Apple Inc. (NASDAQ:AAPL) earnings don’t matter. I said it. The internet’s tech and financial journalists are salivating today at the prospect of the earnings announcement after the market closes this afternoon. Though I have written articles on it myself and will be waiting on tenterhooks for the announcement I am fully aware it’s a shadow game. Unless there is an incredible surprise today’s earnings are unlikely to have any real effect on the way Apple does business or the way investors see the firm.
Apple Inc. (NASDAQ:AAPL) own estimates for this quarter, EPS of $8.50 and revenue of $32.5 billion, are well below the analysts expectations, of $9.99 EPS and revenue of 36.7 billion. The company will more than likely will outperform its own expectations this quarter particularly looking at the expected. Assuming that the figure are untouched by huge quakes they don’t matter.
The volatility of Apple’s stock is based on future expectations of the company’s performance rather than its performance in this quarter. This quarter’s performance is already built into the stock’s price and that’s not a problem. The issue arises from the other assumptions built in.
Forecasts about the company’s future asserting that it will hit $1000 a share in early 2013 or even more ‘modest’ estimates like Piper Jaffray’s $910 twelve month target have been weighing on investment this quarter. Investors buying at prices above 600 are buying because of the perceived increase in value to come.
The current volatility is a product of the shake up in expectations of the firm’s future. Recent upgrade fees on contracts added by the major carriers in the US have caused fears that the iPhone’s subsidies are not sustainable. Both Verizon and At&T have added $30 charges to those already on contract. It was fears like this that led to the company’s original fall earlier in the month.
An analyst suggested that major carriers may refuse to subsidize the phone sooner rather than later and dropped the price target on the shares. Investors are worried that the winds of change may have risen for the company and things may not be as rosy in the future. With a little shake up and the massive market cap of the company it is easy for a big slide to happen quickly. It is the original slide that caused investors to reassess the stock and caused many to get out on fears of a bubble.
When Apple first launched the iPhone the subsidies it secured from carriers were impossible. It secured deals nobody else ever could and changed the smartphone market forever. If anybody can find a way around the current difficulties it is the same team that had that original inspiration. For that reason this evening’s conference call, assuming the address the issues, is much more important than the earnings themselves.
Apple’s executives have a chance to reassure investors and massage the volatility away if they play their cards right. That having been said tonight’s earnings could have a short term effect on the price with investors jittery about the recent sell off, but in the long term earnings for Q2 2012 will not matter.
Apple has had an incredible quarter. Even if the numbers come in well below their expected values Apple has still had an incredible quarter. The company’s constant hitting of new heights in revenue, market share and stock price has been phenomenal. Today’s earnings will reinforce this. For those of you who’ll be clicking refresh on Google Finance later this afternoon find something more fun to do, if not for your selves then for me.
I’m an addict, I’ll be mashing F5 for all of us.
(Disclosure: No position)