If you would have given me Apple’s (AAPL) earnings report before it came out, I would have told you that the stock would be down – possibly by a lot. Because it was decidedly mediocre. And yet it’s +6% in the after hours. Let’s take a look at the numbers.
Overall revenue was -4% and iPhone revenue -10% compared to the year ago quarter. Net income was -2% compared to the year ago while EPS was up a penny to $1.53 due to a reduced diluted share count from stock buybacks. What’s to like? The quarter clearly supports my thesis that AAPL is now a value stock, no longer a growth stock. I see no reason to change my calculation of intrinsic value of $120 from earlier today.
Investors seem to be latching onto a new $110 billion share buyback – the largest in history. But why is buying back your overvalued stock and thereby misallocating capital bullish?
Let’s see what happens tomorrow….
Disclosure: Top Gun is short shares of AAPL.