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Apple Quarterly Earnings Send Stock Price Spiraling Down

Jan 28 2014

English: Steve Jobs shows off the white iPhone...

English: Steve Jobs shows off the white iPhone 4 at the 2010 Worldwide Developers Conference Español: Presentación del iPhone 4 por Steve Jobs en la Worldwide Developers Conference del año 2010 (Photo credit: Wikipedia)

It could only happen to Apple. They come in with blockbuster numbers in their Quarterly Earnings report and the stock price tumbles. Ipad sales up, iPhone sales up, overall sales up, the CEO upbeat about the future ..... but oh-oh, iPhone sales, though up, don't meet analysts' expectations. So down goes the stock price.

So what's the problem? Well, first off Tim Cox is no Steve Jobs. Jobs had a knack for managing expectations. He was always low-balling the numbers that would be reported on the next Quarterly Earnings report and then beating them. Cox tells investors how wonderfully the company is doing, and look out below stock price if the Apple Quarterly Earnings show any weakness.

There are a couple of problems with Apple that are really not reflected in the Quarterly Earnings. For one, the company is sitting on a pile of cash, like about a hundred billion dollars, and investors wonder if the company will ever use this money in a productive way. A stock buyback which artificially boosted the earnings per share this quarter apparently isn't good enough. Nor is the two percent dividend.

In addition, Apple seems to be transitioning from a growth company to a value company; that's certainly what the price to earnings ratio of about fourteen indicates. After three blockbuster products, the company seems to be hunkering down with new iterations of its existing line of products, particularly ipad and iPhone. Apple TV, widely expected to be the next driver of earnings, is nowhere in sight.

Though every new edition of the iPhone brings devotees out in droves and sales in China and other emerging markets will drive Apple Quarterly Earnings for some time to come, unless the company has a new i-whatever up its sleeve, the stock price will probably be range-bound.

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