Despite publishing an excellent set of quarterly results on Tuesday, Apple stocks have received unkind treatment from investors with the stock dropping by as much as 8% in late trading after the release of the results.
There are no apparent fundamental reasons to have caused the large fall in the price of Apple Inc. (AAPL, -4.23%) stocks, with investor sentiment seemingly influenced by analyst views and a perceived lack of transparency by Apple Chief Executive, Tim Cook.
Several analysts picked up on two negative aspects of the results which they focused on, making adverse comments about the earnings announcement. Apple provided guidance saying its expected sales for its fiscal fourth quarter would be in a range of between $49 billion and $51 billion. Analysts polled by Thomson Reuters, before Apple’s announcement, had resulted in a consensus fiscal fourth quarter sales estimate of $51.13 billion, in excess of the Apple forecast.
Sales of $49 billion, at the lower end of the Apple projection, would still represent a year-to-date increase of a very respectable 16%. Analysts appear to have only seen the negative aspects of a forecast below the consensus without taking an optimistic view of at least a 16% increase in sales, no mean achievement if reached.
While the Apple forecast might be an indication that sale growth is slowing, there is no evidence to indicate that sales will decline which is the way a number of analysts tended to interpret the Apple guidance.
In addition, analysts and investors had expected much greater detail with regard to sales of the Apple Watch which featured in a quarterly report for the first time.
The only comment from CEO Tim Cook with regard to the Apple Watch in the earnings release was to say the company was “incredibly excited” about the watch. Questioned about his reticence to provide sales details during the earnings conference call, he said, “[It was] not a matter of not being transparent, it was a matter of not giving our competition insight [into] a product that we’ve worked really hard on.”
Cook added, “sales of the watch did exceed our expectations and they did so despite supply still trailing demand at the end of the quarter.”
Cowen Group were the first to downgrade Apple by reducing the stock to market perform from outperform on Wednesday morning. Analyst Timothy Arcuri also lowered his price target on Apple stock from $140 to $130, quoting increasing concerns about lower demand projections for the iPhone 6 from China.
Other analysts such as Katy Huberty of Morgan Stanley reiterated an overweight view on the stock, keeping the price target at $155.
BMO Capital Markets analyst Keith Bachman also expressed a more bullish sentiment saying Apple had a “very good quarter against high expectations”, leaving his outperform rating and $145 target price unchanged.
Apple might be a classic example of how analyst views and investor sentiment can be based on perceptions rather than on facts.
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