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Apple surges despite a miss in earnings

It would appear that the main market driver remains the Fed's pivot, rather than company's fundamentals.

Apple (AAPL) revealed its earnings report for the first quarter on Thursday. The company made $1.88 per share on sales of $117.2 billion for its first fiscal quarter, which concluded on December 31. Analysts surveyed by FactSet predicted earnings per share of $1.94 on revenue of $121.4 billion. Apple’s profits decreased 10% year-over-year, while sales fell 5%.

Apple estimates a 5% reduction in sales for the March quarter, compared to Wall Street’s prediction of a loss of less than 1%. Moreover, iPhone sales, which account for over half of Apple’s overall revenue, fell 8% year-over-year to $65.7 billion.

The earnings report further revealed that Apple’s base currently includes a staggering 2 billion devices. Additionally, during the company’s earnings call, CFO Luca Maestri explicitly mentioned Mexico and India in reference to the iPhone base, which is at an all-time high. 

Focus on services from now on

In addition, Apple’s services revenue increased 6% year-over-year to $20.77 billion in the December quarter. In the meantime, the company’s hardware sales dropped 8% to $96.39 billion. Apple’s services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, and Apple Arcade.

You may also read: How to start investing in the stock market?

In addition, Apple reported that the total number of paying customers for its different services reached 935 million. This is 150 million more than the corporation had one year ago and four times as many as it had five years ago.

Apple has focused on services development for years to reduce its reliance on iPhone sales. With $20.7 billion in revenue in the first quarter, the services division is now the company’s second-largest revenue generator behind the iPhone.

Solid valuation

Apple’s projected P/E is at 23.8x, marginally above its 5-year norm of 22.3x and above the S&P500‘s 19x. As problematic as these numbers were, a little premium over the market appears to be a reasonable price for the largest public firm in the world.

Apple has $165 billion in cash and marketable securities, down from $169 billion in the prior quarter, and $109 billion in debt, down from $110 billion in the prior quarter. In addition, Apple returned $25 billion through dividend payments ($3.8 billion) and share repurchases ($19 billion) throughout the quarter.

Apple’s stock price soared above the 200-day moving average (the blue line) and tested previous highs, now key resistance, at around $157.50. A break above that level would confirm the uptrend, likely sending the stock price to its all-time high near $175.

On the downside, the support is expected at $147. The immediate outlook seems bullish as long as the stock trades above it.

Apple daily chart

Apple daily chart, source: author´s analysis, tradingview.com

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