Plain and Simply Apple (AAPL) Has Stopped Growing Earnings

January 16, 2013 3:35 PM EST
Shares of Apple (NASDAQ: AAPL) are down 30 percent since its September high, leaving many investors scratching their heads. However if you look at the most fundamental metric of any growth company the decline may be perfectly justified.

The plain and simple fact is Apple's earnings have stopped growing... dead. For the upcoming quarter (Q113), for example, EPS is expected to drop about 4% to $13.35 per share. Last year the company posted EPS of $13.87. If you compare this quarter's EPS growth to past quarters you can quickly see the red flag.

In Q412 Apple posted EPS growth of 23%... in Q312 it was 20%... in Q212 it was 92%... in Q112 it was 116%. The drop-off is so glaring it is blinding.

On the top-line, Apple is still showing growth, although that is also slowing dramatically. Revenue this quarter is expected to grow 18%. In last year's Q1 revenues grew 73%.

Apple is still a wonderful company and likely undervalued on various metrics. However if you ask the very fundamental question - "Is Apple growing earnings?" The answer is a big fat NO.

It appears the law of large numbers has finally caught up with the company. Smart investors noticed and took a hike.

Apple is scheduled to post earnings on January 23rd, after the market closes.

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You forgot something big
Jimbo on 2013-01-17 12:20:46
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On the surface it appears that AAPL earnings are shrinking, but you need to adjust last year's EPS to account for the 14th week last year in Q1. This year, like most, only has 13 weeks.

When adjusted, last year's EPS is really 12.88 EPS vs an expected 13.34 to 13.44 consensus for this year. That is still earnings growth, although not nearly as robust in years past. Regardless, AAPL's current valuation is not pricing in any real growth.

Finally Someone Gets It
Mooper on 2013-01-17 02:45:31
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Great article. Many Apple investors don't understand the distinction between growing revenues and profits. Apple will continue to grow revenues for quite some tine, despite their slow bleeding in worldwide market share. However, because mid-2012 ushered in a new era where the iPhone and iPad are no longer best-in-class devices, Apple has lost dominance because consumers won't pay their premium when superior competing devices are available for less money. This is putting pressure on margins, and even a slight decrease in margins coupled with booming sales still leads to stagnant profits. You buy a stock for the profits, and when profits aren't growing, the current 500 stock price is *extremely* expensive.
Anon on 2013-01-16 15:48:05
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You have lost one loyal visitor - I am sorry but the stupidity in some of your recent articles is overwhelming!
Laughing on 2013-01-16 15:44:09
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This piece is so ignorant its almost funny. First of all, its hard to take it serious when there are misspellings, like "undervalued on various emetics"? "Expected to growth"? And characterizing Apple's earnings as "stopped growing...dead" makes no sense.

Second, did you know Apple's 1Q12 last year was a week longer than it usually was, thus resulting in an extra week of sales - in Apple's busiest quarter at that?

Growth is slowing from the hyper-growth resulting from being the first mover on several consumer electronics knock-outs. Is it stopping or declining? Absolutely not. In fact, Apple's 2012 was one of the most profitable years for any company in HISTORY.

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