Though Apple successfully exceeded analyst's expectations for its previous quarter, the company reduced expectations for the current quarter during Wednesday's financial announcement. Expectations fell to nearly half of what Wall Street had predicted. The company cited lack of consumer confidence, an unpredictable economic outlook, and worldwide fears following the September 11 attacks.
Reuters reports Prudential Securities analyst Kimberly Alexy - who cut her estimate for fiscal 2002 earnings per share to 45 cents from 61 cents - as saying: "We see limited downside."
Worst downturn AFX news quotes Needham and Co. analyst Charles Wolf as saying: "Apple continues to be profitable and to earn operating returns on capital that far exceed its cost in by far the worst downturn to have hit the PC industry in 20 years."
Credit Suisse First Boston analyst Kevin McCarthy cut his estimates to 25 cents per share from 30 cents. He said: "Apple has the potential to beat low expectations with a chance 'hit' in any given quarter." The analyst believes Wall Street's numbers remain overoptimistic, expecting Apple's stock to trade at $14-20 over the next few quarters.
AG Edwards maintains its belief in Apple, though it has revised its guidance for the company's stock from "Strong Buy" to "Buy", reflecting Apple's position as a still profitable concern within a softening market.
Stock up Apple stock stood at $18 when the markets closed last night, a rise of 5.94 per cent on the day. Nasdaq rose 0.39 per cent on average during yesterday's trading. Analysts have observed that Apple is maintaining profitability while most of its rivals, excepting Dell, are returning a loss.
An unnamed Goldman Sachs analyst told AFX: "Apple is not immune from industry weakness, but management has executed very well and delivered solid, profitable results."
"We continue to believe the stock is attractive," he concluded.
Apple's progress sits against the background of a beleaguered IT market. Dataquest reports an 11.6 per cent year-on-year fall in shipments for PCs in 2001's third quarter. The analysts predict the slump will now extend throughout 2002.
Reflecting Dataquest's predictions, Fred Anderson, Apple's chief financial officer, warned MacCentral that Apple "doesn't expect a major economic rebound until the last half of 2002". He predicts that April to September 2002 will be a little better than the next six months are expected to be.
With profit margins floating at about 30 per cent, low inventories and research and development standing at about 8 per cent of sales ($116 million) in the just past quarter, Apple is preparing to innovate its way through the recession. The company has also launched a number of special offers intended to boost sales.