While earnings season is not over, it hit its apex Tuesday when Apple reported quarterly results. The stock has been in retreat since mid-March on fears that the company would suffer from a decline in iPhone sales. Well, as it turns out, despite some mild disappointment in iPhone sales, versus consensus estimates, the company managed to report better than expected EPS and Revenues.
As it turns out, iPhone sales rose year-over-year (YOY) and average selling price (ASP) jumped 10% YOY; thanks to iPhone 10 sales. Recall how the pundits said that model was supposedly a bomb with consumers.
So, while all of Wall Street was obsessed with phone sales, the company turned in results above expectations from its service businesses: Apple Music, iCloud, and the Apple Store. Sales in China rose 21%, which does not sound like a trade war to me.
As a cherry on top, Apple boosted quarterly per share dividends by 10 cents or 16% and announced an additional $100 billion in stock buybacks. To put that in perspective, that is roughly 1/9 of AAPL market cap, and nearly the entire market cap of 3M (MMM) or Adobe (ADBE) and the combined market cap of Ford (F) and General Motors (GM). Netflix (NFLX) with a market cap of about $136 billion, would be a nice purchase for AAPL.
All told, AAPL rose 4.4% in trading the day after the news announcement. So, what did we learn? 1) Don’t rely on suppositions from Apple suppliers, 2) Don’t extrapolate pre-earnings stock movement to actual earnings results, 3) Apple is the single largest cash machine ever in the corporate world; and, 4) Selling at 15 times earnings and growing at 14%, AAPL stock remains cheap.
As I said, for the most part; earnings season has peaked. However, retail earnings are up next and that will carry some weight on the market. Then again, AAPL is the largest retailer in the world, nearly 4 times as large as Walmart (WMT). Retail stocks have been on fire lately and just might very well add to those gains on strong earnings results.
Not to be ignored will be Berkshire Hathaway’s (BRK/a; BRK/b) earnings report Friday after the market close. An important part of that earnings report will be Warren Buffett’s letter to shareholders. I was invited to participate in CNBC’s Closing Bell on Monday to discuss Berkshire Hathaway and Warren Buffett. That will take place from 3 to 5 PM EDST (12 to 2PM PDST), though I am not sure when during that show I will be on. I will have more clarity on Monday.
Lastly, you can watch my interview on I24 News at this link: https://www.i24news.tv/en/tv/replay/clearcut/x6iouj0 I appear at about the 4:45 mark in the segment. Note me sporting a Vegas Golden Knights pin in my lapel. Tough loss last night. Go Knights Go.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was AAPL, GM, NFLX and WMT — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage, and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is also a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
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