Following Apple's earnings release yesterday evening - where they posted the most profitable fourth quarter in the history of the world - shares of Apple took a nosedive, falling by over 10% to the $460 range.
Speaking to the absurdity of Wall Street, some were disappointed that Apple didn't quite hit consensus estimates regarding revenue and iPhone sales, even though Apple's overall profits were in line with what analysts were expecting. Consequently, shares of Apple are now trading at nearly 52-week low levels.
So what gives? Why is one of the most profitable companies on the planet taking a beating in the stock market? Well, a lot of it has to do with Apple's guidance for the next quarter.
Historically, Apple has issued very conservative guidance that it has been able to beat handily. Soon, analysts caught on to Apple's little game and began ignoring Apple's guidance altogether. This often resulted in earnings estimates for Apple that were rather grand, and while Apple was able to keep up for a while, growth may indeed be slowing down.
In any event, Apple CFO Peter Oppenhiemer yesterday noted that Apple would no longer issue conservative guidance but would rather issue a realistic range as it pertains to its future earnings.
In recent years, our guidance reflected a conservative point estimate, or results every quarter that we have reasonable confidence in achieving. Going forward, we plan to provide a range of guidance that reflect our belief of what we are likely to achieve.
Looking ahead, Apple is anticipating revenue next quarter to fall in the $41 to $43 billion range. That's significantly below the $45 billion estimate folks on Wall St. were expecting. And since Apple is no longer low-balling their guidance, there is now less of an assumption that Apple will blow past everyone's estimates and deliver record breaking earnings. For what it's worth, Apple's revenue during the January-March quarter of 2012 was $39.2 billion.
The takeaway from all of this is that many believe Apple's growth is slowing permanently, and as a result, the stock is taking a nosedive.