While Apple sold 12.7 million iPads during the quarter, beating projection for 11.4 million units, its revamped Mac personal computer sold only 4.1 million units, a million short of analysts’ estimates. Cook said Apple couldn’t churn out units fast enough to keep pace with strong demand, thus curbing sales.
Last year, Cook reinstated the company’s dividend, which was stopped since 1995. Until Apple starts giving more of its $137.1 billion cash pile to investors it won’t truly become a value stock. The company’s 2.4% dividend yield is still behind similar technology companies like Intel Corporation (NASDAQ:INTC) which pays out 4.3%, Hewlett-Packard Company (NYSE:HPQ) with 3.1% and Microsoft Corporation (NASDAQ:MSFT) whose indicated yield is 3.3%. Chief Financial Officer Peter Oppenheimer told analysts that last quarter, Apple paid out about $4.5 billion in cash between dividends and stock buyback and plans to increase both.
Weak Investor Sentiment is a Buying Opportunity
BTIG co-head of research Walter Piecyk said , “People are concerned about how quickly sales are falling off after the initial product launches and whether the company can deliver new and interesting products to reignite growth.”
Apple’s price decline is not just a result of portfolio rebalancing, but a lack of faith in Apple’s products, as could be seen by declines in Apple supplier stocks. The shares of Apple suppliers were somewhat down with Hon Hai Precision Industry, its assembler, dropping 2.9% in Taiwan; AAC Technologies Holding, speaker-maker, down by 6% in Hong Kong and chip-maker Samsung falling 1.4% in Seoul. In New York, circuit-maker Cirrus Logic plunged 11% to $26 while flash memory supplier Fusion-io shed 1.1% to $21.
To address investors’ concerns over decreasing market share, Cook said Apple gives consumers more options and continues to sell older models at reduced prices, such as the iPhone 4 which was still selling out during the quarter. In China, where the company opened 4 stores in the past quarter, sales grew 67% to $6.8 billion.
With the latest results, analysts are now inclined to look at Apple as a value stock. After years of spectacular growth, they predict the new trend will continue and Apple will be like AT&T Inc. (NYSE:T) or International Business Machines Corp. (NYSE:IBM), offering investors more predictable earnings and steady dividends corresponding to slower sales growth. Mizuho Securities analyst Abhey Lamba said , “This is a big shift in the company’s position from a year ago. The growth has slowed down much faster than we anticipated.” Other analysts agree and think that Apple may soon attract value investors in view of these latest reports.
Some investors however, see Apple will regain growth ahead. The company earned $13.1 billion profit out of $54.5 billion sales for the first quarter and revenue would have been higher if supply constraints had not prevented it from keeping up with demand. Wedgewood Partners chief investment officer David Rolfe said , “This is not by any stretch of the imagination a broken company.”
Conclusion
The smartphone market is going to see lower prices for devices and lower profits. While future rivalry and price reductions are already priced into Apple shares, they still present an excellent buying opportunity for investors looking at the tech sector.
The article Apple’s Growth Slows, But Still An Attractive Buy originally appeared on Fool.com and is written by Bill Edson.
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