On April 26 after market close, Apple Inc. (NASDAQ:AAPL) reported earnings for its second fiscal quarter and issued guidance for its third fiscal quarter. Apple posted its first-ever decline in iPhone sales and its first revenue drop in 13 years!!
Earnings of $1.90 per share fell short of the average analyst estimate of $2 per share, according to Thomson Reuters I/B/E/S. Revenue of $50.56 billion missed expectations of $51.97 billions. Its shares fell a whopping 8 percent, wiping out almost 45billions from market cap. As if these poor results weren’t already bad enough, the company announced poor guidance for the third quarter. Revenue is now expected to be in the range of just $41 billion to $43 billion, widely missing a consensus of $47.32 billion!!
Wow. Take a minute to digest what just happened!
The most popular stock market darling, the biggest company on planet earth just missed expectations, declines in earnings/revenue and outlook negative first time in 13 years and that’s happening right after “not-so-bright” results from Microsoft (MSFT) and Alphabet (GOOG).
Is Time Over for Apple Now?
Of course, as one would Expect, Mr Tim Cook said “The future of Apple is very bright” and that “Our product pipeline has amazing innovations in store.”
The investors don’t seem to be so excited in spite of raising its capital return program by $50 billion through a $35 billion increase in its share buyback authorization and a 10 percent rise in the quarterly dividend
It Pays to Prepare in Advance
I hope you learnt the power of options beforehand so you could have protected your portfolios before earnings announcement (if not, join here). In fact, few years ago we detailed a comprehensive post outlining 3 options strategies that one could use to protect their shares (Click here to learn from this educational post)
Some Ideas on What do now?
When stock opens for trading tomorrow, there will be two camps of traders. One who thinks it is a great opportunity to be a buyer and another who thinks that apple will crash to new lows. Whatever it is, here are my three cents-
As Apple results make headline tomorrow onwards, don’t jump to early conclusions as if all is lost. Unless $90+/- is taken out, I will stay positive about the company and wait for the next trigger. Apple has clear support around $90+/- and during post earnings announcements, it dropped to $96. If Apple shares were to drop further, and break $89 (which I assume will be a popular stopout area), you might want to protect your apple holdings.
Do your homework before market opens so you have strategies and system in place. If you would like to have my opinion on your ideas, post your views/trade ideas in the comments section. I will be glad to share my views.
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Profitable Trading, OP