Apple Inc. (NASDAQ:AAPL) is on the verge of its fiscal second quarter earnings release, and the fate of the stock’s immediate future rests in the next 60-90 minutes. Trading at $406.13 at today’s market close, the stock is sideways after-hours, in anticipation of the hard data. It’s worth noting that on the eve of Apple’s Q1 earnings in late January, the stock closed above the $514 mark, before an array of disappointing data caused close to a 10% drop-off the following day.
In fact, here’s a look at Apple Inc. (NASDAQ:AAPL)’s price movement since its Q4 earnings release, in late October 2012, via Google Finance:
Judging by this basic geometry–and we’re not saying you should make investment decisions solely from a chart–Apple’s stock price has lost relatively $100 in share price between each earnings period. By this crude method, shares would be set to flirt with the $295-$310 range by the end of July, if more pain is in store.
Of course, from a valuation and growth standpoint, there’s still oodles and oodles of things to like about Apple Inc. (NASDAQ:AAPL)’s stock:
Forward P/E: 8.16, eighth-lowest in the S&P 500’s technology sector (77 companies)
P/E: 9.04, fifth-lowest in the S&P 500’s tech sector
PEG ratio: 0.44, the absolute lowest in the S&P 500’s tech sector
Expected 5yr annual EPS growth: 20.72%, fifth-highest in the S&P 500’s tech sector
Moreover, Apple’s appeal to income investors isn’t all that bad either. Check out Apple Inc. (NASDAQ:AAPL)’s rank in a couple key dividend-related categories:
Dividend yield: 2.66%, 25th-highest in the S&P 500’s tech sector
Payout ratio: 11.98%, 27th-lowest in the S&P 500’s tech sector
With that said, there’s still room for Apple to boost its dividend outlay significantly, as most analysts forecast the tech giant could surpass $300 billion in cash by the end of its 2015 fiscal year. Equally as important, in one of our earlier analyses on Seeking Alpha, we indicated that Apple’s “secret” hedge fund could be prepping for a dividend boost, due to the fact that “when we measure the size of Apple’s holdings in these highly liquid asset classes, we can see that their size has now eclipsed $14 billion, more than twice that of what should be considered “normal,” at least in recent years,” with those highly-liquid assets being cash, money market and mutual funds.
For a brief recap of how Apple Inc. (NASDAQ:AAPL)’s cash position has grown over the past few quarters, consider this:
End of Q1 2013: $136.2B in total cash hoard
End of FY2012: $120.2B
End of FY2011: $81.5B
End of FY2010: $51.0B
End of FY2009: $33.9B
As you can see, Apple’s cash has grown by about $15 billion to $16 billion per quarter, indicating that there’s massive potential for a strengthened share buyback program, a heavier dividend outlay, or even a strategic acquisition.
We’ll let you know the latest Q2 figures as soon as we have them below.
——-END UPDATE, 5:00pm EDT———
Update: Apple outpaced top and bottom line estimates, as iPhone and iPad and sales were better than most expected. Revenue was $43.6 billion against $42 billion consensus. Earnings per share came in at $10.09 versus $10.00 consensus, which, according to the call, was “fueled primarily by strong iPad and iTunes sales.”
The company sold 37.4 million iPhones, which was 0.5-1 million above most analyst estimates. iPhone’s market share is increasing, and the phone gained the No. 1 position in Japan, in “both handsets and smartphones.” “The first time a non-Japanese company has achieved the top spot for more than a year.” The call also cites a “95% loyalty rate.”
Apple Inc. (NASDAQ:AAPL) sold 19.5 million iPads, about 1 million above consensus.
Mac data is essentially flat, while 5.6 million iPods was 0.6-1.0 below analyst estimates.
Guidance is lower than most expected.
Revenue guidance: $33.5-$35.5 billion next quarter.
Margin guidance: 36%-37% (gross) next quarter.
Total cash was $145 billion, a bit below our $15B quarterly average mentioned above.
——-END UPDATE, 5:15pm EDT———
Update: A few important points of news from earlier in the call:
Apple CEO Tim Cook made it a point to specifically address his company’s treatment in the financial markets, saying, “The decline in Apple’s stock price over the past couple of quarters has been very frustrating to all of us,” before strongly asserting that “The most important objective for Apple will be creating innovative products.”
In that frame, Cook said that “share repurchases” was their preferred method of boosting yield for shareholders, saying, “we concluded that investing in Apple was the best.”
On the whole, the quarterly dividend will be increased to $3.05 a share, a 15% boost. Cook also mentioned that it will employ the use of at least some debt to aid its share buyback and/or dividend increase. The details have not yet been announced.
——-END UPDATE, 5:25pm EDT———
Final update: Our Q&A recap can be seen exclusively here: 4 Revealing Comments from Today’s Q&A Session.