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It was a quarter of a drop in iPhone sales, but Apple saw significant growth in most other categories.
Mladen Antonov / AFP via Getty Images
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Stocks prevailed Friday a day after the company reported a strong September quarter, but one quarter sparked questions just enough to cause investors to pause after the big trade. 2020 of stocks.
For the quarter, Apple (stock ticker: AAPL) reported revenue of $ 64.7 billion, up about 1% from a year ago and slightly ahead of the Wall Street consensus of 64.2 billion USD. The return is 73 cents a share, two cents higher than the consensus level.
It was a down quarter for iPhone sales, due to slowing demand prior to the launch of the iPhone 12, but Apple saw significant growth in most other categories. Mac’s revenue was $ 9 billion, up 29%. IPad sales were $ 6.8 billion, up 46%. Wearables increased by 20.8% to $ 7.9 billion. Service revenue was 14.5 billion USD, up 16.3%.
There are many factors that affect stocks. First, iPhone sales fell 21%, not a big surprise, but slightly worse than some analysts’ predictions. Second, a 29% drop in sales in China was a bit of a shock and reflects the company’s lagging position on 5G phones in a key market. And third, Apple declined to give guidance for the third straight quarter, which is really not surprising to anyone but seems to worry some investors.
During the announcement to investors, the company answered all of those concerns. Without providing details, they said iPhone 12 sales are starting off strong – but they are just starting to ship the iPhone 12 and iPhone 12 Pro and won’t even start taking orders for the iPhone 12. Low-end Mini or high-end iPhone 12 Pro Max until next week.
On the Chinese side, the company said it was affected more than other markets due to a shortage of 5G phones this quarter, but is expected to see a recovery in the December quarter and early demand for electricity. New phones are promising.
In terms of instructions, Apple did not provide details, but did say that iPhone sales would increase year-over-year during the holiday quarter despite only a quarter of iPhone 12 sales – and it is expected to grow two numbers in service and all – Variety of phone hardware in the quarter.
Citigroup’s Jim Suva adds two more records to the worry – gross margins fell slightly and worries about regulatory oversight. In terms of guidance, he wrote that he was “a bit surprised” when Apple didn’t offer a outlook. Regarding China, he wrote that “China has a more advanced 5G network than many countries and simply consumers want a 5G phone rather than a 4G phone”. In terms of margins, he says the problem is mostly a mixed one, with Macs and iPads having lower margins than iPhones and services. (Remember that was a spectacular quarter for both the Mac and the iPad.) And in terms of regulation, he sees headline risk, but no risks to fundamentals for at least the next 12 months.
The bottom line: He maintains a Buy rating and a target price of $ 125.
Bernstein analyst Toni Sacconaghi, who holds a Market rating for Apple shares, wrote that the quarter was “sure, but not spectacular.” It is worth noting that Apple did not provide clear guidance, he noticed. “As a result we suspect that consensus EPS projections are likely to change materially, which we consider a probable disappointment given high expectations by investors,” he writes.
Sacconaghi agrees that the key here is iPhone 12 demand. “So how do we explain Apple’s Q1 guide / comment and what it says about the iPhone 5 cycle?” he asks. “Unfortunately, it might be too early to tell – and Apple itself legally doesn’t seem to know, given the very limited number of days to sell and the timing of the single iPhone launch. But the bottom line is simple: iPhone revenue must have double-digit growth year-on-year in fiscal Q1, or March needs to be a lot stronger than seasonality for this cycle to turn into. super cycle that outside investors seem to be predicting. “
Morgan Stanley‘S
Katy Huberty left the call more optimistic than ever. “All the signs point to a super bike,” she wrote in a research note, repeating her Overweight rating and $ 136 price target. “We continue to see an increase in FY2021 forecast after Apple increased double-digit sales across all products including the iPhone after normalization. [the iPhone] product cycle. IPhone growth will accelerate even more as the replacement cycle lengthens, more newer products [models] and active subsidies. “
Huberty added that “her confidence in Apple’s ability to retain existing users, attract new users, and accelerate growth and profitability has never been higher as Apple entered its fiscal year. 2021 with the strongest product and service portfolio in years and a number of trends behind, including the rise of 5G technology; work, learn and play from demand at and increasing adoption and monetization of digital services. ”
Wedbush analyst Dan Ives is also not discouraged by his optimistic stance. “Last night… Streets and markets in general expect outstanding results from FAANG’s leading technology companies with Apple and
Amazon
lead and eventually disappoint with technology stocks sell-off this morning after the news, ”he wrote. “Taking a step back, we believe Apple is at the pinnacle of the biggest iPhone product cycle since the iPhone 6 back in 2014, and we would be buyers if there is any weakness.” He holds an Outperform rating and a $ 150 target.
Apple was down 4.9%, at $ 109.70, in recent trading. The
S&P 500
fell 1.3%.
Write letter for Eric J. Savitz at eric.savitz@barrons.com
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