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Seven Things You Need to Know About Apple

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Apple reported monster second-quarter numbers after the close yesterday. Here are the important takeaways from its results.

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Apple (AAPL) reported monster second-quarter numbers after the close yesterday, smashing analysts' earnings expectations by a whopping 36%. Led by rapid iPhone sales and continued success in its notebook and desktop product lines, Apple saw its revenue rise an incredible 49% while earnings jumped 86%.

Digging through the details brings me to seven important takeaways from Apple's results, all pointing to one conclusion: This stock is going higher.

1. The iPhone is a paradigm of positive pricing power.

IPhone unit sales blew away all expectations, growing 131% with revenue up 124%, implying a decline in revenue per unit of just 3% -- pretty amazing for a line of two phones that have been out for nearly one and two years, respectively. This is proof that Apple's ability to exercise pricing power within competitive markets hasn't gone anywhere. Apple's gross margin nearly hit the 42% mark this quarter, absolutely dwarfing that of commodity operators like Dell (DELL).

2. The iPhone didn't skip a beat after the
holidays.


You'd think iPhone sales would have slowed just a bit after the holiday rush, but they didn't. Unit sales were actually up fractionally from the December quarter, nicely picking up the slack from iPod sales, which dropped 45% sequentially.

It's official -- the iPhone is a consumer staple, just like toilet paper. Toilet paper good enough to make you sign up for an expensive data plan, that is.

3. Apple's Mac numbers are incredible.


The iPhone results are getting all the attention, but don't forget the almighty Mac! Notebook and desktop unit sales skyrocketed 33% in the quarter, comparing very favorably with Gartner's recent report indicating 27% PC-industry growth through March. What's more is that Apple is generating this kind of growth with premium-priced models, not bargain-bin netbooks and notebooks. Apple's newly designed desktops were especially strong, with units growing by 40% and revenues by 45%.

4. The balance sheet remains bulletproof
.

I like companies with more money than they know what to do with, and Apple fits that description with $42 billion in cash and no debt. Plus, Apple has no history of making moronic acquisitions or announcing massive share repurchases at all-time highs. The ability to let money pile up is a sign of old-school financial discipline, and there's nothing wrong with having a stockpile of dough in case the right big target ever does comes along (cough, Adobe (ADBE), cough).

5. Apple stole Microsoft's (MSFT) old investor-relations strategy.

Seriously Apple, who are you trying to fool with that lousy guidance? Steve Jobs would never admit that he ever learned anything from Microsoft, but this constant pattern of offering lousy guidance after blowout quarters is exactly what Bill Gates did back in Mister Softee's glory days.

6. It's gonna be a good summer.

Apple is almost certainly releasing a new iPhone this summer given that it's done so in each of the past three years. And of course we can't forget about that whole Gizmodo fiasco (see also Steve Jobs' Worst Nightmare Comes True by Mike Schuster). Mac and Macbook numbers are still going strong, and the craze over the iPad is reminiscent of the crack epidemic of the 1980s.

And finally...

7. Don't forget about potential wild cards.

With what I know right now, I'm pretty sure that Apple's going to have a great year. But there are wild cards that could catapult the company even further. The iPhone could end up at Verizon Wireless (VZ), which would jack up iPhone sales estimates by several billion dollars in the blink of an eye. And in Apple's press release, Steve Jobs said "we have several more extraordinary products in the pipeline for this year," one or more of which is likely to be more impressive than KFC's Double Down.

To sum it all up, Apple, you're the best around.

PS: Did you see the big numbers out of Seagate (STX)? The PC bull market is going strong (see Four Ways to Play the Bull Market in PCs).

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Positions in AAPL and MOT.
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