Monday, January 28, 2013

Apple Inc. (AAPL) Beat Earnings Guidance, So Why The Rotten Share Price?

According to a report from ValueWalk, Apple Inc. (AAPL) beat their guidance estimates in the latest earnings report by more than $2 billion. Guidance was set at $52 billion and Apple reported $54.5 billion, which begs the question, why the rotten share price?

Apple opened this morning below $440 per share, which is a huge gap from its $705 high water mark of last Fall. So, what happened, and why are investors scurrying to get out of the way of the falling price?

Well, for starters, Apple missed the estimates of nearly everyone outside their own office. While they sold a record breaking 47 million iPhone units during the quarter, they missed estimates of 50 million units, which left investors feeling bruised and taken. Had they made the 50 million unit mark, BCG analysts believe the stock would have seen a positive movement, rather than the plunge in price we have been witnessing lately.

Another area where Apple is perceived to be hurting is its performance related to the index it trades in. The NASDAQ is mostly comprised of tech stocks, and Apple Inc. has been its driving force all year last year. The stock carried the weight of other, less successful companies through the rough quarters of 2012. While the NASDAQ remained steady overall, Apple Inc. took off and boosted the numbers of the entire exchange. When the NASDAQ languished, Apple flourished, keeping the trading floor busy. However, now the company follows more closely to the rest of the exchange, if not falling off even.

BCG has set their price target at $550, which is a $25 reduction from earlier estimates. While many people thought it would never happen, it appears that Jeff Gundlach may have made the right call, when he said Apple would come crashing down. However, the tech company will not stay down for very long, and now may be a great time to snap up some of Apple's shares, while the price is under $450 per share.