We touched base briefly on Apple’s (AAPL, $507.23, down $43.27) earnings this morning and we said going into the announcement they would post an incredible quarter but could “sandbag” their numbers going forward.
The company has been famous for presenting earnings on a silver platter over the years but has a history of lowering Wall Street’s expectations for upcoming quarters.
Apple has said it wouldn’t let the air of the balloon and would call it like they see it but it appears this is another classic example of over-delivering and under-promising.
Apple reported earnings of $14.50 a share versus the suit-and-ties expectations for $14.09 a share. Revenue also came in above expectations at $57.6 billion versus estimates for $57.46 billion. Incredible.
For the recently ended quarter, Apple sold 51 million iPhones, 26 million iPads, and 4.8 million Macs, with gross margins of 37.9%. The company generated $22.7 billion in cash and ended the quarter with nearly $160 billion in its coffers.
For those that are saying Apple isn’t a “growth” company, there aren’t too many firms that can say they are banking $20-$25 billion per QUARTER.
Shares have tested and held support at $500 after Apple said it sees its current quarter revenue coming in at $42-$44 billion versus a forecast of $46.05 billion.
We had a feeling shares could move $50+ based on Apple’s numbers and when we heard activist investor Carl Icahn pulling a Richard Sherman last week, we had a feeling their could be a selloff. Captain Carl has his panties in a knot as he tweeted he bought another $500 million in stock today but there hasn’t been a huge bounce off the lows.
There is a chance shares test $475-$450 on continued weakness and where we would look for a bottom if they fall below $500. Carl probably is committing another $1 billion to his position and why he only bought half today in case shares continue to drift lower.
Of course, we are speculating but we should have been dabbling in the near-term put options as we could have made some nice profits in less than 24 hours.
The February put options have WEEKLY options on Apple and while the “regular” style options offer more time, there are also more expensive.
For example, the Apple February 500 puts (weekly) (AAPL140207P00500000, $6.35, up $4.15) went into Monday’s close at $2.20 and are currently up 189%. They opened at $6.25 and reached a peak of $9.55 this morning.
The February 500 puts (AAPL140222P00500000, $9.45, up $5.95) were going for $3.50 into yesterday’s close. These put options opened at $11.35 this morning and touched a high of $13.45 on Apple’s dip to $502.
Carl is probably in Tim Cook’s ear and Apple’s board’s rear to spend more money buying back the company’s stock and used today’s purchase to make a stand to help boost the price.
It remains to see if shares remain soft as Charmin or hold $500 but Carl may have to back up his talk with another $500 million if shares fall to $450. After all, it’s a no brainer, right?
Despite the 8% pullback in Apple, Tech has held up well after an opening dip and has been in positive territory as we head into the second half of trading.
The Dow is advancing 88 points to 15,926 while the S&P 500 is up 9 points to 1,790. The Nasdaq is higher by 4 points to 4,087 while the Russell 2000 is popping a 6-pack to 1,134. The S&P 500 Volatility Index ($VIX, 16.27, down 1.15) is down 7%.
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