Since when is a record quarter such a disappointment? Apparently when you’re Apple, the most valuable and profitable company in the world. Apple beat estimates on the top and bottom line, reported a record June quarter, and proved that its ecosystem is stronger than ever. But, judging by the stock price action, you’d think consumers suddenly lost their taste for Apple. Let’s take a look at five core reasons why patient investors may still want to see Apple as a buying opportunity.
The most crucial ingredient of running a successful business is the ability to attract customers and earn a profit. In Apple’s case, money practically grows in an orchard as far as the eye can see. Apple’s net income grew to $10.7 billion ($1.85 per diluted share) in the fiscal third quarter that ended June 27, 2015, compared to $7.7 billion a year earlier. Analysts expected earnings of $1.81 per diluted share. Revenue for the quarter jumped 33% to $49.6 billion, topping estimates calling for $49.3 billion and Apple’s fastest growth rate in over three years.
Apple receives the majority of its revenue from the iPhone. The company sold 47.5 million iPhones in the quarter ($31.4 billion), up 35% year-over-year and a record for the June quarter, but not spectacular enough to please Wall Street’s “whisper number” of 50 million. The Mac and iPad product lines raked in another $6 billion and $4.5 billion, respectively. Apple Services, which includes iTunes and Apple Pay, posted its best quarter ever with a haul of $5 billion.
Apple’s impressive profit history has also allowed it to accumulate and distribute an unprecedented amount of cash. Taking the total of Apple’s cash and cash equivalents, short-term marketable securities, and long-term marketable securities, the company’s cash position grew to $202.8 billion at the end of June. Apple has $47.4 billion in long-term debt, but this is due to its record capital return program. Through March 2017, Apple will return $200 billion to shareholders through dividends and share buybacks. Using debt to accomplish this helps Apple reduce its taxes.