Apple Shares Tumble Despite Record Quarter
Shares of Apple declined after hours as the company revealed earnings for its fourth quarter of the fiscal year ended September 30th.
Despite a record quarter in terms of revenue ($64.7 billion), investors’ disappointment comes from iPhone sales missed and a declining Chinese market share that came at multiyear lows.
Sales for Mac and Services reached an all-time record, helping to conclude a remarkable fiscal year. However, despite rising revenues and rising diluted earnings per share metric, the rise in the sales of the iPad and Mac failed to make up for the decline in the iPhone sales.
Why Apple Sold After Hours?
Apple is one of the companies that benefited the most from the coronavirus pandemic. As people switched to remote working, Apple had the right product at the right time to help to build an adequate home office infrastructure.
All technology companies outperformed in the last six months, so the record quarter in revenue should not come as a surprise for investors. However, if one looks at the bottom line, Apple’s revenue was up only 1% in the last year, while its stock is up over 90% over the same periods. Therefore, the valuation might be viewed as a little too extreme when compared to what Apple actually delivered.
The company also declared a cash dividend of $0.205/share of the common stock, payable on November 12th 2020, to shareholders on record on November 9th, in line with prior on a split-adjusted basis, with a forward yield of 0.71%.
The timing for the release is not great. The stock market’s volatility increased lately as suggested by the VIX index, with only a few days left until the U.S. elections. Major stock indices reacted negatively to the lack of another round of fiscal stimulus before the elections. Despite both candidates hinting at an even bigger stimulus package to be delivered should they win, investors prefer a cautious stance until the results are known. In any case, despite the uncertainty, stocks remain new all-time highs in what appears just a longer consolidation until uncertainty dissipates.
All in all, Apple delivered an incredible quarter in terms of revenue. However, any company that trades at such high multiples will have a hard time justifying them if the revenue growth lags from previous performance.