Apple Earnings- A Low-ball or Really Short on Expectations

by OptionPundit on October 26, 2012

Apple (AAPL) reported earnings that missed consensus estimates. Amongst other tech heavyweights, Amazon (AMZN) missed estimates as well. This was the 3rd time AAPL missed earnings during the last 8 Quarters (including the latest). Besides missing estimates, AAPL also lowered guidance which was the 5th time during the last 8 Quarters (2nd in a row). Here are key take away from the latest earnings (source- Briefing.com)-

  • Apple reported Q4 (Sep) earnings of $8.67 per share, $0.08 worse than the Capital IQ Consensus Estimate of $8.75;
  • revenues rose 27.2% year/year to $35.97 bln vs the $35.78 bln consensus.
  • 26.9 mln iPhones sold in Q4 vs Street est of ~25 mln
  • 14 mln iPads sold in Q4 vs Street est of ~17 mln
  • 4.9 mln Macs sold in Q4 vs Street est of ~5 mln
  • Co reported Q4 gross margins of 40.0% vs Street est of 40.6% and 38.5% guidance.
  • Co issues downside guidance for Q1, sees EPS of ~$11.75 vs. $15.53 Capital IQ Consensus Estimate; sees Q1 revs of ~52 bln vs. $54.95 bln Capital IQ Consensus Estimate.

Beside all those pads/pods, Apple has one more popular product (not physical product per se) called uPOD (Under Promise, Over Deliver). So one may say that latest numbers are no different from the past as company typically guides conservatively. I thought to check out some facts, and here is objective look based on the past 8 quarters, selecting only the instances when AAPL lowered guidance-

AAPL EPS/ Sales Guidance (Only "reducing" Instances)

While the drop in absolute $$ value in EPS may seem a lot,  it doesn’t seem much different from last quarter. The company does seem to keeping the “low-balling” tradition in-tact.  AAPL also kept another key tradition in tact i.e. drop in prices post key product announcements. You may check past history here (FREE- Open to All)

During after market hours AAPL dropped to $585.1, almost kissing the 200dma. A trading trend forecast I shared with OPNewsletter members (speculative trading section).

OPNewsletter Speculative Trade Section (Member's Only)

And the VXX/VXZ trade (Oct 2nd, post QEternity) has also delivered almost >+20% gains (without any significant risk throughout the life of the trade) and if markets drop on Friday open, that will bring even more. If you are an OPN member who opened this trade, pls check your e-mail that I plan to close it today and don’t re-open it yet.

Earnings are in full swing and I am working on posts to explain how to trade earnings. If you have any specific requests, questions or comments that you would like  me to  cover, pls leave your comment.

Subscription are currently open and there is no wait listing fee. The objective is still the same as it was 60 months ago i.e. 5-7% monthly gains. OP Income Newsletter is NOT a GET-RICH-QUICK-NEWSLETTER. The market neutral and volatility strategies that we trade are scalable and diversified. Try it completely RISK FREE i.e. there is no subscription fee for your first month if OPN doesn’t make money.

Take care and trade carefully,
Profitable Trading, OP

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