Analysts weigh in on Apple Computer’s second quarter 2005 earnings and future outlook

Analysts are weighing in on Apple Computer’s second quarter 2005 earnings report that showed sales of more than 5 million iPods, over 1 million Macs, and a six-fold increase in quarterly profit. Apple’s share price lost as much as 5% in early trading this morning on NASDAQ, as concerns over revenue expectations outweighed second-quarter sales of more than 5 million iPods and a six-fold increase quarterly profit. Apple yesterday reported a profit of $290 million, or 34 cents a share, on revenue of $3.24 billion for its second quarter and handily beat the average estimate of analysts surveyed by Thomson First Call, which was a profit of 24 cents a share on revenue of $3.21 billion. During the second quarter 2004, Apple earned $46 million, or 6 cents a share, on $1.9 billion in revenue.

“While Apple beat analysts’ estimates, its shares suffered because some analysts expected revenue as high as $3.5 billion,’ Rex Crum reports for MarketWatch. “Harry Blount, of Lehman Bros., said in a research note that the ‘results were solid but may not be enough to sustain upward momentum.’ Blount added that Apple’s third-quarter revenue is only roughly in line with analysts’ consensus forecasts… Analysts who expressed some concerns over Apple’s momentum said that the company remains strong, and that investors need to re-assess how they view Apple’s stock.”

“Apple shares have been of some of the most successful in the tech sector over the past 18 months, going from about $17 a share in late 2003 to more than $90 before a 2-for-1 stock split in February,” Crum reports. “Bear Stearns analyst Andrew Neff said in a research note that Apple stock could face some near-term weakness given that revenue from iPod was ‘light of lofty expectations.’ However, Neff said that on closer inspection, ‘Apple is emerging as a more balanced growth story, with continued strength in music, more compelling evidence of a coattails effect in Macs.'”

Crum reports, “Signs of the iPod’s so-called ‘halo effect’ on Mac sales were evident, as Apple reported Mac sales of 1.07 million units, up from 749,000 a year ago. It was also the second-straight quarter in which Apple sold more than 1 million Macs. Steven Milunovich, of Merrill Lynch, said the Mac’s performance shows ‘quantitative proof of the halo effect.’ In a research note, Milunovich said the Mac is ‘gaining share in a PC market showing little dollar growth. (The) iPod is bringing new users into the tent, benefiting not only Mac sales, but peripherals and software.’ Milunovich added that since the success of the iPod and Mac has been underestimated, investors need to consider whether Apple has built a sustainable consumer-products franchise.”

Full article here.

21 Comments

  1. I predicted this in these forums about a week ago. This drop was not unexpected. That being said, I’m still holding on to the majority of my chunk of AAPL stock.

    The market needs bellweather companies like Apple.

  2. Let’s face it. Apple is measured by higher standard than the average stock. It is an elastic standard, too. No matter how much success Apple has it will never be enough.

  3. Guys come on and get real … AAPL stock is overvalued, and not because it is a bad company … it is just too high. Implicit in the valuation is an average 10% growth per year in eternity …. that means that in 10 years sales should be 31bn, in 20 years 80bn and in 30 years $209bn

    To put things into perspective Microsoft sales are $36bn

    does this seem realistic?

    Obviously not … so just pipe down and expect the price to drop as the stupid analysts realize that growth cannot be sustained at this rate forever.

    At the same time expect apple to continue delivering great products and gaining share (I have ordered Tiger already)

    Cheers … and my advice: SELL your AAPL stocks and buy more of their products

  4. damn, “anal”ysts

    how bout they analyze my poop and tell me what they predict..two things I hate in life, taxes and analysts.
    they can suck the fluid out of my G5’s built in LC system….and choke.

  5. Analysts have always been behind the curve with Apple. Lately they caught up, and now they’re being very, very cautious. Apple is a company that has been going in the right direction since Steve Jobs took over, and that ain’t gonna change. This yeartheir marketshare will at least double, and this Christmas is gonna be huge for Apple. Also, watch for the back to school season to be big. The mac mini is sweeeeeeeeet for no taking up much space, and is perfect for a college kid. I’m not worried at all, although it would be nice if they could get a damned 3ghz Powermac out there.

  6. I don’t undestand very much about this people. But the fact is that, as nobody remember except me, last quarter I predicted sells for 1.100.000 CPU’s (not bad for a Philosophy Professor!). My outlook for next quarter is 1.500.000 (one will be my first Powerbook).

  7. Everyone must remember that the price of a company’s stock is not a reflection of the company. The price of their stock is based on investors impression of the company. When you buy stock you are actually investing in other peoples thinking. You are hedging against other peoples hedges. Apple continues to do great things and their stock goes up and down. Don’t take it personnaly. Stock price and the company performance are not as closely tied as analysts like to have you believe.

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