Late last week, it was all about Apple Inc. (AAPL) earnings. You could feel the excitement all day as people wondered “What would CEO Timmy (Cook) have to say? What would CFO Lucas (Maestri) have to say? Well, guess what happened on the way to the forum, writes Kenny Polcari, chief market strategist at SlateStone Wealth.
Coming into the report, AAPL had been this year’s underperformer. It was down 12% year-to-date. China concerns and what it might mean for the iPhones, revenue growth, and gross margins, etc...you know the drill. You also know how I felt about it. I think it’s AAPL. That’s what I think.
My friend Stephanie Link – Chief Investment Officer at Hightower – reminded us that AAPL has the “strongest installed base of any company in the world with 2.2 billion users.” I said they would have to report nothing short of a disaster for me to change my outlook on my AAPL.
Not happening! They earn $90 billion+ every three months. In the end, it will be about their AI strategy and how they are dealing with any slowdown. The balance will be about the usual data points – Iphone, Mac, Ipad, Wearable and Service revenues, knock yourself out.
Sure enough, at 4:05 pm last Thursday, AAPL earnings hit the tape: EPS of $1.53 versus the expectation of $1.50. So, that was the first beat. Record services revenue of $23.86 bill – second beat. Mac and iPad revenues also outperformed. Those were the third and fourth beats.
Now iPhone revenues missed. But we knew that. That was not really a surprise. China sales were lower – again NOT a surprise. Wearables also missed – again, we knew that, so not a surprise.
Plus, they raised their dividend by 4%, payable on May 16 to holders of record by May 13 (poz), and they authorized an additional $110 billion share buyback program (another poz).
Remember I said that IF AAPL does not disappoint – then stocks were poised to go higher…and guess what? AAPL did NOT disappoint.
Recommended Action: Buy AAPL.
