Post-Earnings Stock Analysis: 3 Best Buys
Daniel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple's stock has plummeted over 10% since it announced earnings on Wednesday. Despite the horrific drop in the stock price, there was plenty of great news: Year over year revenue and iPhone units sold increased 27% and 29%, respectively (numbers adjusted to reflect the shorter quarter in FQ1 2013). Net income was less impressive, declining slightly from $13.87 per share in the year-ago quarter to $13.81 per share.
Furthermore, a few key items were buried in the debate on the company's financials. For instance, iCloud users were up about 200%, from 85 million in the year-ago quarter to 250 million. Plus, iTunes users topped 500 million, adding a nice $2.1 billion to the bottom line. Apple CEO Tim Cook refers to Apple's cloud services as a "strategy for the next decade."
After the sell-off, Apple has a nice dividend yield of 2.4%. Even better, the stock is priced for zero growth despite average analyst estimates of double-digit growth in earnings in 2013.
Operating on such a large scale already, Apple is no longer a growth stock. But it's a solid, profitable mega-cap with a nice yield that should serve investors well for years to come.
Google is up around 7% since it reported results that beat expectations on Tuesday. Though the stock now trades at a hefty P/E of 23, its forward P/E is just 15.3. This isn't too expensive considering the company's superior economics and its varying growth opportunities.
All the post-earnings hype surrounding Google's improvements in average cost-per-click is no bluff – it really is a great sign. This is a metric that denotes the price advertisers are paying Google per click. FQ4's year over year decline of 6% was a big improvement over FQ3's 15% decline. Even better, there was actually a 2% uptick in average cost-per-click sequentially.
Even after a 7% bump, Google is still a buy.
Like Apple, Coach has taken quite the beating. The stock is down around 15% since the company reported earnings and revenue that missed expectations on Wednesday. Even worse, same store sales in North America were down 2%, year over year. But investors shouldn't fret.
First and foremost, CEO Lew Frankfort has expressed clear intentions of taking the Coach brand beyond handbags in 2013.
Second, management said in the earnings call that sales in China increased 40%, year over year. Likewise, comparable store sales in China are up "double digits."
Third, gross margins remained steady at 72.2% – a clear indicator of continued pricing power.
The long-term game remains the same, but now investors can pick up shares for 15% less.
The Bottom Line
For investors with a long-term time horizon, Apple and Coach are fundamentally the same companies they were before they reported earnings, yet they are both available for significantly less. Plus, both company's have a nice dividend yield of around 2.4%.
Google's 7% bump doesn't mean investors lost their opportunity to invest. It just means the company continues to perform, firing on all cylinders. The stock is still a buy.
DanielSparks has no position in any stocks mentioned. The Motley Fool recommends Apple, Coach, and Google. The Motley Fool owns shares of Apple, Coach, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!