Earnings results
CEO Tim Cook was unusually candid about the tepid nature of Apple Inc. (NASDAQ:AAPL)’s latest operating results: “Though we’ve achieved a credible scale and financial success, we acknowledge that our growth rate has slowed and our margins have decreased from the exceptionally high level we experienced in 2012.” For the second fiscal quarter, Apple saw profits fall by 18% even with an 11% rise in revenue. Reduced analyst expectations had the company earning $10 per share; Apple reported EPS of $10.09 relative to $12.30 a year earlier.
Other news
As a part of the release, the company also announced that it was accelerating the rate at which it returns money to investors. The dividend will be increased by 15% to $3.05 per quarter and a stock repurchase program will be put in place as well. All in all, the company plans to return as much as $100 billion to investors by the end of 2015. The move is seen by some analysts as a good start rather than a complete solution, as shareholders have been clamoring for more since the shareholders’ meeting.
In addition to earnings details and an updated capital plan, Cook hinted that new products would not be available as quickly as once thought. He alluded to new releases in the fall, meaning the iPhone 5 upgrade would miss the summer release some had hoped for. Rumors of a cheaper iPhone abound, though it seems this may be delayed as well.
Behind the numbers
While the operating results were hardly glowing, putting them in context is an important first step. It is very easy to forget how stellar Apple Inc. (NASDAQ:AAPL)’s results have been, even compared to rivals like Google Inc (NASDAQ:GOOG) and Samsung. Google Inc (NASDAQ:GOOG) has avoided the plunge that took Apple shares down 44%, but on valuation and other metrics, Apple’s stock looks compelling here. The impact of these past results is that the street is now looking for near perfection from the company. Most companies and investors would salivate over Apple’s results, yet they look meager relative to hopes.
Still, the report was not without some points of concern. For example, growth in China came in around 8%. This was the slowest growth region for the company behind the U.S., underscoring how much of a challenge Apple Inc. (NASDAQ:AAPL) faces in this critical market. With Android still the dominant OS, and with Nokia Corporation (ADR) (NYSE:NOK)‘s Windows Phones doing well, Apple’s success is far from certain in the region.
Ultimately, the $400 level remains a critical one for Apple Inc. (NASDAQ:AAPL), particularly over the next few days. If the stock can hold above this mark, investors may gain the confidence to help push it higher. If shares falter below $400 for an extended period, the stock could tumble further. Even given this risk, an allocation makes sense here because the pure value is absolutely present.
The article Can Apple Stay Above $400? originally appeared on Fool.com.
Fool contributor Doug Ehrman has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google.
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