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Consumer electronics giant Apple reported mixed earnings Tuesday after the market close with iPhones continuing their slump down 15% in sales but services revenues up 19% giving relief too many.

IPhone 8

Apple (NASDAQ: $AAPL) Reported Earnings After Close Tuesday

$4.18 Beat $4.17 EPS Forecast AND $84.3B Beat $84.10 Billion forecast in revenue 

Earnings 

Apple reported fiscal earnings narrowly beating the lowered targets for its fiscal first quarter ended Dec. 29.  AAPL $4.18 a share on sales of $84.3 billion in the December quarter slightly ahead of expected Apple earnings of $4.17 a share on sales of $84 billion. On a year-over-year basis, earnings per share rose 7.5% while sales fell 5%. On Jan. 2, Apple slashed its revenue outlook for the holiday quarter to $84 billion from $91 billion, citing weak iPhone sales, mostly in China.

 Apple Revenue Trend 1 2019

Market Reaction > Apple. Nasdaq: AAPL

Market Reaction $162.15 +7.47 (+4.83%)

Highlights

  • In the December quarter, Apple's revenue from its iPhone declined 15% year over year
  • Sales from all other products and services grew 19%. Services revenue rose 19% to an all-time high of $10.9 billion.

"While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter's results demonstrate that the underlying strength of our business runs deep and wide," Chief Executive Tim Cook said in a news release. He added, "Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That's a great testament to the satisfaction and loyalty of our customers, and it's driving our Services business to new records thanks to our large and fast-growing ecosystem." 

The last time Apple warned on revenue guidance was 15 years ago. The Cook announcement merely confirmed specualtion after guidance cuts by a number of reliant material suppliers and partner manufacturers. With the revenue decline and unit sales figures removed from its financial reporting operating margin becomes a keen focus.

Apple earnings Q1 2019

Outlook

For the current quarter, Apple expects revenue of $55 billion to $59 billion, or $57 billion at the midpoint. It did not give a target for earnings per share. Analysts had been modeling Apple to earn $2.64 a share, down 3% year over year, on sales of $59 billion, down 3.5%, in the March quarter. Apple guided to a gross profit margin in the March quarter of 37% to 38%. Its profit margin in the December quarter was 38%.

Apple Cuts Q1 Revenue and Margin Outlook

In the first week of January an announcement through a letter from CEO Tim Cook  that the company is lowering its first quarter revenue outlook to about $84 billion,citing the macroeconomic factors from China and the Trade War and also Apple specific factors. The stock collapsed on the news in a very illiquid time, the action also caused a flash crash in the Yen as investors rushed to safety in a time when markets are closed.

Market Summary > Apple Inc. NASDAQ: AAPL

Pre-market $144.72 −$13.20 (-8.36%)

Highlights

      • Apple  cuts revenue outlook to $84 billion, AAPL had predicted revenue to come in the range of $89 billion to $93 billion.
      • Apple also lowered its gross margin guidance to about 38% from its prior range of 38.0-38.5%.
      • The company currently expects operating expenses to be approximately $8.7 billion versus the prior estimate of $8.7 billion to $8.8 billion.
      • Apple will report the final results of the quarter ended December 29, 2018, on January 29, 2019.

s shares, the firm said. "We see the potential for further downside to FY19 numbers depending on the trajectory of Chinese demand in early 2019," Goldman's Rod Hall said in a note to clients late Wednesday.

Apple attributed the most of the revenue shortfall in the guidance to the challenges in the emerging markets, particularly in Greater China. The slowdown in the Chinese economy, rising trade war tensions between the US and China reduced the traffic in Apple retail stores and its channel partners in China. Apple stated that the iPhone revenue was lower than anticipated in China and iPhone upgrades were less than anticipated in some developed markets.

This shouldn't have been a total surprise given Apple cut it's revenue forecast last quarter (see earnings below).  The stock has fallen nearly 40% from its high in the just popped tech mania, so there was clearly an overvalued factor when what looks at PE. There is also competition and the Buy America policy of the US also flips to Buy China, Buy Japan for those countries. Hence Chinese companies are making inroads and the Huawei arrest fuels that, who knows how that is portrayed in China. Cynically we could argue what a great time to clear the decks and throw out the bad washing for Tim Cook.

Bulls will argue the positives, Apple’s installed base of active devices hit a new all-time high, growing by more than 100 million units in 12 months there were warnings. Revenue outside of iPhone business grew by almost 19% year-over-year, including all-time record revenue from Services, Wearables and Mac. Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and the company is confident of achieving its goal of doubling the size of this business from 2016 to 2020. Wearables grew by almost 50% year-over-year. Apple expects to report a new all-time record for its EPS. So all in all not a bad quarter OTHER THAN the key iPhone component and the much public China woes.

For mine this sums up the ignorant state that this bull market was and the leacherous nature of financial drug pushers like Goldman Sachs. Think for yourself on this one and learn what these analysts (for want of a better word) push.

Goldman Sachs on Sept 7th RAISE $AAPL PT to $240 from $200 - On Jan 3 CUTS PT to $140 using an Nokia analogy 

Goldman Analyst Rod Hall in a note clients Wednesday AFTER the release:

"Nokia saw rapid expansion of replacement rates in late 2007 that was well beyond what any linear forecast would have implied,"

"Beyond China, we don't see strong evidence of a consumer slowdown heading into 2019 but we just flag to investors that we believe Apple's replacement rates are likely much more sensitive to the macro now that the company is approaching maximum market penetration for the iPhone."

Goldman new price target  is by applying just a 12 multiple to the firm's new earnings estimate. Its previous price-earnings ratio was 13.6.

Apple September Quarter Earnings Recap

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.

Source: Apple, TradersCommunity, AlphaStreet

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