When Apple Inc. (AAPL) Reports Earnings, Take It With a Grain of Salt

The problem is that Apple is expected to launch a bevy of new products this fall, just as it did last year. However, investors do not know the exact launch schedule yet, and this will have a major impact on next quarter’s revenue, margins, and earnings. Apple sold 5 million units of the iPhone 5 in its first weekend on sale, which alone would have contributed more than $1 billion of profit.

In other words, until investors know the exact product launch schedule assumed in Apple Inc. (NASDAQ:AAPL)’s guidance, it will be impossible to interpret the numbers. A two- or three-week difference in the product launch time frames would have little effect on Apple’s long-term value — which is what ultimately matters — but could conceivably shift $2-$3 in EPS between the September quarter and the December quarter.

Just breathe
Investors should recognize that Apple’s upcoming earnings release is far less important to the company’s future than the success of the new “hardware, software, and services” slated for release in the fall and 2014 (according to Tim Cook’s comments on last quarter’s earnings call).

It’s natural to pounce on every nugget of information available to decide whether to buy, sell, or hold a stock.  However, in Apple’s case, this short-term focus could cause you to miss the bigger picture. As I recently pointed out, while Apple’s earnings have taken a step backward in 2013, revenue is still growing and the company’s margins are likely to stabilize going forward, leading to a rebound in profitability next year. Investors should keep their eyes on Apple Inc. (NASDAQ:AAPL)’s long-term value and avoid making a rash decision to buy or sell based on next week’s earnings report alone.

The article When Apple Reports Earnings, Take It With a Grain of Salt originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg owns shares of Apple and is long January 2015 $390 calls on Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and China Mobile.

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