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AAPL Stock: 102.13 ( + 1.24 )

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AAPL drops on lower forecast for Q2

updated 06:55 pm EST, Wed January 18, 2006

Lower forecast for Q2

Apple's stock was down today in after-hours trading after the company offered a second-quarter forecast that was not as bright as investors hoped. Apple's forecast of 42 cents on revenue of $4.3 billion, which was short of analysts' average expectations of 51 cents per share on revenue of $4.83 billion, according to Reuters. The company said that the forecast, which represents a revenue increase of nearly 33 percent and double digit profit increase, is based on the shorter 13-week quarter, combined with a greater-than-normal seasonal decline in overall business--due in part to its large music sales in the December quarter--and an expected sales slow down in its transition to new Intel-based Macs. The company also said it may not meet demand for its forthcoming Intel-based MacBook Pro, which is due to ship in February.

"Their guidance being overly conservative for next quarter, that's what's causing the most chaos in the shares today," said Jim Grossman, portfolio manager at the Thrivent Technology Fund. "People want a little more explanation of why they're giving such conservative guidance."

Apple's success, focused much on the iPod and iTunes Music Store, may have distracted investors from its core business: the Mac, which is in the middle of a large-scale shift to new Intel processors and faces challenges.

"Historically the Mac has been the primary revenue generator," said Nittin Gupta, an analyst with the Yankee Group. "At this rate of growth, the Mac is not going to be their primary revenue driver. If they become too dependent on iPods and digital audio players, that's a risk over the long term. It's going to be hard to maintain those iPod shipment numbers."

Apple shares fell $2.22, or 2.6 percent, to close at $82.49, following disappointing results by Intel (and Yahoo!) on Tuesday. In after-hours trading, Apple stock fell below $78 before rebounding to $79.71, a drop of 3 percent since its close for the day.




by MacNN Staff

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Comments

  1. ZinkDifferent

    Joined: Dec 1969

    0

    Let's see...

    Apple makes conservative, yet safe, forecasts, which end up being almost always dead-on.

    Analysts try to second guess Apple, and offer their own forecasts, which end up being, almost always, dead wrong.

    Apple is being chastised for making too conservative forecasts, but if Apple were making more aggressive forecasts, and missing them, they would get picked apart by these same analysts.

    Yet, meeting the forecasts they provide, and sometimes going beyond them, is a bad thing, somehow, in this world.

    I'd say "Keep doing what you're doing, Apple!"

  1. testudo

    Joined: Dec 1969

    0

    Re: let's see

    All companies (except those run by idiots) use safe estimates, because if they went nuts and predicted a great quarter, and it failed to materialize, its not that it scares investors, it gets the company sued for investor fraud.

    Now, since all analysts know this, they of course are going to try to predict what a company's actual earnings are going to be. Then they also come out with what they're really expecting (the 'whisper' number), which is what most stocks end up being valued at.

    So, if Apple predicts 59 cents, and analysts average out at 61 cents, but whispers (hopes, if you will) say 67 cents, then of course the price will drop, because people bought on the hope of 67 cents, not 61 or 65 or 59.

    Also, I don't think Apple's numbers are 'right on', since they beat their own estimates.

    Finally, the reason they want to look at Q2 is to know why its so low, not that its low. But, beyond that, Q1 is behind us now, so who cares if they broke expectations. Its all a matter of what is the stock going to do in the next three months, which is dependent on what the company does. If they only plan on earning .42 cents a share, why shouldn't the price of the stock go down?

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