Apple Stock is Up After Earnings – But Are Gains Here to Stay?

Apple stock was up 5% in after-hours trading Tuesday when its earnings report turned out to be better than expected – but, not great.

Everyone was bracing for the worst when Apple Inc. (Nasdaq: AAPL) released second-quarter earnings Tuesday after the close. The big question was just how bad things were going to be.

The answer turned out to be… not so awful. The iPhone maker surprised Wall Street with better than expected numbers, mostly because expectations were so low.

However, as expected, forward guidance was glum.

The technology giant reported earnings of $9.5 billion, or $10.09 per share, on revenue of $43.6 billion.  That was pretty much in line with analysts' low projections of $10.12 earnings per share and revenue of $41 billion – $43 billion.

"We are pleased to report record March quarter revenue thanks to continued strong performance of iPhone and iPad," CEO Tim Cook said in a statement. "Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline."

Looking ahead to the next quarter Apple forecasts sales of $33.5 billion-$33.5 billion with a gross margin of 36%-37%. That's below analysts' expectation of $38.6 billion in sales and a 38.6% gross margin.

Amid growing competition, investors were concerned about a big slowdown in iPhone sales, and rightly so. Apple's iPhones account for 65% to 70% of Apple's profits. The company sold 37.4 million iPhones in Q2, compared to 47.8 million the prior quarter. Apple iPad sales came in at 19.5 million, down from the previous quarter's tally of 22.9 million

On a bright note, Apple boosted its quarterly dividend 15% to $3.05. It also increased its share buyback from $50 billion to $60 billion.

"The longer-term issue is whether Apple has another hit," Brian Colello of Morningstar Research told the Los Angeles Times.

"It's the future of the products that we care most about," chimed in Brian Marshall of ISI Group.

Apple Stock Moves

Indeed, there was a lot riding on Apple's quarter earnings Tuesday.

Apple shares have plunged from an all-time high of $705.05 hit in September 2012. That's a whopping 43.5% decline. Year-to-date, shares are down 25.1%.

Plagued by software blunders, supply constraints, executive shakeups, mounting competition, and the lack of a new "wow" product, investors' perceptions of Apple, once crowned the world's most valuable company, has waned. Institutional shareholders have fled in droves, while value investors wonder if it's time to bite.

Apple stock ended Tuesday at $406, up $7.33, or 1.84%. In after-hours trading, shares jumped $18.87, or 4.56%, at $424.

Markets have logged new highs despite Apple's dreary performance. Thus, the tech behemoth's Q2 earnings report could set an upbeat tone for Wednesday.

For a more detailed look on why Apple stock is down this year – and is not a "Buy" – check out this interview with Money Morning Chief Investment Strategist Keith Fitz-Gerald.

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  Apple's earnings; $43.6 billion in sales, 37.4 million iPhones , 19.5 million iPads