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 not like the broader market, I assumed outcomes have been constructive general. As an Apple shareholder, I’m watching the inventory carefully to see if there’s an additional shopping for alternative for me.

The small print

Let’s begin with the main points of the Apple’s earnings report. Internet gross sales got here simply shy of the identical time a 12 months 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 traders 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, the entire different classes slipped again.

The principle weak point was administration’s income steerage of round $117.2bn for the subsequent three months. That’s in step with final 12 months’s outcomes, however wanting the $122.8bn analysts have been anticipating.

Revenues and earnings

Apple shares at present commerce at a price-to-earnings (P/E) ratio of round 29. So it’s straightforward to see why analysts is perhaps disillusioned 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 though its high line didn’t. The primary is its margins expanded.

Apple’s providers 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, general margins got here in larger. 

Second, the corporate has lowered its share rely from 16.1m to fifteen.7m during the last 12 months. Because of this, 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 general gross sales stay static, EPS can proceed to develop.

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

In line with a survey from Piper Sandler, 87% of US teenagers personal an iPhone and 88% count on their subsequent telephone to be an iPhone. I believe that is extremely encouraging.

One of many key options of Apple’s ecosystem is that folks which are in it have a tendency to remain in it. So the large 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 brief time period. And even accounting for a 3% decline, it seems to be costly to me at at the moment’s costs, including to the chance.

I’m definitely not saying the market is incorrect to assume that slowing income development is a official supply of concern. Nevertheless it’s not the be-all and end-all of the corporate’s development prospects.

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