Investors punish Apple after Q1 performance disappoints.
Investors punished Apple after its Q1 2013 results announcement yesterday, fell short of analyst expectations – shares closed at $ 450.50 – down as much as 12% yesterday – and fell even further to $448.34 in afterhours trading in the US.
This is a massive fall from grace for the company whose shares were predicted to hit $1000 this year.
Yesterday’s volatility knocked $50 billion off Apple’s market cap, which now stands at $482.67 bn.
Before the earnings announcement, the median price target on Apple was $725, and twelve analysts had targets at $800 or higher up to $1,111, reports Reuters.
iPhone sales of 47.8m fell short of analyst predictions’ of 48-50 million unit sales, as analysts worry about the popularity of the once dominant smartphone. iPad and Mac sales also fell short of analyst predictions.
Read: Apple TV? “We’re Pulling Strings”: Cook
Other bad news was gross margin was also down 6% to 38.6% compared to 44.7% in the year-ago quarter.
At the post results earnings call, analysts questioned Tim Cook about the long term case for a larger screen iPhone to match rivals like HTC and Samsung, all of who have released hugely successful 4.5-5″ devices.
And lets not forget Samsung is now the No. 1 phone maker globally and now leading the way on the trend towards larger screen smarties – think 5.3″ Galaxy Note I and II which are selling like hot buns.
“We think Apple is losing the screen-size wars,” said Peter Misek, from analyst firm Piper Jaffray, previously a major advocate of the Cupertino giant.
“[The] slowdown in iPhone sales is real … it appears that demand in the second half of the quarter and into CQ1 was much weaker than management or we expected.”
Piper Jaffray has downgraded Apple shares from ‘Buy’ to Hold:
“We are downgrading Apple from Buy to Hold due to: slowdown in iPhone sales is real and material; we believe margins are likely to continue to fall; new guidance methodology implies less potential upside to the model. We cut our estimates and PT from $800 to $500.”
But Cook was having none of it.
“No one comes close to matching the quality of Retina screen” Apple boss told analysts, referring to the 4 inch display on iPhone 5, released in September.
“We put a lot of thinking into screen size” and are “happy” with what’s been done, he said.
When asked about marketshare in the phone market he said: “the most important thing to Apple is to make the best products in the world to enrich customers lives” and is not as focused on marketshare.
Cook blamed the well documented supply constraint issues on iPhone 5 and iPhone 4, which indicates sales could have been far higher.
When quizzed about the rumoured order cuts for the iPhone 5, he said Apple’s supply chain was “too complex” to comment on and has various sources for its products.
The Company insisted its profit and revenue results of $13.1 billion, $54.5 bn respectively, were at “record” levels.
However, it seems analysts expectations may have been overinflated.
The tech giant, now under severe pressure to exceed its previous quarter results, has enjoyed hyper growth over the last few years, buoyed on the popularity of the iPhone and iPad.
Apple also blamed expectation shortfall on a 13-week fiscal quarter instead of usual 14 week sales period.
But let’s look at the figures.
Apple is still the most valuable company in the world, sold almost 48 million iPhones – 10 million more than a year ago – and 22.9 iPads – over 7 million more than Q1 2012.
So its really not that bad. At all.