Apple Inc. (NASDAQ:AAPL) slid in afternoon trading on Wednesday after the world’s second-largest company by market value reported late Tuesday an 18 percent profit drop and 11 percent revenue growth in fiscal second-quarter.
Apple's shares slipped as much as 0.3 percent to $405.75 at 1:51 P.m. in New York, headed to stretch losses since the beginning of the year to beyond 24 percent as analysts lowered their targets on the company following a conference call. The shares retreated to as low as $392.50 in earlier trading.
Following Tuesday's report, nearly 40 brokers have cut their earnings estimates for the June quarter for Apple — pushing the mean EPS estimate from $8.80 before the report to about $7.77 now, according to Thomson Reuters.
BMO Capital downgraded Apple to "market perform", or neutral, rating. Analyst Keith Bachman said the challenges of “increased competitiveness in the smartphone market, which we believe will pressure [average selling prices] and margins — will largely offset improved capital allocation.” He lowered his price target to $435 from $440.
J.P. Morgan's Mark Moskowitz said he was removing Apple from the firm’s “analyst focus list,” but maintained his "overweight" rating on the stock, cutting his price target to $545 from $725.
Peter Misek of Jefferies & Co. maintained a "hold" rating on the stock, with a $420 price target. He said he believed Apple might finally be working on a larger-screen iPhone for next year.
The stock has been hardly hit by falling 40 percent from the 52-week high of $700 last September to $400 now, compared with a 6 percent gain for the S&P 500 indext (INDEXSP:.INX).
Net income for the quarter that ended March 30 declined to $9.5 billion, or $10.09 a share, from $11.6 billion, or $12.30 share, a year earlier, the Cupertino, California-based company said in a statement on Tuesday. That beat the average analyst estimate which was for a profit of $9.97 a share.
Quarterly revenue rose 11 percent to a record $43.6 billion, also beating the $42.3 billion predicted by analysts.
Apple raised its quarterly dividend 15 percent to $3.05 a share. Apple is among the largest dividend payers in the world, with annual payments of about $11 billion, the company said in a separate statement.
The company also boosted its share-repurchase program to $60 billion from $10 billion, bringing the total to $100 billion through 2015.
Apple also said it would tap into debt to finance the increased return of cash to shareholders, but added that more details on this will be announced later.
“We believe so strongly that repurchasing our shares represents an attractive use of our capital that we have dedicated the vast majority of the increase in our capital return program to share repurchases,” CEO Tim Cook said in the statement.
Apple’s gross margin for the January-March period was 37.5 percent — at the low end of the company’s forecast range from January.
The maker of the iPhone and iPad reported better-than-expected shipments of the devices in the quarter. The company shipped 37.4 million iPhones, up from 35.1 million a year earlier, and 19.5 million iPads, up from 11.8 million. Analysts were projecting iPhone shipments of about 36 million units with iPad shipments of about 18.3 million.
The company predicted the trend will continue. It projected a sales range of $33.5 billion-to-$35.5 billion for the April-June quarter, with gross margins in the range of 36 percent to 37 percent. Analysts had been predicting sales of $38 billion with gross margins in the range of 38 percent to 39 percent for the period, according to FactSet.
While the iPhone is the most popular handset, Apple suffers fierce competition from Samsung Electronics Co. (KRX:005930) which has become the leading smartphone provider by introducing a variety of devices with different designs and prices. The Korean company's flagship Samsung Galaxy S4 Android smartphone will go on sale later this month.
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