Apple Stock Rises After Earnings Easily Beat Forecasts

This post was updated on April 20.

Apple reported earnings of $6.40 a share on revenues of $24.7 billion for the three months ended March 31. Strong iPhone and Mac sales helped push earnings well ahead of consensus estimates, offsetting iPad sales that at 4.7 million were significantly below expectations, although one analyst had it pegged pretty well. Apple's stock (AAPL) reacted well to the report, rising about 2.5 percent immediately after.

The following was posted on April 19.

When Apple releases quarterly earnings after the market closes Wednesday, it will be amid a distinctly different backdrop from the one that has accompanied earnings announcements in past quarters. Apple, its stock and the story of strong, never-ending growth that shareholders have bought into are engendering widespread doubts.

As noted in a recent post, the market share of the iPhone and other mobile devices using Apple's operating system is stagnating, one key factor that had led commentators, including longtime supporters of the company and its stock, to wonder whether Apple is generating a lot of buzz and not much sting. Then there is the Nasdaq 100 rebalancing, in which Apple will be the biggest loser by far.

These developments have not gone unnoticed by investors. Apple's share price hit a nearly-four-month low on Monday. That may not sound so bad, but it's the longest stretch in more than two years during which the stock has produced no net gain. Even the worst price during the flash crash on May 6, 2010, marked only a two-and-a-half-month low. Mary Ann Bartels of Bank of America Merrill Lynch Global Research noted recently that Apple ranked 85th in price momentum among the 100 largest stocks in the Standard & Poor's 500-stock index.

Doubts about Apple - expressed in writing and in trading - are proliferating, but opinion remains conspicuously frothy among the analysts at Wall Street firms that guide mainstream investor opinion. The consensus estimate for Apple's second-quarter earnings (Apple's fiscal year runs October through September) is $5.39 a share, a stupendous 62 percent higher than the same quarter a year ago.

That leaves plenty of scope for disappointment, and as Google's results last Thursday show, investors are in no mood to be disappointed. Google's earnings came in at $8.08 a share, all of 2 cents less than expected, and the stock (GOOG) dropped more than 8 percent the next day.

Could something similar happen to Apple? It almost certainly will if it misses its estimate. A downdraft is even possible if the number comes in as expected but is less than some unspecified whisper number that investors have in their heads.

The negative comments being made about Apple and the recent mediocre performance of the stock, combined with persistently high earnings forecasts, suggest that Apple is especially vulnerable to bad news - even if it's not really bad. A less-than-stellar result Wednesday could inflame investors' fears that Apple is losing its mojo.

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