Thursday, January 24, 2013

AAPL Missed Earnings Leave Rotten Taste In Munster's Mouth

Apple Inc. (AAPL) has had its shares of ups and downs recently, but today is definitely making some investors nervous. The stock has dropped more than 10% since the market opened, and is currently trading at $454.84. This is a big difference from its all time high of $705, just this past Fall.

So, what has investors so worried? Why is the price of the most valuable company in the world falling like a brick from a skyscraper window?

The simple answer is that investors are afraid the interest in Apple products is waning. The iPhone is the premium smartphone on the market, but with many new Android phones that are a fraction of the cost being sold, demand seems to be lower than expected for the iPhone 5. Today's trading follows the earnings reports that Apple has released for the 1st quarter of FY2013.

According to the earnings report, Apple sold 47.8 million iPhones in the first quarter. While this is equal to 10.8 million more units than Apple sold in the same quarter for 2012, it still fell short of estimates that came in around 50 million. While investors seemed to be disappointed with the tech giant, Tim Cook, Apple Inc. (AAPL)'s CEO did not seem to be discouraged by the numbers at all.

Cook said, "No technology company has ever reported these kind of results."

He is correct in that statement. Although estimates may have been higher than actual sales numbers, Apple has turned an impressive corner in the last year. However, will its reign as the top tech company continue, or will investors fears prove to be true, as consumers take more interest in cheaper options? After all, it looks like Jeff Gundlach was right and Gene Munster was wrong this time around. Munster had a price target of $875 on Apple, while Gundlach said the company would be worth less than $450 this year. At the current moment, it appears that Gundlach may have been 100% correct. But will Apple resurrect itself?

I suppose, only time will answer that questions for sure, but I think it is safe to say that even with the drop in price, Apple is going to be a force to be reckoned with for the next few years at least.