Tuesday, April 20, 2010

AAPL Earnings

AAPL reported a blowout second-quarter earnings release, and shares are indicated up 5% to 7% in the after-hours market. Considering that the stock is up 105% over the last year and that expectations were high headed into the print, it's quite impressive that the company was able to beat on every metric.

Earnings came in at $3.33 vs. $2.45 expectations, revenue at $13.5 billion vs. $12.04 billion consensus, with margins expanding to 41.7%, from 39.9% last year and 40% by consensus.

The product sales results were also stunning: The iPhone, its most profitable product, posted 8.75 million units, beating the 7.5 million whisper number. Mac units increased to 2.94 million vs. 2.9 million, and iPod units sold were 10.89 million vs. 10 million expectations.

Guidance was strong (although typically conservative) and will lead to higher earnings revisions for 2010 and 2011. For the third quarter, Apple sees $13 billion to $13.4 billion in revenue and $2.28 to $2.39 a share in earnings, vs. $2.65 consensus. International revenue as a percentage of the total grew to 60% from 50%, and total cash grew to $40 billion.

The accelerating growth in the quarter is quite an accomplishment, given the company's huge $224 billion market capitalization. With the iPad launch upcoming, further penetration of the Mac (only 10% share worldwide) and new product refreshes for iPhone and iPod and an increased mix of international revenue, the story and the stock have many more legs for growth. On a price-to- growth basis, the stock trades at 1.37 times forward, and my target implies 1.65 times growth -- very conservative (typical large growth companies trade north of 2 times) for a long-term quality growth story like this.....

long AAPL

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