The response by shareholders to the 31 percent profit Apple (Nasdaq: AAPL) enjoyed for the fiscal third-quarter, underscores the fear permeating the market.
Some have said that the reason for the stock plunging was the soft guidance released for the fourth quarter by Apple, but anyone that understands anything about Apple knows that this is a expectations management tool that they have used for years.
"The stock is plagued by high expectations," said Shaw Wu, an analyst for American Technology Research. "Looking at the numbers by themselves, they are actually quite strong."
Investors are losing all rationale and confidence in the market, as they've pummeled some of the stronger tech companies, even though they have performed pretty well. Google (Nasdaq: GOOG) is one of the more recent examples.
Leading the way for Apple in the third quarter was Macintosh and iPod sales, with Macs being one of the better gross margin products for the company.
Speaking of gross margins in the quarter, it was about the only are that was down, with margins coming in a 34.8 percent, down from last years' 36.9 percent. Apple executives pointed out that the percentage for this quarter was better than expected.
Earnings came in at $1.07 billion, or $1.19 a share. That was a healthy 11 cents over expectations. Revenue was also up to $7.46 billion, a 38 percent increase. Analysts were looking on average for $7.37 billion.
Leading the way in Apple product categories was the Mac, which Apple said broke shipment records for the quarter, shipping 2.5 million units; a 41 percent increase over last year for the same quarter. Ipods sales also increased at a healthy rate, growing by 12 percent.
Chief Financial Officer Peter Oppenheimer hinted at some fantastic products in the pipeline for the fourth quarter, but added they will result in lower margins because of their introduction into the marketplace.
As I mentioned in opening, having these types of results and shareholders selling in a panic, only confirms that rational thinking has been cast aside and people are being ruled by the emotion of fear. Looking at the performance and numbers of Apple should have been reassuring for shareholders, rather than send them into a selling spree which shocked the stock.
For the fourth-quarter projections, the company said they expect $1 a share on $7.8 billion in sales, down significantly from the $1.24 a share and $8.32 billion analysts are looking for.
But like I said, Apple has always understated its projections in order to manage expectations. Evidently it didn't matter what they did this quarter, investors have lost their confidence, and even great performance can't be seen as good enough.
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