I have a confession. I was terrified for Apple (AAPL) earnings tonight. I’m sure it’s not a surprise that Apple is one of my favorite stocks at the moment (you can read some of my recent thoughts on Apple here and here) and I picked up some more shares last week while the market was down. Then I spent all of today wondering if that was a horrible mistake.
Trading right before or after earnings reports can be risky. Last week Netflix (NFLX) beat earnings per share expectations but missed on subscriber growth numbers and the stock plummeted over 25% and $100 per share!
Given that Apple is so hyped up I worried that any slightly bad news in the earnings announcement would throw investors into a state of selling panic. I seriously considered selling the shares I just bought but decided to hold them in my effort to make more long term investments.
Apple earnings are officially in now, and I can finally relax. Apple not only beat earnings expectations, but is up about $1 (1%) after hours.
It’s not much, but like I said I think the upside potential after Apple earnings is relatively limited since everyone just expects them to do well anyways. So the big surprise, and therefore big price swing, wouldn’t come from beating earnings; it would come from missing them. That’s why on Twitter I urged those of you who don’t own yet not to buy right before earnings. Too much risk for not enough reward potential.
Here’s a quick recap of the earnings figures Apple announced today:
- Earnings per share (EPS) of $1.42 vs. expectations of $1.31 and up 20% from a year ago
- Revenue of $42.1 billion vs. expectations of $39.9 billion and up 12% from a year ago
- Apple sold 39 million phones last quarter, and over 10 million iPhone 6 models during their first weekend available in the U.S.
- Going forward demand is “off the charts” for the iPhone 6 and 6 plus according to Tim Cook, Apple’s CEO
- Emerging markets (i.e. China) are growing twice as fast as developed ones (i.e. the U.S.)
- Very strong MacBook sales in time for back to school – number of units sold were up 25% from last year
Apple had another big announcement today when it launched Apple Pay. Iphone 6 users can now officially use your phone at 31 retailers, including McDonald’s, Whole Foods, and Macy’s. Apple also signed up the 6 biggest credit card issuers. You can check out the full list of participating retailers here.
Today made me even more convinced that Apple is a great long term investment. I’d look into buying additional shares after the earnings reaction dies down, possibly next week. They’re worth holding at least until the Q1 earnings are released, because those earnings will have a full quarter’s worth of iPhone 6 sales included.
While I love Apple from a technical perspective, I’m even more impressed from a real world experience perspective (investment decisions can be made away from charts too, FYI). I went into the Apple store to pick up my iPhone 6 a couple weeks after the phone had come out. The store was a zoo – it was so mobbed I considered either calling it quits and heading home or curling up in the fetal position in the corner to protect my vital organs.
Luckily, I did neither and as I was setting up my phone with an Apple sales person I asked him how the store’s craziness compared to normal. He said, “well, it’s a little extra crowded right now with the new phones but for the most part it’s always this packed.” As I made a mental note to do all of my Apple shopping online from now on, I silently calculated how many more shares I can buy. A store that consistently crowded, and that can deliver great earnings while maintaining huge cash stores, is a good investment in my book.