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Can Apple’s Q1 Earnings Make Warren Buffett Happy?

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Apple’s Q1 2019 earnings

US tech giant Apple (AAPL) is scheduled to release its earnings for the first quarter of fiscal 2019 (which ended on December 29) tomorrow. The trend in Apple’s earnings has been strongly positive for the last two years. The company has delivered positive YoY (year-over-year) growth in its adjusted EPS for the last eight consecutive quarters. However, on January 2, the company revised its first-quarter guidance downward, which resulted in about a 10.0% drop in Apple stock on January 3. Let’s take a look at what to expect from the company earnings release tomorrow.

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Apple and Warren Buffett

According to the latest data compiled by Thomson Reuters, Wall Street analysts expect Apple to report adjusted EPS of $4.17 per share in the first quarter of fiscal 2019. This EPS estimate reflects about a 7.2% increase from its EPS of $ 3.89 in the first quarter of fiscal 2018.

Recent warnings from many large companies, including NVIDIA (NVDA), due to the negative impact of slowing Chinese economy on their business suggest that China could be a bigger problem than expected. This factor is why Apple’s actual earnings might disappoint investors this time.

In the third quarter of 2018, Warren Buffett’s investment firm Berkshire Hathaway (BRK.B) raised its bets on Apple. At the end of the third quarter of 2018, Buffett’s investment firm owned about 252.5 million Apple shares, which made AAPL Berkshire’s largest single holding.

Apple’s weak guidance for future earnings tomorrow, due to factors including the Chinese economic slowdown, could trigger another sell-off, which might worry Warren Buffett. In contrast, if Apple gives solid guidance for its upcoming earnings and revenues, it could attract more buying of the stock.

As of January 25, Apple stock was trading without any notable changes on a month-to-date basis while Qualcomm (QCOM) was down 9.9%. In comparison, other tech companies Microsoft (MSFT), NVIDIA (NVDA), Alphabet (GOOG), Facebook (FB), Amazon.com (AMZN), Netflix (NFLX), Oracle (ORCL), Intel (INTC), Advanced Micro Devices (AMD), and Micron (MU) were up 5.5%, 20.0%, 5.4%, 13.7%, 11.2%, 26.3%, 10.3%, 0.2%, 18.8%, and 22.8%, respectively.

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