It is the 9th of December 2019

Apple Soars To $900BN In Mkt Cap After Crushing Earnings And iPhone X Guidance

While Apple gets a freebie in the current (fourth fiscal) quarter, as it came just before the official release of the iPhone 8 and X, traders were still looking at overall trends and guidance from Tim Cook on what to expected from the all important holiday quarter. What they got was just what they requested, with Apple not only reporting a beat on the top and bottom line, including the first positive quarter in China in one and a half years, but also providing strong iPhone X guidance for a record holiday quarter, which promptly sent the stock price surging over 3% in the after hours, now just $100 billion away from $1 trillion in market cap.

Apple reported Q4 EPS and revenues of $2.07 and $52.6bn, both beating expectations of $1.87 and $50.7bn, even if gross margin was a small disappointment, printing at 37.9% vs 38.0% expected.  Apple also reported Q4 iPhone sales of 46.7 million, also higher than the 46.1 million consensus estimate with 10.3 million iPads sold in the quarter, above the 9.3 million sold a quarter ago. 

Far more important, however, was Apple's forecast for the current, holiday quarter, in which Apple sees record revenue in the range of $84-$87Bn, higher than the consensus midpoint of 84.5%, on margins of 38.0-38.5%, vs est of 38.5%.

The full forecast in a nutshell:

  • revenue between $84 billion and $87 billion, est. 84.5 billion
  • gross margin between 38 percent and 38.5 percent, est 38.5%
  • operating expenses between $7.65 billion and $7.75 billion
  • other income/(expense) of $600 million
  • tax rate of 25.5 percent

Apple also announced it generated $8.5 billion in revenues on services, which includes the App Store and Apple Music, in Q417. This was a 34% increase from $6.3 billion in the year-ago quarter and 17% quarter over quarter growth. According to Bloomberg, this is an all-time record for Apple services, suggesting strong Apple Music subscription numbers. Apple has recently started offering cheaper student pricing and family plans for Apple Music.

Tim Cook was predictably happy:

“We’re happy to report a very strong finish to a great fiscal 2017, with record fourth quarter revenue, year-over-year growth for all our product categories, and our best quarter ever for Services,” said Tim Cook, Apple’s CEO. “With fantastic new products including iPhone 8 and iPhone 8 Plus, Apple Watch Series 3, and Apple TV 4K joining our product lineup, we’re looking forward to a great holiday season, and with the launch of iPhone X getting underway right now, we couldn’t be more excited as we begin to deliver our vision for the future with this stunning device.”

His CFO naturally shares his boss' sentiment:

“Apple’s year-over-year revenue growth rate accelerated for the fourth consecutive quarter and drove EPS growth of 24 percent in the September quarter,” said Luca Maestri, Apple’s CFO. “We also generated strong operating cash flow of $15.7 billion and returned $11 billion to investors through our capital return program.”

And judging by the initial reaction in the stock, which is over 3% higher in after hours trading, shareholders are just as excited.

The result in chart format:

Apple Net Income grew 18.9% Y/Y, EPS rose by 24% even as iPhone sales declined -0.3%

Product sales: While the market was more focused on the company's holiday quarter forecast, it was pleasasantly surprised by the beat in iPhone sales, which came in at 46.7mm, above the 46.1mm expected, while iPad sales o 10.3 million jumped 11% units, generating $4.8 billion in revenue in the quarter. Apple also said it sold 5.4 million Macs in Q417, compared to 4.9 million units in the year ago quarter, a 10% year-over-year unit sales growth.

Regional breakdown: sales mostly grew around the globe, except Japan where they declined by 11%. In positive news, Greater China is back to growth with 22% quarter over quarter and 12% year over year revenue growth. Europe saw the strongest year over year revenue growth, up 20%. The U.S revenues increased year over year by 14%, while the rest of the Asia Pacific increased by 5% year over year.

Finally, while the company's record cash hoard grew once more, rising to $269 billion total, the cash number net of debt was unchanged at $153 billion. As a reminder, most of this cash remains locked outside of the US.

Shareholders are certainly enjoying the company's optimistic forecast, sending the stock 3% higher to new all time highs.

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