By JACK HOUGH
Normally, a 54% profit jump would be impressive even for a promising start-up in a booming economy. On Tuesday, America's largest firm reported such a feat -- even though its posh gadgets fetch high prices and consumer sentiment is broadly drooping.
Investors were far from satisfied, however. Apple (AAPL)
The stock plunged following the report in after-hours trading.
That's the trouble with a popular stock. As SmartMoney.com noted earlier Tuesday, Apple looked poised for a dip, bathed as it has been in excess popularity. Fully 93% of analysts who cover it recommend a purchase of shares. Just one analyst, Colin Gillis of BGC Financial, lowered his recommendation on the stock to "hold" before the earnings report, citing the possibility of iPhone sales disappointing.
They did. Apple sold 17.1 million units, well shy of forecasts for 20 million.
That's not a sign of waning demand, for two reasons. First, it's a 21% increase from a year earlier. Second, this year's September-quarter customers might have held off on iPhone purchases in anticipation of new model launch in October. Last year, Apple launched a new model in June, giving September-quarter customers ample reason to buy.
That's a timing quirk more than a disappointment. And if iPhone sales fell short in this year's September quarter they might top expectations in the December one.
Apple remains in excellent shape. Sales and profits are growing quickly and, as the company is quick to point out in presentations, its market share for phones and computers is low, suggesting there are plenty of customers to be won. Shares are now a bit more affordable and the company is stuffed with cash.
But prospective buyers of the stock shouldn't rush. Analysts are sure to revisit their remaining forecasts in coming weeks and a few might even issue downgrades. Fickle momentum traders might find love elsewhere for a while. There will be angst over whether the new management team is up to its task. Any of these might send the stock price lower.
Apple's Tuesday "disappointment" was mostly a matter of Wall Street disappointing investors and investors disappointing themselves. Once expectations are reined in, what will be left is a fine company at a fair price.