Apple Inc (AAPL) Falls Over Troubling Revenue Forecast

The stock price of Apple Inc (NASDAQ:AAPL) dropped almost 9% during the extended hours trading despite posting positive quarterly financial results. Investors were disappointed with the weak sales forecast of the tech giant for the next quarter, and the fewer number of new phones sold during the holiday shopping season. The stock was trading around $502 a shares after hours, around 5.43 P.M. EST.

Financial results

Apple Inc (NASDAQ:AAPL) posted $13.1 billion profit or $14.50 earnings per diluted share on $57.6 billion revenue for the first quarter of fiscal 2014. The financial performance of the tech giant was higher than its $13.1 billion profit or $13.81 earnings per diluted share in the same period a year ago.

During the quarter, the tech giant sold 51 million iPhones compared with 47.8 million iPhones sold in the same period in the previous year. Apple Inc (NASDAQ:AAPL) sold 26 million iPads, higher than the 22.9 million iPads sold in the year-ago quarter. The company sold 4.8 million Macs, up from 4.1 million Macs sold in the same quarter a year earlier.

Apple Inc (NASDAQ:AAPL) said its international sales represented 63% of its total revenue. Its gross margin declined from 38.6% to 37.9%.  The board of directors of the company declared a dividend of $3.05 per share payable on February 13, 2014.

In a statement, Apple’s CEo Tim Cook said, “We are really happy with our record iPhone and iPad sales, the strong performance of our Mac products and the continued growth of iTunes, Software and Services. We love having the most satisfied, loyal and engaged customers, and are continuing to invest heavily in our future to make their experiences with our products and services even better.”

Apple Inc (NASDAQ:AAPL) generated $22.7 billion cash flow from operation and returned additional $7.7 billion cash to shareholders through stock buyback and dividend payments, according to Peter Oppenheimer, CFO of the tech giant.

Financial outlook

For the next quarter, Apple Inc (NASDAQ:AAPL) projected that it would be able to generate $42 billion to $44 billion revenue. Its gross margin is around 37% to 38%, operating expenses around $4.3 billion to $4.4 billion, and other income (expense) of around $200 million. Its tax rate is expected to be around 26.2%.

Commenting on the guidance, Morningstar analyst Brian Colello said, “The report for the December quarter was fine but the real problem is the forecast for the March quarter. $42 billion to $44 billion is far below Street expectations. At the midpoint, that’s a 25 percent sequential drop versus 20 percent last year. Although the gross margin guidance looks good for March, the revenue certainly appears to be a shortfall.”

Colello added, “The March quarter was especially important because of the China Mobile deal and the initial launch in that region. So the lower-than-expected rev guidance is a troubling sign.”