Apple Trounces Earnings Estimates

Here is a copy of my write-up of AAPL's conference call yesterday:

I call Apple (AAPL) the Rodney Dangerfield of tech, since the stock gets no respect. I'm sure plenty would argue that Apple has had a huge run over the years, and the stock is also up nicely this year, as well as after hours today. But the valuation is a slap in the face considering the accomplishments of this company. If this were any time period other than the post-recession negativity bubble, Apple's stock would probably trade at 25x earnings. That would have it trading almost double where it stands today, at a mere 13x forward earnings (which go up every quarter).

The company absolutely trounced the estimates. The analysts who were appearing on CNBC when the earnings came out could only say "Wow". EPS topped consensus by almost $2, coming in at $7.79. That is up 122% from the year-ago period. Revenue was equally surprising, coming in at $28.57 billion, up 82% from a year ago. That is astounding growth for a company the size of Apple. So much for the law of large numbers catching up this quarter.

The company sold 20.34 million iPhones during the quarter, representing 142% year over year unit growth. This was way above Street estimates and helped drive gross margins higher to 41.7% this quarter. Asia-Pacific was particularly strong, with sales nearly quadrupling. The iPhone launched at 42 new carriers globally during the quarter and is now available in 105 countries.

iPads were also stronger than expected, with 9.25 million sold during the quarter (183% unit growth). The company sold every single iPad it made during the quarter. The iPad continues to revolutionize the way corporate sales forces are working, and 86% of Fortune 500 companies are either testing or deploying iPads in the enterprise.

Macs were a little light vs. Street estimates at 3.95 million sold. But the 14% unit growth still healthily outpaced the PC market and IDC estimates. Apple will launch the new Lion operating system tomorrow. One thing that could have limited Mac sales during the quarter was that some consumers opted for an iPad instead of another laptop. That's what I am looking to do.

As for guidance for next quarter, it was typically conservative. Earnings per share are expected to be around $5.50, and revenue was guided to $25 billion. Gross margins are forecasted at 38%. But as we have seen quarter after quarter, the company's guidance means very little in the end, and I believe it is almost being tossed aside in forming expectations.

The stock touched $400 after hours, a nice pop. That makes for a nearly 30% rally from the recent June lows. As such, it wouldn't surprise me to see Apple rest again around the $400 level. But looking out further, I still like the stock to go higher, and am holding on to the shares we own and keeping it as one of our largest positions.

long AAPL