Back to Main

How Apple Got Its Mojo Back

By: Chris Ciaccia
Posted: 5/7/2014 10:07:00 AM
Referenced Stocks: AAPL

With the share price near $600 following an exceptionally strong fiscal second-quarter, it looks as if Apple (AAPL) has its mojo back.

Cantor Fitzgerald analyst Brian White notes in his Apple Barometer that preliminary April sales are coming in stronger than the company has seen historically. The Apple Barometer consists of some of Apple's Taiwan-based suppliers that generate a healthy percentage of Apple-related sales, so they are seen as a good proxy for what Apple is doing. White noted that preliminary April sales are up 7% month over month, much stronger than the average decline of 1% over the past nine years. "With Apple's March quarter results out of the way a couple of weeks ago and WWDC [Worldwide Developer Conference] on the horizon in June, we believe more investors will be getting more actively involved with the name ahead of this product cycle during what we have dubbed as the 'Year of Innovation,'" White wrote in the note.

This comes after Apple reported fiscal second-quarter earnings that blew past Wall Street estimates, showing the strength of the iPhone around the world. The company earned $11.62 a share, generating $45.6 billion in revenue. Leading the way were the 43.7 million iPhones shipped, helped by the shipment of 16.4 million iPads and 4.1 million Macs during the quarter.

Apple is working diligently on increasing sales of all of its products, and it appears that consumers are responding, judging by White's Apple Barometer. This comes as Apple is reportedly planning a massive promotion to give the iPhone a boost in the U.S. ahead of a seasonally slow period, as it emails customers eligible for an iPhone upgrade to come to Apple Retail Stores.

Despite the high price of the iPhone compared to other smartphones (most of them running Google's Android operating system), CEO Tim Cook noted that it's making significant gains: "We gained smartphone share in many developed and emerging markets including the U.S., the UK, Japan, Canada, Germany, France, Vietnam and Greater China, just to mention a few. In fact, we established a new all-time record for total iPhone sales in the BRIC countries."

Apple isn't just sitting on its laurels, allowing existing products to continue to play the lead role. Apple is widely expected to unveil a new iPhone later this year, perhaps as early as September. Reports have suggested it will come in two sizes, a 4.7-inch version, and a 5.5-inch version, and may have a radical redesign compared to previous iPhone models, coming in much thinner than its predecessors.

Then there's the recent MacBook Air update. Though Apple didn't do much to change the computer, only adding Intel's Haswell processors, it did make one major move. It cut $100 off the starting price of the previous models. The 11-inch model will set you back $899, and the 13-inch version starts at $999. Given that the PC market is continuing to slow down, thanks to the growth of the tablet market, and consumer dollars going elsewhere, a price cut for a company that has grown PC market share for the past 31 of 32 quarters can only be a good thing, as long as it doesn't impact the company's famously high gross margins.

Apple sold 4.1 million Macs during the fiscal second-quarter, accounting for $5.5 billion worth of sales. Apple sold 5% more Macs year over year, leading to a 1% boost in revenue, and the price cut should only help benefit Apple in the quarters to come.

Couple these small, but very important moves to get Apple devices in the hands of more consumers with the upcoming product refreshes and the long-awaited iWatch, and you can see why Apple has its mojo back. And for investors who've seen other technology stocks come crashing back down to Earth, not a moment too soon.