Monday, January 27, 2014

Apple Traders Were Disappointed

Apple traders were disappointed by today's earnings release for the quarter ended 12/31/13. The disappointment chiefly lay in quarterly iPhone sales figures---"only" 51 million when analysts had expected 55 million. While year-over-year quarterly revenue rose 5.7% from $54.5 billion to $57.6 billion, Apple's net profit remained the same at $13.1 billion. Note, however, that quarterly earnings per share rose 5% from $13.81 to $14.50 because of the share buyback program, which appears to have retired about 45 million shares using simple arithmetic.

Yes, of course, it would have been much better to have sold AAPL at today's close of $550.50, before the earnings announcement.

Update - 1/28: Apple fell 8%, or $44, on Tuesday to $506.50. Some perspective: when we looked at whether to remain an investor nine months ago the price was $406.13. The annualized rate of return for holding AAPL for the past nine months, assuming disposition at $506.50 per share on Tuesday, was 37%:

In addition to iPhone--with a rumored larger screen--and iPad refreshes in 2014, the company may have new products up its sleeve, such as an iWatch, an iTV, or electronic payments system.  It's not impossible for the price to get back to $600, roughly a 20% gain from today's levels. Meanwhile, investors will have the dividend of $3.05 per quarter (2.4% yield versus the price) to give them comfort.  The bottom line: AAPL is an excellent investment with more upside than downside, but the stock is problematic if one is a short-term trader.

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