Thursday, July 26, 2012

Apple (AAPL) Recovers 0.50% After Posting Worst Day In 9-Month

Shares Apple (NASDAQ:AAPL) jumped 0.50% to $577 in the opening session on Thursday after posting its worst single day loss since mid October after the company posted much lower than anticipated earnings.

on Wednesday, AAPL's target price was revised down to $790 from $850 by Bill Shope, an analyst at Goldman Sachs, who cited the iPhone and iPad maker's disappointing June quarter results and guidance as the reason.

In a note to investors on Wednesday, The firm said that Apple's June quarter revenues at $35.02 billion and earnings per share at $9.32 were below its estimates of $35.54 billion and $9.98 a share.

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The company's guidance for the September quarter at $34 billion on revenues and earnings of $7.65 a share were also below expectations, Goldman analyst Bill Shope said.

On average, analysts have predicted that Apple will post $46.79 earnings per share for the current fiscal year.

"While we had expected some weakness as a result of a pause in iPhone demand ahead of the iPhone 5 refresh, the impact was greater than we anticipated. In addition, Apple’s gross margin performance and macro commentary served as key sources of disappointment," said the note by Bill, who though has retained a buy rating on the stock.

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But it’s not all bad news. Shope held out the hope that any drop in share prices would be temporary and the stock would bounce back fast.

Bill's note, which has been widely picked up by the analyst community said, "The pause ahead of iPhone 5 was even more pronounced than expected," and "While several elements of Apple’s June quarter results were surprising and disappointing to us, we believe most of these issues are temporary. In fact, we believe the December quarter will enjoy a tailwind from the iPhone 5 and consumer seasonality that will likely quickly eliminate current investor concerns. In addition, we saw no evidence in this quarter’s results that Apple’s platform momentum or the related customer loyalty and market share potential were damaged in any way."

The Goldman note also pointed to lower-than-expected gross margin as a key point of concern. The company reported a gross margin of 42.8 percent against a consensus estimate of 43.5 percent. This was attributed to lower price realisation as customers opted for cheaper versions of the phone.

Bill is however expecting a recovery in margins by December though he viewed Apple's comments on macro-economic pressures as worrying, especially the impact of Europe on its future performance.
Shares of AAPL tumbled 4.32% on Wednesday, its biggest single day fall since Mid October and ended at one month low of $574.97.

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