Despite disappointing quarterly earnings from Apple, my long-term Apple (AAPL) stock target of $1,000 remains intact.
Apple ‘s earnings report was bad on almost all metrics, but future guidance was downright shocking. For Q1 Apple now sees EPS of $11.75 vs. consensus of $15.53. For Q1 Apple now sees revenues of $52 billion vs. consensus of $55 billion.
In my analysis, not much has changed from a fundamental perspective since the release of bad earnings. Some may find it disconcerting that gross margins dropped to 40% vs. consensus estimate of 40.6%. In my models, I had anticipated a drop because of new products and new technologies in those products. I was especially concerned about the cost and delivery impact of the new display technology in iPhone 5. (For background please see Wafer-Thin iPhone 5 Chatter Gives Apple New Buzz As Stock Breaks Out.)
Apple CFO, Peter Oppenheimer, summed it up quite nicely, by stating that margins of new products are lower than previous versions, especially on the iPhone 5. Undoubtedly with time, Apple and Foxconn will gain experience with the new display technology and improve manufacturing efficiencies.
iPad Mini was widely expected to have much lower margins than Apple’s other products before the release of Apple earnings. There is no new adverse information in this regard in the earnings report.
iPad sales decelerated to 14 million from 17 million in the quarter before. Tim Cook explained that 14 million is better than what the company had expected due to 1.2 million sell-into-the-channels in the previous quarter…Read more at Forbes
