Apple Stock: Earnings Take Backseat to Holiday Hopes (AAPL)

Apple’s (AAPL) earnings report Oct. 27 will come with strong year-over-year profit and sales growth, but that won’t matter to Apple stock nearly as much as expectations for the upcoming holiday selling season.

After all, Apple’s newest iPhones — the iPhone 6s and 6s Plus — barely had time to make an impact last quarter. A year ago, the then-new iPhone 6 sold for eight days in AAPL’s fiscal fourth quarter. As Morgan Stanley analysts wrote in a note to clients:

“The tight range of expectations along with the fact that the new iPhone 6s only sold during two days of the quarter, make the September quarter less relevant to stock performance.”

What really matters is how the new iPhone 6s is faring against the very tough year-over-year comparison right now — and some analysts don’t see it doing all that well.

Susquehanna Financial Group has a positive rating in Apple stock, but says early returns suggest that sales of the newest iPhones aren’t quite as strong as Wall Street expected. From a client note:

“We therefore have less confidence that iPhone can post year-over-year growth off last year’s tough compares.”

Indeed, Susquehanna analyst argues that the recent retreat in Apple stock reflects the market’s belief that AAPL won’t report year-over-year iPhone sales growth for the holiday quarter.

On the upside, if Apple stock has a decline in iPhone sales already baked in, AAPL should remain resilient amid any less-than-stellar news. And on the other side of the action, Apple stock is primed to pop on any better-than-expected iPhone 6s news.

AAPL Stock Having a Nice Year Either Way

With the recent pullback helping to limit further downside in AAPL, investors can remain reasonably confident that it will end the year as a substantial market-beater.

No, Apple stock hasn’t put up anything like big gains this year, but then in a weak year for equities, it’s been kind of a hero. AAPL is up more than 7% in 2015. At the same time, the S&P 500 is barely above breakeven.

And with the December quarter being much more significant than the one ended September, there should be little risk to Apple stock from results that are already in the books. Besides, it’s supposed to be a good one anyway.

For the most recent quarter, analysts, on average, forecast Apple earnings at $1.88 a share, according to a survey by Thomson Reuters. In the year-ago period, AAPL earnings were $1.42 a share.

Revenue is projected to grow more than 21% to $51.09 billion from $42.12 billion.

AAPL is masterful at managing investors’ expectations, so there’s little reason to fear a sales or profit miss. Indeed, over the last two years, Apple has beaten the Street’s earnings forecast for 10 straight quarters and has missed on the top line just once.

The bottom line is that Apple earnings will take a back seat to anything the company has to say about current-quarter iPhone sales.

Much of any disappointing news is already baked into the stock. If Apple stock suffers a knee-jerk selloff on earnings, you can bet that it will come back soon enough.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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