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.