Published On: Fri, Aug 9th, 2013

Revenue growth and surprise profit drop in Q2 for Apple

apple large logoAs one of the world’s biggest and most respected technology firms, Apple are seen as a barometer of how the sector as a whole is performing. Until recently, their growth was almost unrivalled, enjoying quarterly profits in the billions, but the latest quarterly results show something of a mixed picture. Sales rose to $43.6bn, although profits fell for the first time since 2003.

Despite a fall in year-on-year profits for the second quarter to $9.5bn, down from $11.6bn for the same period in 2012, the results posted by Apple show that they’re still one of the most formidable in the highly-competitive technology sector. However, shares in the firm have fallen considerably in the past few months, giving shareholders and Apple fans cause for concern.

Taking stock?

Apple remain strong in the smartphone and tablet markets, but confidence from shareholders in whether they can remain innovative and profitable doesn’t seem to be too high at the moment. Joshua Raymond from explained why:

“Apple shares had come under large pressure ever since prices hit the heights of $705.07 in September last year. Since then, shares fell 45% to reach a low of $385.10 on 19 April.

“These falls were dictated by large scale profit taking from shareholders in the face on lingering doubts that Apples pace of revenue growth can continue in the face of escalating competition from Samsung, concerns over future product innovation and its muted cut through into the mass Chinese market”, he said.

Any recovery from this slight if worrying dip is possible, but given the almost unprecedented growth that Apple has experienced in the past decade, could they have reached the zenith already? Share prices in the firm have recovered slightly, but it seems that there’s work to be done.

Cracking the Far Eastern markets is vital for Apple’s fortunes for the foreseeable future. In anticipation that they’re making a big effort, shares in the firm have recovered to a degree.

“These concerns remain, however the huge share repurchase programme which is set to see the company return $100bn to shareholders over three years has helped to restore some beleaguered shareholder loyalty”, continued Mr Raymond.

“It is no surprise therefore that shares have recovered as much as 16% from the recent April lows. Key to maintaining a restoration of investor confidence is whether the company can deliver a new wave of product innovation after the death of its previous creative leader Steve Jobs and if its efforts to broaden its product reach in China.

“For the latter to happen, investors would like to see tie ups with suppliers such as China Mobile. If steps are made in this area, that could attract buyers back to Apple’s shares”, he added.

Investors who might be dissuaded from investing in the firm could do worse than consider spread betting. That way, they can make money even if Apple’s share price continues to fall in the face of disappointing performance.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.