Apple Stock News

Apple released its second quarter earnings report on Tuesday after the markets closed and narrowly beat expectations. The company posted earnings per share of $1.85 and revenue of $49.6 billion. While these figures did beat expectations of $1.81 and $49.43 billion, the stock traded as much as 7% yesterday in after-hours trading as investors were unimpressed by the smallest EPS beat in two years. The recent quarter is traditionally the company’s weakest, but guidance for the coming quarter was also short of expectations leading to the selloff.

The recent quarter is usually the weakest for iPhone sales, but the company managed to sell 47.5 million units, 35% more than in the same quarter a year ago. Prices were also higher as revenue increased 59%. But the 47.5 million iPhones were less than the expected 48 million, and the resulting selloff of the stock represents just how dependent on iPhone sales the company is. The smart phone made up 63.2% of quarterly revenue, and investors are assuming that it will be hard for the company to maintain its growth rate, even with China posting impressive figures.

The lower performance of the iPhone 6 and 6 Plus also damages the belief among analysts that the current version of the phone would have a longer tail life compared to other versions. CEO Tim Cook did say that the company had the biggest ever rate of users switching over from Android, leaving the possibility that many Apple users are still waiting to upgrade their older phones. Besides the iPhones, analysts wanted to see how the Apple Watch did, but results were lumped in with other and Cook did not give specifics besides stating it did better than the company had expected.

The dip of the stock price should just be temporary, as the company’s valuation is now super cheap when taking the $202.8 billion cash pile Apple has now. The forward P/E ratio is now under 10, which is considerably less than the overall market, trading at 17 times earnings. With the company being punished for not beating its expectations by enough, look for the stock price to rebound and reach new highs going forward.