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Consumer electronics giant Apple reported better than expected September financial results on Thursday after the market close. However $AAPL shares fell over 4% as the company missed iPhone shipment estimates and offered light guidance with profit gains all on higher ASP.

IPhone 8

Apple September Quarter Earnings

Apple Inc. (Nasdaq: $AAPL) Reported After Close Thursday

$2.91 Beat $2.78 EPS AND $62.90B Beat $61.59 Billion Revenue Forecast

Earnings

Apple Inc. (NASDAQ: AAPL) reported its fiscal fourth-quarter results of $2.91 per share beating the $2.78 forecast  consensus estimates with revenue of $62.9 billion also ahead of forecasts of $61.57 billion. Shares have a 52-week range of $150.24 to $233.47.

In a nutshell Apple posted iPhone unit sales basically flat year-over-year, to compensate, Apple has increased the price of the iPhone, boosting its ASP and overall profit. The company reported an ASP of $793, up  28 percent over last year, and well above analyst projections of $750.78. The high ASP is related to the highest-priced smartphone models,  the iPhone XS, starting at $999, and iPhone XS Max, starting at $1,099. Both went on sale about a week before the end of the September quarter. It also indicates users are settling into higher device prices. The higher ASP has the risks of higher costs, read China trade wars and a limited consumer ability to pay for the higher phones.

Last quarter Apple reported earnings of $2.34 per share, riding on a revenue hike of 17% to $53.3 billion. Earnings for the fiscal  third quarter improved 40%, surpassing analysts’ expectation of $2.18 per share. Revenue also beat Wall Street expectations, which was projected to be around $52.34 billion.

Apple Inc. NASDAQ: $AAPL

Market Reaction > After hours $212.76 −$9.46 (-4.26%)

AAPL Earnings Q4 18

 

Highlights

  • iPhone sales: 46.89 million vs. 47.5 million, forecast by FactSet and StreetAccount estimates
  • iPhone average selling price (ASP): $793 vs. $750.78, forecast by FactSet and StreetAccount estimates
  • Services revenue of $9.98 billion, a year-over-year increase of 17 percent, but below Wall Street estimates of $10.2 billion, according to FactSet and StreetAccount estimates. (Includes revenue segments like App Store sales, Apple Music subscriptions and iCloud storage.
  • Apple’s Other Product revenue, which includes sales from gadgets like AirPods and Apple Watches was $4.23 billion, an increase of 31 percent year-over-year. 
  • iPad: 9.7 million units and $4.09 billion in revenue
  • Mac: 5.3 million units and $7.41 billion in revenue
  • Apple reported double-digit, year-over-year revenue growth in all geographic regions, led by a 34-percent revenue upside in Japan and a 22-percent revenue upside in the rest of Asia Pacific.
  • Apple announced a dividend of 73 cents per share, payable on Nov. 15.

Outlook

The company is projecting total revenue for the first quarter in the range of $89 billion to $93 billion, extending just slightly below analyst estimates of $93.02 billion.

What to Look for in Earnings

The iPhone 8 and iPhone 8 Plus were introduced in September 2017. Apple customers are a mix of "cultists" you want the latest and greatest and the price conference who plan to buy the older models at lower prices. When Apple introduces a new iPhone, it cuts the prices of its previous models.

Toni Sacconaghi, an analyst with Sanford C. Bernstein said "Investor focus has shifted to iPhone demand in FY19 with the next generation iPhones."

Apple's biggest earner is still the iPhone which accounted for around 62 percent of sales. (Services, Macs and iPads and "other products" like AirPods contributed to the rest of revenue).

In the March and June quarters the iPhone X was the best-selling device every week of the quarter, even though it was the most expensive phone Apple's ever made. It starts at $999, $300 more than the iPhone 8 and $200 more than the iPhone 8 Plus. With the iPhone X, Apple redesigned the iPhone for the first time in three years, getting rid of the home button to expand the touchscreen and adding new FaceID technology. (Big Brother at work we see)

Back to the new phones, Apple introduced three new iPhones in September, a phone larger than the iPhone X and another that's much less expensive. The iPhone is now a stable business, rather than the outside growth driver.

