Apple results a mixed bag

By Gareth Watson | April 29, 2013 | Last updated on April 29, 2013
2 min read

Apple has reported fiscal Q2 earnings that beat expectations, but the street cared little about the past quarter’s results and focused on other information in the release.

Read: Apple shareholders want more of the pie

The company is returning a good amount of value to shareholders. It’s no secret Apple has had an incredible amount of cash on its balance sheet for some time and investors wanted to know what management was going to do with it.

Management responded by announcing it would return $100 billion to shareholders with US$60 billion in share buybacks through 2015 and US$40 billion in dividends. The quarterly dividend was raised 15% to US$3.05, which gives the stock a yield close to 3.0%.

Read: Apple adds $55 billion to shareholder payout

Investors didn’t gain any insight into future product releases, but we weren’t expecting Apple to reveal any secrets. Regardless, this quarter has left investors asking “what’s next”? There are a number of product launches expected in the second half of the year, so investors will have to be patient again to find out what’s in the product development pipeline.

The company’s guidance for the current quarter was well below what analysts were expecting. Consensus estimates were way too high going into the results, so perhaps this was not surprising, but the numbers were ugly nonetheless. So things will get worse before they get better.

Read: Apple caves to Chinese censorship

Did the investment community like the results? We think Wall Street opinion was mixed. On the one hand, the company’s strategy was not clarified to a great extent; however, the return of value to shareholders did manage to lift the stock. It’s fair to say this quarter’s results emphasize that we are seeing a transition in the company’s shareholder base from a growth orientation to more of a focus on value and income.

Such transitions take time, so Apple investors will have to be patient for the remainder of the year. That’s not to say the company is in significant trouble; however, now that Apple has grown to such a massive size, it has become much more difficult to grow rapidly. Accordingly, our U.S. research partners at Credit Suisse lowered their target price this week to US$525, but still rate the stock to outperform.

Read: China’s pressure on Apple politically motivated: FT

Gareth Watson is the Vice President, Investment Management & Research at Richardson GMP in Toronto. This team of research experts is responsible for monitoring and interpreting economic, geo-political situations, current market environments and trends. @Gareth_RGMP

Gareth Watson