Apple Earnings? Ignore Them
That’s right, ignore Apple’s (AAPL) earnings coming out tomorrow, Tuesday, April 23. Day traders, go home. Investors, stick around. Focus on Apple, the company, not Apple, the stock over the past few months.
The critical reason to invest longer term is misperception — Apple is not a tech company, it is a consumer products company with near-fanatic customer loyalty compared to all competing brands. This is a distinction with a difference. And that is why Apple, long term, is by far the best company and stock among “tech” companies.
Much has been made of Apple’s slowdown – a look at very recent data shows a momentum shift.
- StatCounter, a market tracking firm, showed growth in share for Apple in February, the latest month available. Apple’s market share in smartphones hit 27.2% in February, 23.3% in December. Android share stalled in February.
- The Yankee Group’s March U.S. Consumer Survey said, “Only about 15% of consumers intend to buy a Samsung phone within the next six months, while 40% intend to buy Apple iPhones.” The report showed 61% of Samsung owners willing to buy Samsung again versus 85% of iPhone users doing the same.
- In the U.S., ComScore found Apple on top with 39% of the people owning smartphones owning Apple, making the previous loyalty number very important. As important, Android’s ownership share dropped more than 4% in just two months.
This trend may not show up completely in tomorrow’s quarterly results. The physics majors who use Blackberries and now pose as Apple analysts churn out spreadsheet after spreadsheet calculating short-term sales. Since they see AAPL as a tech company, they are missing the forest through the twigs. Apple has brand strength that persists through upgrade cycles that competitors do not have. See any lines outside a Samsung store lately? And quietly, that loyalty is extending to computers: IDC data shows sales growth of 7.4% for Macs last year, the only personal computer company to see growth.
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What’s in the Apple pipeline
Upside catalysts in 2013 include a possible deal with China Mobile, an iPhone 5S, a lower-cost iPhone and perhaps a real Apple TV device.
The stock is seen by many as dead money at best. Trust me, I know – after having ridden AAPL for a while, then selling, I got back in around $620 – and still have more than three-fourths of that position staring me in the face every morning. But I am a long-term investor and I find the math of Apple compelling. From continuing sales growth — iPad sales grew 48% in 2012, the Mac is the only computer taking market share — to overpowering financials, all wrapped in the power of the brand, Apple is the still the finest company on the planet.
Could Q1 2013 earnings miss? Yes. Longer term, based on the low end of analysts’ growth estimates, the enterprise value of the stock, margins and profitability the stock is worth $1,080-$1,240 a share.
Disclosure: Michael Shulman owns Apple shares.