Apple shares down 7% after hours even though the company posted its best fiscal Q3 profit ever. The problem at this point is whether the company can continue making hit products.

• Iphone sales came in line with our estimates of 47.5mln however fell short of the market estimates.

• No mention of unit sales of the iwatch – however it was mentioned that sales were modest – company has to keep banking on the iphone. (The company probably shipped at least 1.9 million smartwatches since it debuted in April, short of the 3 million to 5 million projected by analysts, according to data compiled by Bloomberg.)

Financials

• Sales were reported at $49.6bn we are forecasting $44.9bln

• EPS were reported at $1.86 in line with our estimate of $1.87

What’s next

• Expected launch of new iphones in September

Apple shares have gone up 20% YTD much better than the NASDAQ (11%) and the S&P500 (4%).

Based on our previous valuation and initial over reaction to the results, I would not rush into selling the shares. We will be going through our model in the coming days.

Good day and happy trading!

Kristian Camenzuli