Apple Shares Poised to Soar on Record Q1 2011 Results
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    Apple Inc. Paid the Toll of Japan Crisis; Poised to Recover

    Apple Inc. (NASDAQ: AAPL) shares gained 2.30% this morning, moving toward recovery after the stock tumbled 6.7% over the last two trading days on an analyst downgrade citing deceleration in sales growth for an important manufacturing partner in China. The stock was also harmed by the Japanese crisis, since the country is a major supplier of microchips and glass for displays used in production of the iPhone and the iPad. The eventual closing of semiconductor factories, following the earthquake, tsunami and nuclear power plant crisis as well as the subsequent shortage in electricity supply jeopardizes the production of electronic devices around the globe.

    The recent decline in AAPL stock price annihilated the preceding appreciation caused by the successful launch of the iPad2. As of March 16, AAPL traded in the range of $330.01, flat when compared to beginning of 2011 price of $329.57. With a 52-week range of $199.25-$364.90, the March 16 trade is on the higher end of that range.

    AAPL’s growth story is impressive, with revenue and EPS growing in average 36% and 58% a year over the last five years, respectively.  The company earned $15.15 a share on revenue of $65.2 billion in fiscal 2010, compared to $9.08 a share on revenue of $42.9 billion in fiscal 2009. The company’s stock price increased 5-fold over the last five years to became the second-largest company in the United States.

    The company picked up the pace during the first quarter of fiscal 2011, with growth rates exceeding historical levels and analyst expectations. For the last reporting quarter, Q1 FY2011, ended December 25, 2010, AAPL’s revenue rose 71% to a record of $26.7 billion, much better than analyst consensus’ forecast for revenue of $24.4 billion. Previously, for Q4 FY2010, the company’s revenue jumped 67%. AAPL reported earnings of $6 billion for Q1 FY2011, or $6.43 cents a share, up 78% from a year-ago net profit of $3.4 billion, or $3.67 a share. Analysts on average were expecting a profit of $5.40 a share, according to Thomson Reuters.

    The company’s acceleration was buoyed by holiday purchases of iPads, iPhones and Mac computers, which sales smashed even the most optimistic estimates last quarter. AAPL sold 4.13 million Macs during Q1 FY2011, a 23% unit increase over the year-ago quarter. The company sold 16.24 million iPhones in the quarter, representing 86% unit growth over the year-ago quarter. Moreover, AAPL sold 7.33 million iPads tablets during the quarter, which is approximately a million more than analysts were expecting.

    Despite the growth, a number of analysts have pointed that Google Inc.’s (NASDAQ: GOOG) Android platform is gaining market share from both iPhone and iPad, wearing away the company’s growth potential. According to a recent report from Nielsen, Android is claiming 29% of the U.S. smartphone market for the last quarter of 2010, while Apple and Blackberry maker Research in Motion Ltd. (NASDAQ: RIMM) tied with 27% each.

    Meanwhile, Strategy Analytics said that tablet sales overall more than doubled to 9.7 million in the fourth quarter, from 4.4 million in the third quarter. The iPad’s share of those global sales dropped from 96% in the third quarter to 75% in the last quarter. Tablets running on Android, meanwhile, rose from 2.3% to 22%, due to the growth of Samsung Electronics Co.‘s Galaxy Tab.

    Competition in the mobile tablet category is poised to heat up even more, as Dell Inc. (NASDAQ: DELL) and Motorola Mobility Holdings Inc. (NYSE: MMI) have also launched tablets running Android. In addition, Hewlett-Packard Co. (NYSE: HPQ) and Research In Motion (NASDAQ:RIMM) are also planning similar devices.

    The recent launch of the iPad 2 is poised to beat the success of previous version and sustain the company’s growth at stellar rates. AAPL sold nearly 15 million iPads in the first three quarters it has been available. The first reports confirms that the iPad 2 debuted exceptionally, with sales probably nearing 1 million units during the first weekend, and more importantly, expanding its customer base away from the owners of the iPhone or the iPad. As a result, the sales of the new iPad 2 outperformed both the analyst estimates, who bet on sales of 0.5-0.8 million devices during the first weekend, as well as the debut sales of iPad, which neared 0.3 million.

    Over the long term, the market expect the sales of the iPad 2 to range between 25 million-30 million in fiscal 2011 and to approach $40 million in fiscal 2012. These estimates can be characterized as rather conservative, given the estimates of the research company Gartner, which predicted that sales of tablets could grow from 19.5 million in 2010 to 208 million in 2014.  However, even these conservative estimates, have the potential to significantly scale the company’s sales going forward. AAPL can generate approximately $15 billion from the sales of iPad 2 in fiscal 2011.

    Despite the expansion of Android platform, the temporary problems caused by the Japan crisis, AAPL will continue growing exponentially leveraging the company’s ability to innovate and technology leadership. Moreover, the company is reaching new customers internationally and among businesses that have not typically used its products. The iPad 2 is already a hot issue, with supply struggling to meet the burgeoning demand, despite the fact that distribution is still limited to a small number of countries.

    With the most of its competitors trying to catch up, AAPL has the power of the first mover as well as all the time and abilities needed to improve or build new devices and maintain the leadership.

    Should you buy or sell AAPL? Visit www.applestock.org to do your own research and decide.

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