Apple Falls on Earnings—Buy on the Dip?

Shares of Apple Inc. (AAPL) declined after the gadget giant posted strong second-quarter results after the closing bell yesterday. Let’s dig into the details and determine whether Apple is a good buy on the dip.

This was actually the best March quarter in the company’s history, with iPhone, Mac and App Store sales leading the way. Compared with Q2 2014, net sales soared 25% to $58.01 billion. This beat the consensus revenue estimate of $56.06 billion. Over the same period, net income jumped 33% to $13.6 billion, or $2.33 per share. Analysts were looking for $2.16 earnings per share, so Apple posted a 7.9% earnings surprise. This is also the fifth quarter in a row that Apple increased earnings.

Breaking it down, Apple sold 61.2 million iPhones last quarter, a 40% increase over a year ago. Apple also sold 4.56 million Macs, a 10% increase over last year. At the same time, iPad sales fell 23% year-on-year to 12.6 million units. It appears that investors may have reacted to the iPhone decline.

Regardless of the post-earnings jitters, Apple still has plenty going for it. Looking ahead to the third quarter, the company anticipates revenue between $46 billion and $48 billion. This is in line with the Street view of $47.06 billion.

Even better, Apple has increased its shareholder reward program by more than 50% to $200 billion. Apple now plans to repurchase a total of $140 billion of its stock. In addition, the board of directors approved an 11% increase to its quarterly dividend. Shareholders of record on May 11 will be paid $0.52 per share on May 14.

With the stock trading at less than 14 times forecasted earnings, AAPL is an excellent buy on the pullback.

Sincerely,

Louis Navellier

Louis Navellier

P.S. I will be speaking at the JW Marriott Atlanta in Atlanta, Georgia, on Tuesday, May 5. This seminar starts at 7 P.M. and you may attend at no cost, but please call 800-454-1395 to register. I will review where investors can achieve the highest yields in both bonds and stocks, as well my current market outlook, favorite stock picks and have an extensive question-and-answer session.

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