Apple Earnings Leave Wall Street Gasping

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Apple iPad and iPhone, Apple earningsIs Apple (AAPL) unstoppable?

The Cupertino, Calif., cash machine absolutely crushed Wall Street earnings expectations, reporting red-hot sales across all of its major product lines for its fiscal 2010 second quarter. Even for a company that habitually lowballs expectations, the numbers -- coupled with a better-than-expected forecast -- were an impressive display of evidence justifying the stock's massive run-up over the last year.

"These were phenomenal results," said Brian Marshall, an Apple analyst at Broadpoint AMTech. "And I don't think their growth is going to slow down."

Apple reported $13.5 billion in sales for the period, well exceeding Wall Street's expectation of $12 billion. Earnings per share were $3.33, storming past the Street's estimate of $2.43.

The results also show that consumers are flocking to Apple's comparatively higher-end products, a sign that the economy is gathering steam at the retail level. But perhaps most important, Apple's results demonstrate, yet again, that no other company is like it: No one else can back up the hype with such tangible results.

Trading in Apple shares were halted minutes before the earnings announcement amid intense chatter and volume. Trading resumed at 4:50 p.m. (EST), and the shares immediately shot up 8% to a new all-time high of nearly $260.

"Heading into today I had a stock target of $280 and they exceeded my expectations," Marshall said. "So I think we're going to see $300 by the end of the year."

Widespread Strength

Almost every major part of Apple's business is showing robust growth. In particular, Marshall pointed to a 131% increase in iPhone sales over last year -- some 8.75 million units shipped -- which blew past the 7 million threshold Wall Street had been watching for.

"We're thrilled to report our best non-holiday quarter ever, with revenues up 49% and profits up 90%," CEO Steve Jobs said in a statement. "We've launched our revolutionary new iPad and users are loving it, and we have several more extraordinary products in the pipeline for this year."

International growth is also boosting the company, and that trend is expected to continue. Apple only just launched the iPhone in China in January. In a sign of that country's potential, the company said its business there increased 200% from a year ago. Apple said it plans to have 25 retail stores open in China by the end of next year.

Apple sold 10.89 million iPods, which was down 1% from the year-ago period, but still nicely beat the Street's expectation of 10 million. Over time, higher priced iPhones have eaten some of the company's iPod business, but it still remains very strong.

High Hopes For iPad,Strong Outlook

With the much-hyped release of the iPad tablet computer, Apple is trying to create an entirely new product market. Already, the company has sold over 500,000 units, but those sales weren't reflected in the latest quarter's numbers. "I think this is a major new category," Apple COO Tim Cook told analysts on the conference call. "It's early, but we really like what we see." Cook said the company was "shocked" by early demand for the product but was scant on details for future iPad sales.

Despite -- or perhaps because of -- the iPad's early success, some analysts expressed concern that the device might take away from sales of other Apple products including the iPod Touch, Mac desktop or laptop machines. Marshall of Broadpoint AMTech said that while he's "a little concerned about whether the iPad is going to cannibalize existing products," the device differentiates itself enough to represent something quite new.

"My personal experience playing with it over the last few weeks is that it's not a PC replacement and it's not a laptop replacement," Marshall said. "It's a fantastic media player for browsing the Web or watching movies. It's not so much for data entry or typing, so I don't think there's going to be too much cannibalization."

As if its stellar numbers weren't enough, Apple also offered a rosy outlook for next quarter well ahead of Wall Street's consensus forecast of $12.9 billion. Said Chief Financial Officer Peter Oppenheimer: "Looking ahead to the third fiscal quarter of 2010, we expect revenue in the range of about $13 billion to $13.4 billion, and we expect diluted earnings per share in the range of about $2.28 to $2.39."
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