Apple strong despite biggest share price fall

Apple suffered the biggest share price fall in its history this week following a mixed earnings report on Thursday but there are sign the worst may soon be over.

Shareholders of Apple, the biggest United States company by market capitalisation, punished the stock. Apple shares dropped 12.4% to $US450.50 ($NZ543.15).

Craigs Investment Partners broker Greg Easton said the latest result showed the growth in the smartphone market was moving from high-end to lower-priced devices.

That was a trend highlighted by the likes of Samsung, which had more than 80 touch screen handsets in the marketplace and continued to see strong earnings growth.

''There has been some speculation that Apple will look to enter the lower-end smartphone market with a new device to try and capture that part of the market. While this will inevitably lower margins, it should drive strong top line growth.''

Lower-priced devices were likely to be more successful in emerging markets where disposable incomes were significantly lower, Mr Easton said.

At current prices, Apple became a value play. For a company easily posting double-digit revenue growth, the current valuation appeared undemanding.

Despite recent market disappointment, Apple remained a quality technology stock, albeit with a lower growth outlook, he said. The company had strong margins, unmatched cash hoard and relatively recurring revenue streams from users upgrading to new versions of devices.

The latest quarterly report was a crucial period for Apple as it saw the convergence of a number of factors which should have helped to drive a strong set of numbers, Mr Easton said.

Going into the quarter, the company had refreshed almost every product in its line-up which put it in a strong position to grab the attention of customers.

The most talked about ''refresh'' was that of the iPhone with the release of the much anticipated iPhone 5. Additionally, the latest quarter included the US holiday shopping period which traditionally saw strong consumer spending, he said.

The weak numbers did little to reverse the negative investor sentiment which had been gaining momentum in recent weeks regarding Apple's ability to regain the growth trajectory which saw the stock hit an all-time high of more than $US700.

Although the company still posted revenue growth of more than 18% to $US54.5 billion, that came in below the market expectations of $US54.8 billion, Mr Easton said.

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