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Apple Inc. (AAPL) Posts Disappointing Results; What’s Now?

Apple Inc. (NASDAQ:AAPL) posted disappointing results yesterday after the close, and the market has reacted in a negative fashion. The company posted revenues of $75.87 billion, which was below consensus estimates–$76.6 billion. Earnings per share increased to $3.28/share up from the $3.06/share posted last year–and they beat estimates of $3.23/share here. Net income also increased, to $18.36 billion–a boost of almost 2%.

However, while these numbers represent growth, they do no show the sort of explosive climb analysts and investors have grown to expect from Apple. And once you dig into the numbers, there is reason for concern. The all important iPhone numbers were similarly disappointing, with the sales growth essentially flat–growth was less than 1%. Mac computer and iPad sales provided no solace, and were down year-over-year.

While the company reported higher sales to China than elsewhere, those numbers were also down when compared to the past fiscal year. Apple noted that sales were harmed in foreign markets–which are hugely important to the company–due to the stronger US dollar.

Luca Maestri, Apple CFO, noted that “record sales and strong margins drove all-time records for net income and EPS in spite of a very difficult macroeconomic environment.” Tim Cook, the CEO, also noted the tough global environment and said earnings were impacted by “extreme conditions unlike anything we’ve experienced before just about anywhere we look.”

The shares declined in aftermarket trading last night, and so far today they are down even more. As expected, the relatively bad news from Apple hurt the market today as those results, along with bad reports from Boeing, served to further fuel doubts about the health of the global economy.

Of course, this stock is a powerhouse. It will take a while for changes in guidance, analysts estimates, and share price fluctuations to work their way through our systems. For now ValuEngine continues its BUY recommendation on Apple. Based on the information we have gathered and our resulting research, we feel that Apple has the probability to outperform average market performance for the next year.


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