Why You Shouldn’t Take Financial News Reports at Face Value

Going beyond the headlines…

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On 12 December 2019, CNBC reported that Apple’s shares fell after Credit Suisse said that iPhone sales in China tumbled 35% year-on-year in November that year.

Source: CNBC

I was curious to find out what really happened with Apple’s business during that quarter in 2019 and whether what Credit Suisse mentioned was true.

Upon looking at Apple’s quarterly report for the three months ended 28 December 2019, I found that the company’s Greater China sales actually increased 3% during the quarter.

Source: Apple 10-Q 2020 first-quarter

Apple said that the growth in Greater China was mainly due to higher net sales from the Wearables, Home and Accessories sub-segment.

This could mean that the iPhone sales in the region wasn’t that great. So, the prediction by Credit Suisse could have been right.

However, looking at Apple’s overall iPhone sales for the quarter, the company posted an 8% increase in revenue.

Source: Apple 10-Q 2020 first-quarter

What this means is that while iPhone sales in Greater China could have slowed, other regions made up for it, leading to an overall increase in iPhone revenue for Apple.

Investors who had sold Apple shares upon seeing CNBC’s negative news that day would be kicking themselves.

Since 12 December 2019, Apple’s share price has gone up 147%, even after taking into account the large declines in early 2020 and 2022.

Financials-wise, Apple’s revenue, net income, and free cash flow have also stepped up from fiscal year 2019 (ended 28 September 2019) to fiscal year 2021.

Source: Tikr

So the quick lesson from this post is that we shouldn’t make investment decisions based on news reports and emotions.

We should always go deeper and think critically. Some questions to ask would be:

  • Is there a chance that the report is wrong?
  • Even if the report is right, can the company still continue doing well?
  • Is the company fundamentally shaky?
  • Is it a one-time solvable issue (temporary), or is there a structural damage to the business?
  • Is the investment thesis busted?

Hope this article gives you some clarity as to what to do when you come across negative financial news, especially amid the volatile stock market period like now.

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Disclaimer: The information provided in this article is purely based on my opinions and is not intended to be personalised investment advice. The ideas discussed here are not recommendations to buy/sell any stock.

Author: Sudhan P

I simplify investing concepts to help you navigate the stock market jungle.

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