The Apple (NASDAQ:AAPL) share worth seems to be set to decrease Friday after its Thursday (2 November) earnings report. Instantly following the discharge, the inventory slipped 3% in prolonged buying and selling.

But in contrast to the broader market, I assumed outcomes have been optimistic total. As an Apple shareholder, I’m watching the inventory carefully to see if there’s an extra shopping for alternative for me.

The small print

Let’s begin with the small print of the Apple’s earnings report. Web gross sales got here simply shy of the identical time a yr in the past – $89.5bn in comparison with $90bn. 

Earnings per share, nonetheless, have been up 14%, from $1.29 to $1.47. Each revenues and earnings got here in forward of analysts’ expectations. 

All of this was fairly encouraging. However there have been a few points for buyers to be cautious of. 

One is that {hardware} revenues got here in decrease than 12 months in the past. And whereas iPhone gross sales continued to develop, all the different classes slipped again.

The principle weak point was administration’s income steerage of round $117.2bn for the following three months. That’s in keeping with final yr’s outcomes, however wanting the $122.8bn analysts have been anticipating.

Revenues and earnings

Apple shares presently commerce at a price-to-earnings (P/E) ratio of round 29. So it’s straightforward to see why analysts is perhaps dissatisfied by a forecast of zero gross sales development.

That is solely a part of the story, although. I believe the truth that the corporate managed to develop its earnings per share regardless of non-existent income development is extra important.

There are two causes the agency’s EPS went up regardless that its prime line didn’t. The primary is its margins expanded.

Apple’s companies division grew revenues by 16%, offsetting declines in {hardware}. Since this a part of the enterprise has a 70% gross margin, in comparison with 37% in merchandise, total margins got here in increased. 

Second, the corporate has diminished its share depend from 16.1m to fifteen.7m during the last 12 months. Consequently, every remaining share now has a declare on a higher portion of the corporate’s earnings.

Wanting forward

I believe these two options imply the corporate has the capability for additional earnings development forward. Even when total gross sales stay static, EPS can proceed to develop.

Moreover, revenues from the iPhone – the corporate’s most necessary {hardware} product – remained resilient. And the outlook on this entrance is encouraging to me.

Based on a survey from Piper Sandler, 87% of US teenagers personal an iPhone and 88% anticipate their subsequent cellphone to be an iPhone. I believe that is extremely encouraging.

One of many key options of Apple’s ecosystem is that folks which might be in it have a tendency to remain in it. So the massive teen following the corporate has appears to me to bode nicely for the longer term.

A shopping for alternative?

Macroeconomic headwinds are a transparent subject for the inventory within the quick time period. And even accounting for a 3% decline, it seems to be costly to me at immediately’s costs, including to the chance.

I’m actually not saying the market is flawed to assume that slowing income development is a professional supply of concern. But it surely’s not the be-all and end-all of the corporate’s development prospects.

The Apple share worth has some option to fall earlier than I look so as to add to my funding. However the destructive investor sentiment has put the inventory firmly again on my watchlist.