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Apple Inc. (AAPL) Finding Defective Component In Apple Watch: A Concern For The Stock Or Not

Apple Inc. (NASDAQ:AAPLreported its earnings report for fiscal second quarter on Monday after the bell. In spite of the Apple Watch debut, it was expected that the iPhone sales was going to dominate the earnings for Apple Inc. (NASDAQ:AAPL). As expected, due to a stronger iPhone sales in China, Apple Inc. (NASDAQ:AAPL) managed to sell more than 61 million units of iPhones in that quarter. Apple, which owns one of the most profitable businesses ever, reported earnings of $2.33 per share with a revenue of $58 billion in the quarter, which was more than the consensus estimate of $2.19 per share earnings and $57.46 billion revenues. Apple stock rose by more than 1.5% as it started trading on Tuesday. Vice Chairman of Equities at Baird, Patrick Spencer talked on CNBC about Apple stock and its earnings report.

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Apple managed to beat expectations on both topline and bottomline. But soon after, Apple found that there were some defects in its smartwatch. This came in as a blow to Apple. Spencer said that Apple Watch is very popular among younger generation and he feels that Apple is “on to a winner” with that product.

A Wall Street Article reported that a key component of Apple Watch made by a Chinese Supplier is defective. This has concerned many investors and made them rethink about the future of Apple stock. Spencer feels that it is just a minor setback and might not impact the stock a lot. He thinks that for a technology company earnings revision and managing to beat the estimates are the key and he pointed out that Apple has recently come out with some fantastic numbers. He added that Apple managed to sell more mobiles in China that they did in US in the quarter that ended in March. He mentioned that outlook for the company is extremely rosy.

Spencer said that Apple Inc. (NASDAQ:AAPL)’s valuation is not a concern even though the stock is trading very close to its record high. Stronger dollar might come as a huge headwind for companies that make majority of its sales overseas. Spencer pointed out that the dollar valuation is down 3% since the beginning of this month.

“Its interesting that the dollar [..]  at the beginning of this month [..]  everybody was talking about stronger dollar and impact that was going to have on earnings and the dollar is now down by 3% in a month. People were concerned about earnings being down 2.5% as we go in to the quarter because of worries about strong dollar. It looks like earnings are going to be up for the quarter,” Spencer said about strong dollar threat.

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