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Apple Stock Drops After Earnings Beat. Cause for Concern?

By:Mike Butler

With a handful of new iPhones and other Apple products, the tech giant could have a monster holiday season

  • Apple reported quarterly earnings on Thursday Nov. 2 and beat both revenue and EPS expectations.
  • Apple reported an EPS of $1.46 on an expectation of $1.39, resulting in a 4.75% surprise
  • Apple reported revenue of $89.50 billion on an expectation of $89.42 billion, resulting in a 0.09% surprise.
  • The stock sold off slightly after the announcement, likely on a cautious outlook for the next few quarters.

Apple Earnings Review

Before Apple (AAPL) reported quarterly earnings on Thursday, the expected earnings-related move in the stock price was +-$7.38 for the week, based on current implied volatility. After the announcement, the stock dropped as much as $3.33 from the previous close on Nov. 2 to the low point on Friday. This was well within the stock's expected move for earnings, but it puts it near the higher end of the weekly expected range given the massive market rally we saw prior to this announcement.


This is a classic example of an instance when actual earnings number means less than how the market digests it. Apple beat both revenue and earnings-per-share (EPS) expectations, but the stock dropped.

The big question was whether Apple would be able to improve the pace of iPhone sales—and that could be what saved Apple from a bigger selloff. iPhone sales and cloud services were the darlings of this quarterly earnings call, while smaller product sectors took a hit, including the Apple Watch, AirPods, and iPad.

The silver lining for Apple regarding this earnings announcement was that it stopped the bleeding from a revenue standpoint, posting a revenue figure that was $7.7 billion higher than the previous quarter.

The bullish case for Apple stock

We're just around the corner from the big holiday season and with a handful of new iPhones and other Apple products new to the market, I'd imagine the tech giant is in for a monster holiday season.

With that said, economic concerns still loom, and the fact that the tech company beat EPS and revenue estimates this quarter and the stock still sold off isn't the best news for the future—what will it take to see a strong rally in Apple? Clearly much more than what was just reported, a story told by the market's reaction to the news.

The bearish case for Apple stock

It feels easier to be on the bearish side of Apple stock considering the earnings beat that resulted in a stock price selloff. The market expects big figures for the holiday season, but if consumers are pinching pennies and holding off on more expensive purchases, we could see an Apple miss next quarter which could result in the stock tumbling. We'll have to see how the rest of the year shakes out and how that impacts Apple stock in the next few months.

The expected move for AAPL stock through the January 2024 options cycle is +-$11.38 based on current implied volatility. Check back next quarter for another AAPL stock earnings preview ahead of the announcement!

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb

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