Not much has gone right for Apple on Wall Street since Apple passed $700 in September. Now another quarterly earnings report has come and gone with so-so financial results and lackluster earnings, putting more downward pressure on the stock.
You might think.
But actually, Apple’s stock is up in after-hours trading — almost $20 to $440. Perhaps when the market has been so pessimistic for so long, less-bad news is good enough news to bump your stock.
Being Apple is a clearly a tough gig. You can bring in record quarterly revenue of $54.5 billion and profit of $13.1 billion, selling almost 50 million iPhones, and your stock goes down. Then you can follow that up with slight decline in Q2, still sucking another $43.6 billion from iPhone-starved consumers’ pockets, but your stock still goes down.
Paradoxically, however, today’s up-and-down quarterly numbers might signal a turning point.
Apple sold more iPhones than analysts predicted, although fewer iPads, and both revenue and profit were down from the same quarter last year. But the big iPhone numbers — presaged by massive Verizon iPhone take-up — are an antidote to some of Wall Street’s biggest concerns.
The sad fact for Apple is that most analysts have been thinking that Google/Android is winning the mobile war, and the mobile war is the only war worth fighting right now. The result is that Apple has shed hundreds of billions of dollars in stock market valuation, and even though its first quarter of 2013 alone had more revenue and profit than all of Google’s 2012, Google’s stock is taking off by some at least one measure of business worth — enterprise value, which is market cap minus cash on hand — the search+mobile company is worth more than Apple.
Add in a tepid-at-best market for smartphones — which drive a huge percentage of Apple’s revenue — that has seen even mobile king Samsung return less-than-great results, and you’ve got a recipe for failed Wall Street expectations and hopes.
But the stock is up tonight after the earnings release dropped, and many analysts are still bullish on Apple, predicting returns to stock valuations to $700,000 heights as Apple brings on new products such as the iPhone 5S, cheaper iPhone, and a new retina iPad Mini. Katy Huberty of Morgan Stanley is one of them, believing that Apple’s coming products will push the company back into big growth territory.
Apple problems are not in the U.S., with strong smartphone sales at home. The company knows how to sell premium smartphones to premium consumers, with a dramatic jump in iPhone sales by key U.S. carrier Verizon to 3.8 million and AT&T activating another 3.7 million iPhones last quarter as well.
The problem is international sales, which are Android territory.
That’s precisely the problem that Apple’s cheaper iPhone, rumored earlier but likely coming out this next quarter, is designed to fix. And it’s something that Morgan Stanley has said could triple Apple market share in the critical Chinese market. Apple CEO Tim Cook hinted at that in a statement in Apple’s earnings release:
“We are really excited about the upcoming releases of iOS 7 and OS X Mavericks, and we are laser-focused and working hard on some amazing new products that we will introduce in the fall and across 2014.”
That is indeed the critical point.
If Apple can bring out an amazing iPhone 5S, a cheaper iPhone, and do something about its worrying iPad sales, the company has a chance to regain a strong growth curve.
And, to hit some of the high-price targets bullish analysts still have for the stock.