Apple was taken to the cleaners on Thursday after it reported financial results on Wednesday night. One of the world’s most discussed stocks and a perennial Wall Street darling lost about $63.70 or almost $60 billion in market capitalisation. So what gives? Is Apple in trouble or going out of business? I’m not making a buy or sell recommendation, only giving some food for thought on the world’s second largest company.1. Expectations Game. One of the main reasons the stock was hit so hard is Apple failed to live up to the hype. Apple used to give conservative estimates which its actual results would consistently blow away. In response to this, it appears Wall Street expectations are way ahead of the company’s ability to surprise to the upside. Although the tech giant’s first fiscal quarter earnings per share of $13.81 beat analysts’ expectations, they were still below last year’s comparable $14.03. For the first time since 2003 the company saw negative year-over-year growth. It didn’t help sentiment that they released quarterly guidance range for the second quarter with the high end of the range lower than street expectations.2. Lacking Near Term Catalysts. The quarterly conference call was essentially devoid of any near-term positive catalysts. There was no definitive hint at a new product launch, the company did not allude to a ramp-up in its share buyback or dividend policy, nor did it announce a new global phone carrier deal.3. Arrogance. There were a few very concerning comments made on the call that seemed rather arrogant. When asked about adopting a bigger screen size that consumers seem to prefer, Tim Cook simply dismissed the idea. You would think a company would be amenable to catering to consumer preferences? When asked about focusing on growing market share, Tim Cook simply dismissed the idea as getting “revenue for revenue’s sake”. As a CEO, don’t you think it would be worth considering products that do grow both the top and bottom line and secure dominance in your field?4. Investor Shift. A lot of investors in Apple were momentum and growth investors. Now that the stock may be viewed less of a growth play the investor base is shifting. The growth and momentum guys need to sell and the value guys are buying or waiting to buy at the price they want. It is tough to accurately predict how this transition will play out and at what price the value players begin to step in with volume.5. Valuation. At this stage it is very hard to argue that Apple is expensive. Some would argue that looking at price-earnings multiples that are low does not necessarily equate to value but rather act as a warning sign. While true in many cases where obsolescence or a dramatic business change alters the company’s industry, I don’t think that is the case with Apple. Now it trades at only 6.5x (ex-cash) expected current fiscal year earnings per share. Its cash balance represents more than 30% of its market capitalisation.6. Opportunity. Apple is just getting started in China. It still does not have a major deal with China Mobile which boasts a staggering 710 million mobile phone subscribers. China’s 3G penetration rate is still only 21 percent as at the end of 2012. Revenue for Apple in Greater China grew 67 percent year-over-year and represents just 12.5 percent of sales. In fact, the global smartphone market is still rolling ahead at a rapid clip. Sales increased 36.4 percent year-over-year for the global market in the fourth quarter. According to GSMA, the global smartphone penetration rate should surge from roughly 29 percent in 2012 to about 37 percent in 2014. In the US, where it is about 50 percent of the market, smartphones will likely rise to 63 percent of the market by 2014. According to MarketsandMarkets, the total global smartphone market is expected to be worth $150.3 billion by 2014. If Tim Cook is right, Apple also has a huge opportunity converting numerous PC based laptop users to iPad tablets. Cook believes the tablet market will become bigger than the PC market going forward and that many of the roughly 90 million PCs sold quarterly will convert to tablets. Apple sold 22.8 million iPads in its latest quarter.Just some food for thought while you take a bite out of your apple.Nathan Kowalski is the chief financial officer of Anchor Investment Management Ltd.Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Anchor Investment Management Ltd. to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. Readers should consult their financial advisors prior to any investment decision. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. The author and clients of the author own a position in the stock discussed.