Cramer: Apple’s Blowout Earnings Proved Wall Street Analysts Wrong

Apple proved Wall Street analysts wrong when it released earnings results that showed its quarterly profits had nearly doubled, while its revenue easily topped expectations, Jim Cramer said Wednesday on CNBC’s “Mad Money.”

Apple Store
Flickr: hairygrumpy
Apple Store

Thanks to Apple’s blowout earnings, its stock surged almost 9 percent to finish at $610 a share. Apple is nearly 6 percent away from its all-time high of $644 a share. The stock sold off 11 percent going into the release, though, due to a barrage of “awful and unhelpful” commentary from the Wall Street analyst community, Cramer said.

“Wall Street analysts don’t exactly have a sterling track record, but this, this was perhaps the biggest screw-up we’ve seen with a high profile stock in ages,” he complained.

To make his point, Cramer first noted that he views Apple as an investment, not a trade. Apple has an inexpensive stock that sells at a discount to many other technology stocks, Cramer said. He thinks the Cupertino, Calif.-based company has great future growth prospects, too, even despite the recent passing of Apple founder Steve Jobs.

But the analysts made a lot of mistakes along the way, Cramer said, especially going into earnings. While the analyst community expected Apple’s earnings to disappoint, it actually delivered a bigger beat than usual. Its revenues totaled $39.2 million, which is roughly $2.4 billion more than what Wall Street had expected, and a year-over-year increase of 59 percent. Apple’s net income increased 94 percent year-over-year, which translates into $12.30 of earnings per share and handily soared over the Street’s most bullish estimates.

Apple sold 35.1 million iPhones — which accounts for about half its revenue — in the March quarter, outpacing the 30 million or so expected by Wall Street analysts. Earlier this earnings season, wireless providers AT&T and Verizon Communications said they had activated far fewer iPhones than expected. In turn, analysts thought Apple’s iPhone sales would disappoint. This analysis proved to be errant, though, because AT&T and Verizon just don’t matter like they used to, Cramer said. Where the two carriers used to account for 31 percent of total iPhone sales, they now make up just 21 percent of total iPhone sales because Sprint Nextel sold 1.5 million iPhones.

The analysts got Apple’s iPad numbers wrong, too. Apple sold 11.8 million iPads, the latest version of which hit store shelves in mid-March. That compared with the average forecast of up to 13 million.

Cramer said the analysts also underestimated Apple’s retail stores, which sold 24 percent more product year-over-year. With more than 350 locations, the company is moving a lot of product.

The analysts worried that supply constraints at Qualcomm, which recently announced a shortage of capacity for one of its chips that go into the iPhone, Cramer said. In turn, the analysts grew concerned the release of the iPhone 5 could be delayed. But Apple executives said it has far more supplier options to deliver the iPhone without issue, he noted.

“Put it all together, and you have a classic case of virtually all the analysts missing the forest for the trees,” Cramer said. “They fret and extrapolate from all these individual negative data points from other companies, when they should be focusing on all the incredible opportunities Apple has going for it.

“I say stop listening to all of these bogus trading calls and focus on investing in Apple. That's the only way to make money in the most important stock of our time.”

—Read on for Cramer’s Earnings Preview for Thursday

Reuters contributed to this report

When this story was published, Cramer’s charitable trust owned Apple.

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