Apple down on better-than-forecasted margins; some see a buy opportunity

Apple Online Store“Apple Inc (AAPL) shares sank as much as 6 percent on Tuesday on disappointing iPad shipments and margins, but most analysts remained bullish on the stock, expecting a buoyant holiday season and sensing a buying opportunity,” Jennifer Robin Raj reports for Reuters. “Apple posted a better-than-expected profit helped by iPhone sales, but margins and iPad shipments came in below expectations during the fiscal fourth quarter.”

MacDailyNews Note: The “problem” with iPad is that Apple’s suppliers can’t make them fast enough to satisfy demand. While that’s a nice problem to have, Apple does need to focus on ramping iPad production. Apple’s gross margins for the quarter were 36.9% which was above Apple’s guidance of 35% for the quarter:

We expect gross margins to be about 35% reflecting approximately $14 million related to stock-based compensation expense. We expect most of the sequential decline to be due to a higher mix of the iPhone 4 and iPad sales, which have higher cost structures and provide great value to customers as well as the revenue deferral impact of the iPhone 4 case offer. To a lesser extent, we expect the sequential decline to be driven by back-to-school promotion and the absence of the favorable adjustment that benefited gross margin in the June quarter.Apple CFO Peter Oppenheimer, during Apple’s Q3 2010 earnings conference call with analysts, July 20, 2010

Raj continues, “Apple, which typically issues very conservative outlooks, forecast first-quarter earnings of $4.80 a share, below consensus estimates for $5.07 a share. ‘Guidance implies a material drop in iPhone 4 gross margins and likely slightly lower iPad margins due to a more rich feature set,’ UBS said, adding that it views this ‘as largely component related.'”

“With gross margin expectations reset and expectations for strong holiday demand, the pullback is an opportunity, UBS added, echoing several other analysts,” Raj reports. “Analysts expect solid sales of iPhone 4 and iPad this holiday season and noted strong demand for the iPhone in China. ‘This success is playing an important role in bolstering the broader Apple brand internationally, thereby opening the door for the Mac and the iPad, whose geographical footprint has room to expand materially,’ said Oppenheimer.”

Full article here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

40 Comments

  1. What did you expect?

    Every single quarter, Apple blows away the Street and has huge growth YOY.

    Then, Apple puts out its conservative guidance the stock drops the next day.

    So a wise person buys that day, low and behold, the stock rises over time.

    This is pretty easy to figure out, folks. Buy today and hang on for the ride (and if you’re going to sell, do it a couple of days before the next quarterly report to maximize your shares).

  2. What did you expect?

    Every single quarter, Apple blows away the Street and has huge growth YOY.

    Then, Apple puts out its conservative guidance the stock drops the next day.

    So a wise person buys that day, low and behold, the stock rises over time.

    This is pretty easy to figure out, folks. Buy today and hang on for the ride (and if you’re going to sell, do it a couple of days before the next quarterly report to maximize your shares).

  3. Analysts are greedy and stupid !!!!

    It is very clever to invest in iPad marketshare thanks to a very attractive price level and keep the competition away.

    What is the difference if Apple has now 51 oder 52 billion Dollar in cash, but if they own the tablet market, then they can earn 100 of billions in the next years.

  4. Analysts are greedy and stupid !!!!

    It is very clever to invest in iPad marketshare thanks to a very attractive price level and keep the competition away.

    What is the difference if Apple has now 51 oder 52 billion Dollar in cash, but if they own the tablet market, then they can earn 100 of billions in the next years.

  5. Apple reported a huge ( for them ) amount of inventory despite gangbusters sales. In the week(s) running up to this statement, Apple was prepping to add Target, Wal-Mart & Verizon to it’s vendor list for iPads. At the same time Apple I
    Has probably been ramping up inventory of the expected new MacBook Air and iLife SW bundle for release in the October-December Quarter. This inventory would show as a drag on the reported quarter, but sales in the next. You can figure out what that means.

  6. Apple reported a huge ( for them ) amount of inventory despite gangbusters sales. In the week(s) running up to this statement, Apple was prepping to add Target, Wal-Mart & Verizon to it’s vendor list for iPads. At the same time Apple I
    Has probably been ramping up inventory of the expected new MacBook Air and iLife SW bundle for release in the October-December Quarter. This inventory would show as a drag on the reported quarter, but sales in the next. You can figure out what that means.

  7. My folks’ financial advisor told them to sell all their AAPL before the end of the year. Something about capital gains, tax rates rising, etc. She said the guy said that he doesn’t care if they sell Dec 31 and buy Jan 1, as long as they sell in 2010.

    Makes me wonder how many people are getting this advice? Could mean an otherwise unforeseen bump in the road for the AAPL stock price…

  8. My folks’ financial advisor told them to sell all their AAPL before the end of the year. Something about capital gains, tax rates rising, etc. She said the guy said that he doesn’t care if they sell Dec 31 and buy Jan 1, as long as they sell in 2010.

    Makes me wonder how many people are getting this advice? Could mean an otherwise unforeseen bump in the road for the AAPL stock price…

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