Will Apple and Intel Continue to Outperform?

It has been a bumpy ride for Apple (NASDAQ:AAPL) investors recently.  Since reaching its all-time high of $426.70 in October, shares have entered into a steady decline.  However, shares of Apple and Intel (NASDAQ:INTC) continue to outperform the broader market.

Apple has returned nearly 15% year-to-date, while Intel has gained nearly 13%.  The recent trouble started for Apple after it reported lighter-than-expected revenues and profits for the company’s fiscal fourth quarter.  Clearly, the issue is due to customers waiting for the iPhone 4S, which sold out in only 10 minutes in Hong Kong.  Numbers for the iPad 2 were also weak, but once again, the iPad 3 is speculated to be released in early 2012.  Bill Shope from Goldman Sachs (NYSE:GS) explains, “While we were disappointed and surprised that results were below expectations, particularly on the iPad line, we still expect the company to deliver solid December quarter results, boosted by iPhone sales momentum,” he writes. “As consensus estimates are now likely to hug guidance more closely, we expect next quarter’s expectations to remain realistic and perhaps even conservative.”

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On Monday, Morgan Stanley’s (NYSE:MS) Katy Huberty reiterated her buy rating for Apple, due to the upside potential for the iPhone to gain shares as new carriers are added.  In addition to Verizon (NYSE:VZ) and AT&T (NYSE:T), Sprint (NYSE:S) now carries the new iPhone as well.  The iPhone’s 230 carriers are well below the 600 that exist for the BlackBerry (NASDAQ:RIMM), she argues, and there’s room for expansion in the Asia-Pac region.  Currently, Apple accounts for less than 5% of the phone market.

While other tech giants such as Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) lag behind this year, shares of Intel have outperformed.  Investors looking to wait out the volatility in the markets may also find comfort in the company’s 3.5% dividend.  Investors should keep an eye on a pullback due to a 6% reduction in technology spending by the city of Seattle.  Seattle’s chief technology officer said, “Spending is going to be down, and in some places it’s going to be down considerably.”

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