iPads did so well in Tuesday's results: 17 million were sold in the quarter (best ever). That represented a 44% sequential growth rate in units sold -- and we didn't even have any help from China to get to that number. The iPad 3 didn't start selling in mainland China until last Friday. It's worth remembering though that some of these iPad sales in the quarter announced Tuesday could have been to the channel to top up supply; that means we might see more weakness next quarter, especially as the focus goes to the smaller iPads.

The bottom line here is that I still love Apple and still stand with my longer-term call of it going to $1,650 by end of 2015. However, it's quite possible we trade down to $500 over the rest of the summer.

In my view, the next catalysts are all coming in the fall with the new iPhone (now rumored to be coming in September), a smaller iPad and then an announcement of TV (maybe not until 2013).

Apple's stock has a history of big moves and then long periods of consolidation. I think we're going to be in a holding pattern for another couple of months after this.

Although many people will be telling you to, I don't think you need to "buy the dip" today on Apple.

At the time of publication, the author was long AAPL.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Eric Jackson is founder and Managing Member of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. In January 2007, Jackson started the world's first Internet-based campaign to increase shareholder value at Yahoo!, leading to a change in CEOs in 2007. He also spoke out in favor of Yahoo!'s accepting Microsoft's buyout offer in 2008. Global Proxy Watch named Jackson as one of its 10 "Stars" who positively influenced international corporate governance and shareowner value in 2007.

Prior to founding Ironfire Capital, Jackson was President and CEO of Jackson Leadership Systems, Inc., a leadership, strategy, and governance consulting firm. He completed his Ph.D. in the Management Department at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management and Corporate Governance, and holds a B.A. from McGill University.

He was previously Vice President of Strategy and Business Development at VoiceGenie Technologies, a software firm now owned by Alcatel-Lucent. In 2004, Jackson founded the Young Patrons' Circle at the Royal Ontario Museum in Toronto, which is now the second-largest social and philanthropic group of its kind in North America, raising $500,000 annually for the museum. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson.

You can contact Eric by emailing him at eric.jackson@thestreet.com.