Behind the Apple Share Price

Apple’s share price tumbled on news of its last quarters financials. 800,000 Apple shares worth $300 million were executed in 17 second intervals, just before the announcement. Coincidence. Inside information.

Many financial bloggers have offered an alternative explanation for Apple’s decline, suggesting the company has run out of growth prospects, highlighting flat quarterly earnings, as reported in comparison to the quarterly income statements from last year.

However, Apple’s earnings for the winter quarter of 2012, included an extra, 14th week. This extra week is added to Apple’s fourth calendar quarter (Apple’s fiscal Q1) every five or six years. That means Apple’s revenue was $4.2 billion in the recent December quarter versus $3.3 billion in the prior-year period. On an equal week basis, revenue in the quarter rose 26.7%. So much for a decline.

Lets not forget Apple’s sizable $132 billion cash pile, the $2.5 billion distribution to shareholders and $2 billion allocated to the company’s stock buyback plan. As part of being a well managed company, Apple defers revenue for Mac and iOS devices, totalling $7.274, it has sold in order to provide free software updates over the course of those products. This aspect adds great value to the longevity of a hardware purchase. This revenue is counted as net sales over the next 8 fiscal quarters.

Apple also declares US tax expenses on its cash holdings in advance, even though it doesn’t have to pay those taxes until it chooses to bring those earnings into the US. In the December quarter, Apple deferred $1.179 billion in income tax expense, resulting in a total of $14.712 billion in tax expenses that Apple has preallocated, but not actually paid. This means should Apple bring the money back into the USA, there will be no further tax expense.

Due to the above, it wouldn’t surprise me to see Apple’s share price stabilise after 2 quarters. By then we should also have seen the release of new products from Apple and its competitors. And hopefully we will see something special.

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