Buy this dip in Apple shares

Apple, which Real Money’s Stephen Guilfoyle calls, “the greatest consumer electronics company of all-time,” released the firm’s fiscal fourth quarter results on Thursday night. Apple shares promptly sold off in response.

stock chartStephen Guilfoyle for Real Money:

For the firm’s fiscal fourth quarter, Apple reported EPS of $0.73, beating the street by three cents, on revenue of $64.69 billion. The revenue print was good for growth of 1%, and easily beat consensus view.

Now, we already know iPhone sales missed. Does that not make sense though? Ahead of a highly publicized launch of the next generation 5G capable iPhone 12’s (four varieties). I think it does. Away from the iPhone line, the rest of the firm’s product lines all handily grew (25% in aggregate) and beat projections. We’re talking iPad, Mac, Wearables and Home Accessories. They all beat.

The real story for me is in services, still… The group beat expectations and continues to grow. That said, even now, with Services accounting for 22% of sales, the higher margin unit provides 39.4% of gross income. Hmm. Gross margin for the entire firm landed at 38.2%. For services… 66.9%, for products… 29.8%. This is the main reason why markets have over the past year and change, assigned a much higher multiple to the equity in terms of valuation.

In short… buy this dip. No, don’t buy the markets. There’s a national election next week. Just buy some Apple on the dip. The firm had a better quarter than you think, and is set up for accelerated success in the future.

MacDailyNews Take: Sound advice.

2 Comments

  1. I simply do not understand the stupidity of this exaggerated Apple sell-off. On days like this a person should be buying stock in a company that had decent earnings and has solid fundamentals. I’m not upset or concerned, I’m just puzzled at the logic of some investors. Have these people been buying on margin and can’t cover losses? I just can’t figure it out. Buy high and sell low strategy? I’m long Apple 2004, so this day or this week means nothing to me, therefore I obviously have no reason to panic (sell).

    Dumping your stock sure isn’t going to change the CoViD-19 situation unless you need that money to survive loss of income or something similar. I’m just curious as to what’s going through some investor’s heads in terms of dumping a good stock with a decent earnings report. Anyway, it’s a good day to buy stock and I hope Apple is still doing buybacks if they’re not going to increase dividends considerably. Less than 1% dividend yield is somewhat absurd, but Apple does have a lot of outstanding shares out there. If Apple uses its money to purchase video and music content for Services, I’ll go along with that. Keep services growing and get it closer to iPhone sales revenue.

    Because Mac sales were up quite a bit last quarter, I’m really looking forward to the release of Apple Silicon Macs to the public. If Apple makes them relatively affordable, Apple is going to make a killing not having to pay Intel for their somewhat expensive processors. I would love to see a Mac computer resurgence for schools and the enterprise. Only time will tell as to whether Apple Silicon Macs can upset the Wintel laptop market.

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