Owners' love of Apple not shared by Wall Street
While Apple (NASDAQ: AAPL) owners might love their devices, Wall Street does not love Apple's stock, at least based on the stock's drop following the posting of record quarterly revenues and profits.
On Wednesday after the stock market closed, Apple reported record revenues of $54.5 billion and a record new profit of $13.1 billion for the first quarter of its fiscal year 2013. This compares with revenue of $46.3 billion and net profit of $13.1 billion in the year-ago quarter.
Apple sold a record 47.8 million iPhones in the quarter, compared to 37 million in the year-ago quarter, and a record 22.9 million iPads during the quarter, compared to 15.4 million in the year-ago quarter.
These financial results hardly suggest a company in trouble. Yet, its stock price nosedived from $514 per share at the market close on Wednesday to around $450 at the close of the market on Thursday.
In addition, the results prompted at least 14 brokerages to cut their price target on the stock by $142 on average, according to a report by CNBC.
So what gives?
Apparently, despite the record revenues and income, Apple failed to meet Wall Street's revenue forecasts.
"The company faces a much more difficult business landscape, the competition is escalating and that's going to challenge profitability over the next couple of years," Douglas Kass, president of Seabreeze Partners, told CNBC.
Kass compared Apple today to Microsoft (NASDAQ: MSFT) in the late 1990s, when its explosive growth cooled. "They're both maturing, large cash flow stories. In the late '80s, early '90s, Microsoft expectations were elevated similar to what Apple was, let's say, in the middle of 2012," he said. Kass expects Apple's stock price to stay below $500 "as long as the eye can see."
Abhey Lamba, an analyst at Mizuho Securities USA, agreed. Lamba told Bloomberg that Apple has become a "value stock" like AT&T (NYSE: T) and IBM (NYSE: IBM). "This is a big shift in the company's position from a year ago. The growth has slowed down much faster than we anticipated," he said.
Certainly, record revenues and profits are not bad for financial results. Apple will no doubt continue to churn out popular and innovative products, even if the company is no longer the darling of Wall Street.