Options Insights VII: How To Trade Apple After Its Earnings?
$Apple(AAPL)$ is a long-term Sell put target for me, as well as an important compass for the global economy and a leading technology stock. Therefore, I pay close attention to its earnings report.
Today's article will discuss post-earnings trading opportunities for Apple.
1. How Do We Read Earnings?
When we look at earnings, we don't just look at the numbers.
Instead, we look at
- earnings vs. market expectations
- the core figures about company's growth
- the company's future outlook
Therefore, a company's stock price is not necessarily up if earnings beat expectations or down if they miss.
2. Key Figures of Apple's Earnings
Revenue: $83 billion, up 1.9% year-over-year, compared to market expectations of $82.76 billion.
Net income: $19.44 billion, down 10.6% year-over-year, compared to market expectations of $18.976 billion.
Core revenue: IPhone revenue is 40.67 billion USD, up 2.8%, the market expects 38.3 billion USD.
Overall, $Apple(AAPL)$ 's core data all beat expectations, which is quite good.
But there are risks: in the current background of economic slowdown and longer cell phone replacement cycle, Apple only has a single-digit growth.
3. Median Valuation
Analysts adjusted $Apple(AAPL)$ EPS in 2023 to 6.51 from 6.13 this year, up 6% year-on-year.
Corresponding valuation: forward PE = 157.35/6.51 = 24.17
EPS estimates
And we can find its P/E on Tiger app: click the ticker → enter its interface → click the "Analysis" → find "Valuation Anlysis"
Its P/E is 24.9, among the median range in the past 5 years.
4. Trading Opportunities: Buy Stock/Buy Call/Sell Put?
$Apple(AAPL)$ has a healthy fundamental, although with a bothering growth rate.
Apple's share price is not expensive, but not particularly cheap either. So it's not worth to "buy call", nor is it worth leveraging to go long on the underlying stock.
Apple won't rise/plunge sharply. The stock might go up/down 10/20%. Therefore, we can sell put.
For example, I sell put $Apple(AAPL)$ at $120 a few days ago and have made 60% profit.
This price is very reassuring, and I do not need to pay too much attention to the share price. I just need to look at its earnings report.
Summary:
This example also reflects options advantages:
options are applicable to more scenarios, especially when the stock price will not go up and down greatly.
To learn more about my series for beginners- Options Insights, you can click:
Options Insights III: What is Cash-Secured Puts (TSLA, QQQ, PDD)
Options Insights IV: The Downside of Cash-Secured Puts
Options Insights VI: The Advantages of Cash-Secured Puts
Options Insights: Criteria For Selecting Long-Term Target & Recommendations
Options Insights II : Why choose QQQ over SPY?
Options Insights: A Good Time to Sell Put of TSLA & TENCENT Now
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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