The Loudest Voices Hate Apple's Guts: Should Investors?
Unless you're a short-term swing trader or active trader, there's little reason to pay attention to events causing knee-jerk reactions. If you take a look, you will see that most releases have done nothing but elevate investor stress levels.
Long-term investors shouldn't care about a single quarter's results. Watching patterns develop over several quarters is the only way to avoid overconfidence (or "overpessimism"). Active traders can roll in and out of positions at incredible speed because a company's worth doesn't matter. What matters to them is the expectation of price movement and direction today.
If you're a long-term investor, here are the key takeaways from the earnings release. These are the primary points I am focused on and used as influences for my decision to go long.
Gross Margin : In Bobbing for Another Apple, I wrote about the naysayers using any metrics they could find including gross margin to "prove" Apple was finished.
I pointed out that Apple has higher margins than Nokia (NOK) at 1-2%, Research In Motion (RIMM) at 3-6%, Microsoft (MSFT) at 28-32%, and Sirius XM (SIRI) at 25-26%. If relative margins are so important, why do these companies have greater valuations based on earnings, yet lower operating margins?
It doesn't make logical sense (I know, it doesn't need to), but Apple came in at 38.6%. Remember hearing opinions about other smartphones becoming indistinguishable and approaching commodity status? Apple apparently didn't get the memo.
Even with competitive pressure from Nokia, Microsoft, and Google's (GOOG) Android, Apple still outshone its peers. But that's not the truly amazing part.
More astonishing is that margins may increase, not decrease as many are predicting. The increase in new products and updates Apple launched last quarter clued analysts in on potential margin pressure. Launching products is expensive in terms of capital, human resources, logistics, and marketing.
If the desirability of Apple's iProducts continues, fewer launches in the current quarter should result in improving margins. Expectations for Apple are falling faster than a Wisconsin thermometer on a winter night. Watch for a "surprise" jump in margins for our current quarter.
Revenue: If you thought the gross margins weren't examined closely enough, revenue numbers will really leave you scratching your head. Apple reported the second-best quarter in the history of the company, and the average amount of revenue per day was a record.
The only reason this quarter wasn't the best quarter ever for Apple was due to fewer days in the quarter than the year-ago period. On a daily basis, Apple sold more than any previous quarter.