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Reasons to Buy Apple Inc. (AAPL) After Earnings

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Apple Inc. (NASDAQ:AAPL) was rising more than 5% on Wednesday after the company reported earnings results above analysts’ expectations the day before. The company is not completely out of the woods yet, but things are looking much better for Apple Inc. (NASDAQ:AAPL) investors from middle term point of view.

Apple Inc. (NASDAQ:AAPL)

1. Strong iPhone

The biggest positive takeaway from Apple Inc. (NASDAQ:AAPL)´s earnings release is that the iPhone is selling better that most analysts had anticipated. The company sold 31.2 million units during the quarter, a 20% increase versus 26 million iPhones sold in the same quarter of 2012.

The iPhone is Apple Inc. (NASDAQ:AAPL)‘s biggest and most profitable product, so this has a considerable financial impact on the company. Even more important, it says a lot about Apple Inc. (NASDAQ:AAPL) from a competitive point of view.

Google Inc (NASDAQ:GOOG)

has leveled the playing field in mobile with its enormously popular Android operating system, and this has allowed

Samsung Electronics Co., Ltd. (KRX:005930)
and other low cost manufacturers to outgrow Apple over the last quarters, especially in emerging markets where pricing can be considerable disadvantage for Apple Inc. (NASDAQ:AAPL)versus the competition.

Strong iPhone sales show that, even if lower cost Android smartphones are gaining market share, Apple still owns the high end segment of the market, and that segment continues providing opportunities for growth.

The average selling price (ASP) of iPhones continued to trend lower this quarter, dropping from $600 to $580 as some consumers choose cheaper versions like the iPhone 4 and 4S over the more expensive iPhone 5. This can have negative effects on profit margins, and it reflects how important pricing has become as the mobile revolution expands into emerging markets.

On the other hand, the fact that older iPhone versions are doing better than expected in the face of aggressive competition from lower cost Android devices is a strong sign about Apple´s brand power and competitive strength.

iPad sales disappointed during the quarter as Apple sold 14.6 million units, a year over year decline of 14%. However, Apple launched a third generation iPad in March of 2012 and no iPad update has been released in 2013, so product cycle seems to be an important reason for the decline. Besides, Tim Cook said that the company reduced its iPad inventory by 1.9 million during the quarter, which would explain more than 79% of the 2.4 million units decline in iPad shipments.

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