With Apple the last remaining hope to bring back some enthusiasm for the flagging FAANG/growth sector – and perhaps overall market – investors were focused on three key things that Apple would report in its earnings report today: i) whether the average selling price of its iPhone would remain above $700 (and continue rising), indicating continued demand for its top-end products; ii) whether Apple services would remain a source of continued strong growth even as iPhone unit sales appear to have plateaued in recent quarters, and iii) most importantly, Apple’s guidance for the all important holiday quarter will be to gauge the success of the new iPhones and especially the lower-priced XR model.
With that in mind, here’s what Apple reported moments ago.
In the fourth fiscal quarter, Apple sold 46.9MM iPhones, well below analyst estimates of 48.4MM with iPad unit sales of 9.8 million also missing expectations, even as it beat on the bottom and top line, reporting Q3 EPS of $2.91, vs Exp. $2.78 on revenue of $62.9BN, and also beating expectations of $61.44BN. More good news from Tim Cook: the average selling price of its iphones soared to $793, up from $618 a year ago, and smashing analyst expectations of $729.
But the main reason why the stock is sliding in after hours trading is that Apple’s holiday quarter guidance was somewhat soft, at $89BN-$93BN, with the midpoint below the analyst estimate of $92.74BN.
A summary of key metrics from the fourth fiscal quarter:
- Q4 EPS: 2.91BN, beating Exp. $2.78
- Revenue: $62.9BN, beating Exp. $61.44 billion
- iPhone sales: 46.9 million, missing Exp. 48.4 million
- iPad sales: 9.8 million, missing Exp. 10.5 million
- Mac sales: 5.3 million, beating Exp. 4.9 million
- iPhone ASP: $793, up from $618, smashing Exp. $729
- Guidance for holiday quarter revenue: $89-$93billion, with the midline below Wall Street estimates of $92.74 billion
Of the above, the last items most important according to Morgan Stanley analyst Katie Huberty, who said that: “Guidance will be the most important driver of investor sentiment as it provides the first read on iPhone XR demand.” And judging by the market’s reaction, the company’s guidance could have been much better.
To be sure, Tim Cook was euphoric as usual:
“We’re thrilled to report another record-breaking quarter that caps a tremendous fiscal 2018, the year in which we shipped our 2 billionth iOS device, celebrated the 10th anniversary of the App Store and achieved the strongest revenue and earnings in Apple’s history,” Cook said. “We enter the holiday season with our strongest lineup of products and services ever.”
So far, however, the market does not share his sentiment, with the stock down over 4% after hours.
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