may have just reported a pretty mediocre quarter. But with shares
popping $20 yesterday, there are reasons to believe that this is
the start of a huge comeback for the world's largest tech
On the surface, Apple's third-quarter earnings were nothing
Profits continued to sag, declining year-over-year for the
second straight quarter after a decade of nothing but growth.
Earnings per share of $7.47 were at the lowest level since 2011.
Meanwhile, iPad sales are slumping, falling to 14.6 million units
from 17 million sold a year ago.
Apple's earnings weren't all doom and gloom, however. That's
why the stock got a nice 5% boost on Wednesday, closing at its
highest level in more than a month.
In reality, there was plenty to like about Apple's fiscal
third quarter. For starters, the company did manage to narrowly
beat analyst estimates for earnings and revenue. That's something
it hadn't done in two of the previous four quarters.
Granted, not much was expected from Apple's latest earnings.
That allowed the company to clear a relatively low bar by its
lofty standards. But a win is a win come earnings season - not
matter how it's accomplished.
And there were other reasons to like Apple's latest earnings
report. Here are three positive signs that the world's most
profitable technology company may be on the verge of ending its
iPhone Sales Were Way Up
A whopping 31.2 million iPhones were sold last quarter. That's
51% more units sold than in the same quarter a year ago, and well
ahead of the 26.5 million estimate. So much for the theory that
consumers are growing weary of Apple's iPhones amid
competition from Samsung's Galaxy S4
Nexus. Competition from those two rivals is definitely growing.
But it hasn't been the death of Apple's iPhone. Prior to this
week's earnings, some analysts had insisted that iPhone sales had
already peaked. A 51% year-over-year sales increase suggests that
the iPhone continues to dominate, and the company has no problem
finding new buyers.
Emerging-Market Sales Are Growing
Apple is most definitely a global brand. However, the company
is just starting to penetrate some new and potentially profitable
Apple's growth in emerging markets was impressive last
quarter. The company sold a record number of iPhones in Russia.
Sales were up 400% in India, 140% in the Philippines. Apple's
China revenues, while down in the recent quarter, totaled $27
billion over the past 12 months, a number that by itself would
put the company at No. 112 on the Fortune 500.
As sales in the U.S. and Europe slow, Apple will rely more
heavily on emerging-market growth in the coming years. And that's
fueling speculation that the company is working on a lower-priced
iPhone that would have appeal in emerging markets.
"Amazing New Products" Around the Corner
What has plagued Apple's stock since last September is the
absence of new products. Despite strong sales, new versions of
iPhone or iPad no longer impress
Wall Street. Investors
want to see something truly groundbreaking
from the world's most innovative company.
Rumors of new Apple products have swirled for months. On
Tuesday, CEO Tim Cook confirmed that speculation by promising
that "amazing new products" are on the way. Some could be
introduced as early as this fall.
What qualifies as "amazing" is anybody's guess. It could be a
" - a wearable electronic device that slips around the wrist like
a watch. Or perhaps it will be the long-awaited Apple TV,
something Cook said is "an area of intense interest" for the
Regardless, new products are what move Apple's stock. Until
recently, new iPhone or iPad product announcements resulted in an
automatic 10-12% boost for Apple shares. That's no longer the
case. Investors want to see something truly new from the world's
largest technology company.
If those products are as "amazing" as Cook says, they could be
just the catalyst Apple needs to get out of its current rut.
At this point, investors are desperate for good news from
Apple. Prior to Tuesday's earnings, the stock had fallen 40%
reaching $700 a share
last September. Even this quarter's earnings - which narrowly
exceeded expectations - were enough to send the stock higher by
$20. And the stock is now 14% above its recent low of
There's a lot to like about Apple at this depressed valuation.
It's currently trading at just 10 times forward earnings. Wall
Street analysts are generally optimistic about the stock, with an
average price target of $539.
I've been bullish on Apple as well. A few weeks ago, I
personally bought more shares when the stock briefly fell below
$400. And I recommend buying shares on the dips - particularly if
you can get it at less than $400 a share.
With iPhone sales still growing, emerging-market business
still expanding, and some new products in the pipeline, there are
plenty of reasons to believe that a comeback for Apple shares is
coming soon. The world's largest technology company shouldn't be
stuck in the mud much longer.