Cupertino has been on a winning streak for a very long time. The company was struggling towards the end of the previous century, but then came the iMac. It was a massive success, but then came the iPod revolution. After the iPhone and iPad were released, the company climbed to being the most valuable in the world.
Ever since the passing of Steve Jobs, analysts have been questioning whether Apple is still capable of being an innovator and it shows in their market capitalization. From a high of over $700 per share in Sept 2012, it has been hovering around the $400 mark lately. While their latest results posted on Tuesday, 23 April would look great for most other companies, some people say it might be time to start seeing red lights.
The period ending 31 March is the second quarter in Apple’s trading year, and the numbers still look pretty solid. Revenue was up from $39.2 billion to $43.6 billion year-on-year, with sales of 19.5 million iPads and 37.4 million iPhones during this period. This is actually a decrease in sales from Q1 (which includes the holiday season), when 22.9 million iPads and 47.8 million iPhones were shipped. What is raising a couple of flags among shareholders is the decline in net profit from $11.6 billion to $9.5 billion year-on-year. This is actually the first year-on-year decline in net profit that Apple has seen in almost a decade!
It will be interesting to see what Apple stock does over the next month, with rumours of a smaller, cheaper iPhone floating about as well as a phablet sized iPhone. I don’t believe there is any need to panic, and the doomsday prophets should look at the history of the company. When they are backed against a wall, Apple finds a brilliant new innovation to claw their way to the top again. I wouldn’t be surprised if we see that happening again, but it will need to be sooner rather than later.
Besides, investors should still receive a higher dividend than last year, as CEO Tim Cook has talked about dipping into their vast cash pool to supplement investor earnings. In fact, with a cash stockpile standing at $145 billion, don’t be surprised if we see a couple of acquisitions in the next 12 months either.