Earnings Report Summary
Apple reported 3Q 2017 earnings tonight after the market close. They beat on both earnings and revenue for the quarter. Earnings per share was $1.67 vs. the $1.57 analyst estimate. Revenue was $45.4 billion vs. $42.4 billion in 3Q 2016. Services was up 22% to $7.3 billion.
Reasons Why the Quarter Was a Surprise
- Everyone is waiting for the iPhone 8
- China has flat-lined
- No Apple streaming TV service
- Concerns that Apple is too iPhone dependent
- Repatriation has not occurred
Long Term View
It is important to keep a long term view of a company that is run as well as Apple. While this quarter was a success, even a slight miss should not deter the intelligent investor.
Prior to earnings, Apple had a P/E ratio of 17.55 and a growth rate of 11.49% per year for the next 5 years. This is cheaper than the average stock in the S&P 500. Because it is so cheap and is run so well, it is now even owned by Warren Buffett!
Whenever there is a chance to buy Apple on sale the opportunity should be taken. I held Apple through the downtrend of 2015 – 2016. By holding on to it and acquiring more shares at a discount, not only have I benefited from the dividend reinvestments, but also the eventual capital appreciation that started last summer right around when Carl Icahn sold it because of fears of a China slowdown.
You should still do your own homework on Apple and ensure you can hold it during short and long term drops. It is important to ignore the noise and Fear, Uncertainty, and Doubt (FUD) surrounding this great American company. Analysts and naysayers are always saying that the company is doomed and cannot innovate.
These people do not have your best interests in mind. Beware of the many stock manipulators in the market. As long as the fundamentals don’t change, I believe that Apple should be held for the long term.