Apple: Even With Disappointment, Still Good For Long Term


I said it earlier, and I'll say it again: traders trade, investors invest, and those with a longer term time horizon -- months instead of weeks; weeks instead of days -- will reap the rewards when it comes to Apple.

That said, traders are ruling the day after-market with Apple and having their way with those long these shares. Apple blew past expectations for its third fiscal quarter, reporting $1.19 versus the $1.08 that Wall Street expected.

And Mac sales once again exceeded 2 million units, selling 2.5 million Macs last quarter, and well over 11 million iPods, when analysts were looking for 10.5 million iPods sold instead.

The trouble for Apple comes from its falling ASPs, or average selling prices. And of course, guidance. As I've written before, and Apple investors well know, Apple is always very, very conservative in its outlook. Some call it sand-bagging; some call it outright manipulation. But for a company that has now beaten Wall Street's expectations quarterly for two years straight, it's a strategy that has worked for them, and a strategy Wall Street is wise to.

So this time around, analysts were looking for $1.25 a share. Realistically, they expected Apple to guide somewhere around $1.14, and said anything under $1.11 would be viewed negatively. All of that on $8 billion in revenue. What does Apple do? Guide the Street to $1 a share instead, on $7.8 billion in revenue. Both numbers widely viewed as negatives, especially when you take into account that Apple's fourth quarter is characterized by back-to-school shoppers.

Incidentally, the iPhone number of 717,000 was essentially in line with expectations.

For any other company, Apple's earnings report would be blockbuster. But this is Apple and this company beats to an entirely different financial drummer. Which is unfortunate. But Apple can only thank itself in times like these. Expectations are some time irrationally high surrounding this company, but that's partly because of the enormous hype this company cultivates. Fanatic customers; fanatic investors.

It's kind of like celebrities who complain about intrusive paparazzi, but who still bask in the glow of their celebrity. Same goes for Apple: the company basks in its unique, super-stardom, but also has to constantly surprise and impress and when it doesn't, it has to pay the price. Right or wrong, that's the way it goes.

That could mean opportunity for those with a longer term horizon. So, a message for investors, not the traders dumping their shares right now: I suspect cooler heads will prevail, depending on the rationale Apple offers for the conservative guidance. With nothing fundamentally horrible, these shares will likely weather today's after-market lurch and begin their long, slow climb back.

Questions? Comments?