As expected, Apple (AAPL) had a very merry Christmas, posting the best quarter in its 32-year history, with earnings up 58% over the same period last year. (link) But the good news fell on deaf ears in a market roiled by the broader meltdown.
And the company’s conservative projections for the next three months seems to have spooked investors attuned for signs of a coming recession. Apple’s shares, having closed at 155.64, down 3.5% for the day, plunged more than 12% in after-hours trading. At one point the stock hit 136.75, a four-month low.
If this were any other company, the market’s reaction would have seemed bizarre. Except for sales of its iPods, which have nearly flattened out at 22.1 million units, the company’s results were strong across the product line, beating both Apple’s and its analysts’ expectation.
The company posted revenue of 9.6 billion and earnings per share of $1.76 (compared with the consensus of 9.46 billion and EPS of $1.61). Apple sold 2.3 million iPhones in the quarter that ended in December and 2.319 million Macs, an increase of 44% year to year. (Desktop sales grew 53%, five times faster than the rest of the PC industry, per IDC.)
“The Macintosh business is on fire,” COO Tim Cook said during a conference call with analysts (transcript), noting that more than half of the sales of Macs in Apple’s 204 stores were to new customers.
But Apple is not any stock. The market has come to expect extraordinary earnings growth, especially in the Christmas quarter. Traders instead seemed obsessed with Apple’s forward-looking guidance. Although the company projected sales for the March quarter of $6.8 billion, up 29% year to year from 2007, its projected earnings per share of 94 cents were considerably below Wall Street’s average $1.09 forecast.
Quizzed by skeptical analysts, who’ve been low-balled by Apple’s guidance more than once in the past, CFO Peter Oppenheimer seemed almost apologetic. “We’ll leave the economic forecasting to others,” he said. “We are focused on managing our busines
Piper Jaffray analyst Gene Munster confessed that in his five years of covering Apple he’s never seen anything like the market’s reaction to these earnings. “I talked to one of our technical analysts before the call and he told me that the stock was going down to 130 no matter what results Apple posted,” Munster said in a phone interview. “Something bigger is going on in people’s minds. There’s a feeling that stocks need to go back to their 200 day averages as the market corrects itself. This is not a bullish sign for other tech stocks going forward.”
