Apple results can’t keep pace
Investors are spooked about consumer spending, and Tuesday they took it out on Apple Inc.
The maker of the iPod and Macintosh computer saw its stock fall 3.5%, then plunge an additional 11% in extended trading, after its fiscal first-quarter earnings didn’t beat Wall Street’s expectations enough and its forecast for the current quarter fell short of estimates.
“Investors are so trained right now to be fearful of the future,” said Gene Munster, an analyst with investment bank Piper Jaffray. “Investors are worried something is going to slow down the high-end consumer.”
It didn’t matter that the Cupertino, Calif., company reported its highest-ever quarterly profit and revenue. It was a given that Macintosh sales jumped more than the competition’s, that profit margins on iPods grew and that the company still expected to sell 10 million iPhones by the end of this year.
With all the talk about recession, investors focused more on Apple’s conservative forecast. Shares fell $5.72 to $155.64 before the earnings release, then tumbled to $138.50 after-hours.
“Nothing changed on their part,” said Andy Hargreaves, an analyst with Pacific Crest Securities. “They gave a conservative guidance as they have in the past. But the sentiment in the market is so much more negative that people are latching on to that.”
Investors have loved Apple’s turnaround story, its booming iPod and Mac sales and its position as a dominant player in digital entertainment. Its shares reached a record closing price of $199.83 on Dec. 28, making it, like Google Inc., one of the high-tech blue chips.
But the stock has been falling ever since. The same excitement that pushed the stock up has now turned into a mild panic, industry analysts said. Mountain View, Calif.-based Google has tumbled too, to $584.35 on Tuesday from its record closing price of $741.79 on Nov. 6.
Apple reported a 35% rise in revenue for its fiscal first quarter, which ended Dec. 29, to $9.6 billion, beating analysts’ prediction of $9.5 billion. Profit jumped 58% to $1.58 billion from $1 billion. Earnings per share of $1.76 beat analysts’ expectations by 14 cents.
The company said it shipped 2.3 million Macintosh computers, 44% more than during the same period last year.
“The Macintosh business is on fire,” said Peter Oppenheimer, Apple’s chief financial officer. “We remain very confident in our business and in our products and in our strategy.”
But analysts were disappointed with Apple’s second-quarter forecast of $6.8 billion in sales and 94 cents a share in profit, less than the $7 billion and $1.09 they had predicted.
Another worry: IPod shipments rose only 5%, to 22 million, less than the 24 million some analysts had predicted.
“The question is whether the slow sales of the iPod in the U.S. will linger,” said Shebly Seyrafi, an analyst at Caris & Co. “There are issues that were disappointing.”
Apple executives said the company sold more of its high-end iPods, such as the iPod Touch, which led to a disproportionate 17% increase in revenue from iPod sales, to $3.9 billion.
“That showed that people are willing to go out and buy the higher-end products,” said Shannon Cross, an analyst with equity research firm Cross Research of Livingston, N.J. “Nothing is recession-proof, but maybe some things are recession-resistant.”
Apple’s U.S. revenue rose 27%, compared with international revenue growth of 46%.
Tim Cook, Apple’s chief operating officer, declined to discuss the U.S. economy.
“We’ll leave the economic forecasting to others,” he said. “We’re focusing on managing our business.”