Wall Street did not seem to care that Apple's AAPL fourth-quarter results beat earnings and revenue estimates. The world's biggest tech company reported earnings of $1.46 per share, above estimates of $1.39, and total revenue of $89.5 billion, slightly above expectations of $89.28 billion.
Despite this narrow double-beat, shares of Apple — up around 37% for the year — took an after-hours tumble, falling roughly 3%. The Street's negative reaction to the earnings report came based on a weak holiday sales forecast and weakening revenue growth in China amid mounting competition.
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In the wake of the company's less-than-stellar earnings, Deepwater's Gene Munster said that the Street is "over-reacting." Noting that CFO Luca Maestri expects December revenue to come in 5% below Street forecasts, largely due to the fact that this December quarter is a week shorter than the previous December quarter, Munster said that the bottom line for Apple is still one of ongoing growth.
Analyst: Apple is becoming a consumer staples company
"Each week the business is expected to grow 7% y/y in December, and that’s a measurable step up from the 1% growth in September," he wrote, adding that the calendar will normalize in March, revealing a business that will "likely continue to grow at around 5%, a level that I believe investors will be satisfied with."
Further, Munster said that Apple has continued to grow its active device installed base, an important long-term metric. This metric, he said, will drive Apple into a whole new chapter of the company's storied career.
"Over the next five years, I continue to expect investors to see Apple as a 'can’t live without' consumer staples company," he said. The fact that the stock was only down 3% in response to a 5% guide down, to Munster, is "evidence that this investor shift is happening."
And though Apple hasn't yet launched a branded competitor to ChatGPT, CEO Tim Cook noted on the earnings call that, in terms of generative AI, "we obviously have work going on, and you can bet we are investing quite a bit and we are going to invest responsibly”.
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This, to Munster, is further proof of the bull case for Apple. The company, he said, importantly isn't going to throw billions of dollars down the drain attempting to solve an AI-powered Siri. But it is going to invest the proper time and resources to building out such a product, giving Apple the "pole position among Big Tech to lead in personalized AI."
Wedbush's Dan Ives likewise remains unconcerned about Apple's lower December projection.
"I think investors are viewing this in a glass half-empty view and I think that's the wrong move," he said. "Gross margins, services growth and iPhone growth were all "solid," Ives said, and that is "the focus."
Apple reported gross margins for the September quarter at 45.2%, a record for the company. Apple expects gross margins for the December quarter to be between 45% and 46%.
Apple shares lifted slightly in pre-market trading, down only 1.33% instead of the initial 3.4% dip it experienced directly post-earnings.
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