With so many iPhones out there, Apple's services business such as the App Store, Apple Music and iCloud is the outside surprise now.

"We have the best pipeline of products and services we've ever had," Cook said during Apple's second quarter earnings call on May 1.

The earnings will bring FAANG's earnings for another quarter. Investors will be looking for more Alphabet than Facebook and Netflix.

Apple June Quarter Earnings Recap

Apple Inc. (Nasdaq: $AAPL) Beat Forecasts After Close Tuesday

$2.34 beat $2.16 EPS and $53.30 billion beat $52.34 billion forecast in revenue 

Earnings

Apple reported earnings of $2.34 per share, riding on a revenue hike of 17% to $53.3 billion. Earnings for the third quarter improved 40%, surpassing analysts’ expectation of $2.18 per share. Revenue also beat Wall Street expectations, which was projected to be around $52.34 billion.

Apple Inc. NASDAQ: $AAPL

Market Reaction > After hours 197.95 +7.66 (+4.03%)

“We’re thrilled to report Apple’s best June quarter ever, and our fourth consecutive quarter of double-digit revenue growth.” “Our Q3 results were driven by continued strong sales of iPhone, Services and Wearables, and we are very excited about the products and services in our pipeline,” CEO Tim Cook said. 

Segment Highlights

iPhone

  • iPhone sales for the quarter of 41.3 million units with revenue up 20% year on year, but units were slightly below the consensus of 41.8 million units. However as mentioned in the preview was expected and the factor here was the new phone and ASP. 
  • iPhone ASP growth, driven by iPhone X, 8 and 8-Plus increasing to $724 from $606 a year ago 
  • iPhone grew faster than the global smartphone market gaining share in many markets including the US, Greater China, Canada, Germany, etc. Double-digit growth in iPhone active installed base
  • Seventh consecutive quarter of accelerated revenue growth

iPad and Mac

  • Revenue from both iPad and Mac declined 5% during the quarter
  • iPad unit sales grew for the fifth consecutive quarter;
  • Apple gained a significant share of the global tablet market based on the latest estimate from IDC.

Services

  • Apple’s services business saw a 31% increase in revenue to $9.5 billion.
  • In the prior sequential quarter, Services, which includes App Store, Apple Music and iCloud,reported a 31% gain.
  • Services revenue included a favorable $236 million one-time item related to the final resolution of various lawsuits
  • Apple Pay continues to expand, with well over 1 billion transactions
  • Number of articles read on Apple news more than doubled year-over-year
  • Apple music grew by over 50% year-over-year pple
  • Apple Music has got more than 50 million listeners; includes paid and trial subscribers
  • Developers have earned over $100 billion from the App Store since its launch
  • Based on third-party research estimate, the app store generated nearly twice the revenue of Google Play so far in 2018
  • On target to reach the goal of doubling fiscal 2016 Services revenue by 2020

Other Products

  • Revenue from Other Products  soared 37% in the third quarter to $3.7 billion.
  • Smart home business is bigger than HomePod and Apple TV.
  • Wearables revenue exceeded $10 billion over the last four quarters

AAPL Earnings Q2 18Source: AlphaStreet

China

  • In China; iPhone, iPad, Services, Other Products all saw double-digit growth.
  • Recently-imposed tariffs on Chinese goods don’t cover Apple products.
  • Apple is evaluating fourth tariff proposal covering about $200 billion worth of imports
  • Apple revealed that its revenue from Greater China improved 19% to $9.5 billion during the third quarter,  this overcomes the rumors that  that low-priced local players would eat into its market share.

Debt and Cash

Debt retired $6 billion; net cash balance $129 billion

Outlook

  • For the fourth quarter of 2018, Apple expects revenue between $60 billion and $62 billion and gross margin of 38-38.5%. AAPL forecasts operating expenses of $7.95 billion to $8.05 billion during this period.
  • Apple said on iPhone ASP outlook the company doesn’t provide unit or ASP guidance;
  • September quarter revenue growth is expected to come from iPhone, services and wearables
  • Apple Music has got more than 50 million listeners; includes paid and trial subscribers 

 

Source: Apple, TradersCommunity, AlphaStreet

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