Is Apple Inc.'s (AAPL) Post-Earnings Loss a Bad Omen?

How Apple Inc. (AAPL) fares immediately after earnings tends to dictate where the stock goes in the weeks and months ahead

Oct 27, 2016 at 4:42 PM
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Apple Inc. (NASDAQ:AAPL) dropped 2.2% on Wednesday after Wall Street reacted negatively to the blue chip's mixed earnings report. Because the Dow stock is often treated as a bellwether for the broader tech market, we were curious to know how first-day returns after earnings impacted longer-term returns.

Schaeffer's Quantitative Analyst Chris Prybal reviewed AAPL's historical earnings reactions, going all the way back to 2010. As you can see on the chart below, the stock tends to swing higher on the first day only half the time, with an average overall gain of 0.2%. However, going out to 10 weeks, the percent positive rises all the way to 70%, with an average gain of 4.9%.


AAPL earnings average 161027

At first blush, it looks like Day 1 returns are somewhat predictive of longer-term returns. In other words, if AAPL gains on the first day (see green cells below), it tends to build on the positive momentum. The opposite also appears to be true, as suggested by multiple rows of red cells.

 

AAPL earnings average 2 161027



On a closer look, this initial conclusion is fairly accurate. Out of 27 total earnings reports, AAPL has had 14 positive first-day returns and 13 negative (excluding Wednesday's). Going one week (5 days) out after those positive returns, the stock has been positive 93% of the time, with an average gain of nearly 6%. That trend holds up long-term, as all but one return has been positive 10 weeks (50 days) out, and the average advance rises to 12.4%.

Meanwhile, following a first-day loss, Apple Inc. has ended the next day higher just once, in April 2013. Today was no different, with AAPL giving up 1% to sit at $114.48, despite a highly anticipated MacBook reveal. After a negative reaction, AAPL has been positive just 23% of the time one week out, with an average loss of 3.5%. However, things actually get a little better the further out we go. By 10 weeks, 46% of the returns were positive, and the average loss was slightly lower, at 3.3%.

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