After the closing bell on Monday, shares of Apple Inc. (NASDAQ: AAPL) plunged over 5 percent, despite beating forecasts, after the tech giant reported fiscal first-quarter earnings of $13.1 billion, or $14.50 a share, on revenue of $57.59 billion. These results compare to revenue of $54.5 billion and net profit of $13.1 billion, or $13.81 per diluted share, in the year-ago quarter.
Wall Street had expected the tech giant to issue EPS of $14.05 on sales of $57.46 billion, according to analysts polled by Reuters.
Apple said during the previous quarter it sold 51 million iPhones and 26 million iPads, an all-time quarterly record for both, and 4.8 million Macs.
“We are really happy with our record iPhone and iPad sales, the strong performance of our Mac products and the continued growth of iTunes, Software and Services,” said Tim Cook, Apple’s CEO. "We love having the most satisfied, loyal and engaged customers, and are continuing to invest heavily in our future to make their experiences with our products and services even better."
Ahead of the company’s conference call with shareholders on Jan. 27, 2014 at 5 p.m. Eastern, investors and analysts will be looking for two things: What is Apple doing with China Mobile Ltd. (NYSE: CHL) and what is the iPhone maker doing on a mobile payments platform.
“There’s a few different things to look for, but I think the thread amongst all of these companies, with the exception of maybe Amazon because their business model is a little bit different, is what are they doing in the mobile advertising space? That’s clearly the case with Google and with Facebook and you may start to see a little bit of that out of Apple with that news,” said Keith Bliss, senior vice president and director of sales & marketing at Cuttone & Co., Inc.
In October, Apple saw profit and margins slide, despite selling 33.8 million iPhones during the September quarter, after the company said net income for the fiscal fourth-quarter fell 8.5 percent to $7.5 billion, or $8.26 per share, compared with earnings of $8.2 billion, or $8.67 per share, during the same period a year ago. Revenue from the previous quarter rose 4 percent to $37.5 billion from $35.97 billion a year earlier.
“Specifically what I really want to hear are two things,” said Bliss. “Number one is what are they doing with China Mobility? There are reports that they’re getting back to an average phone sale to the authorized providers of about $600 because the 5s is now outselling all of their other models. When they first rolled out the 5c and 5s people were still buying the iPhone 4 and 4s because they really couldn’t see a discernable difference. Now that that inventory is cleared out, they’re back to selling the higher priced model.”
In December, Apple and China Mobile announced they entered into a multi-year agreement to bring the iPhone to the world's largest mobile network. As part of the agreement, the two said the iPhone 5s and iPhone 5c would be available from China Mobile's network of retail stores as well as Apple retail stores across mainland China beginning on Friday, Jan. 17, 2014.
Apple’s Chief Executive Officer Tim Cook called the China Mobile deal a “watershed” moment during an interview with China Mobile Chairman Xi Guohua on CNBC and Cook added that he expects the deal to boost sales in world's largest smartphone market.
“The second thing is what are they [Apple] doing on a mobile payments platform? There’s talk of them rolling that out and that will really start to compete with the big providers in that space,” Bliss added.
The tech giant also announced this month that customers spent over $10 billion on the App Store in 2013, including over $1 billion in December alone. Apple said with the introduction of iOS 7, developers were able to create apps that took advantage of the redesigned user interface and the more than 200 new features and APIs.
Rival Samsung Electronics Co. Ltd. sold nearly three times as many smartphones as Apple during the third-quarter, and investors are focusing on whether the iPhone maker will top forecasts during the holiday shopping season.
For its fiscal 2014 second quarter, Apple said it expects revenue between $42 billion and $44 billion, gross margin between 37 percent and 38 percent and operating expenses between $4.3 billion and $4.4 billion.
“Lastly, one that I think is going to be interesting on Apple is that if they don’t announce a higher share buyback, expect to hear Carl Icahn come out right on the heels of their earnings report.” Last week, Icahn bought $500 million more shares of Apple stock and pressed harder for buyback.
Ahead of Apple’s conference call with shareholders to discuss first-quarter earnings, shares of the company tumbled 5.80 percent to $519.33.