Wall Street Likes Apple Guidance and iPhone Trade-In Program Results, Sends $AAPL Higher After Hours

2 minute read
| Analysis

Wall Street liked some key pieces of information to come out of Apple’s earning report and its quarterly conference call with analysts. Though the company posted a year-over-year decline in revenue and earnings per share, Apple beat guidance, which investors tend to love. In addition, analysts latched on to better-than-expected guidance for the June quarter, and comments from Apple that its trade-in program have boosted iPhone sales. A combination of these factors helped send shared of Apple higher in after hours trading.

Apple reported revenues of US$58 billion for the quarter, a number that was down 5% year over year. The company also reported earnings per share of $2.46, down 10% year over year. Apple emphasized record Services revenues of $11.5 billion in its announcement and a new $75 billion stock repurchase program and higher dividend. Wall Street was expecting Apple to report earnings per share just $2.37 and revenues of $57.4 billion, above expectations.

Apple money pile

Apple Guidance for June Quarter of 2019

Katy Huberty of Morgan Stanley honed in how Apple’s guidance of revenue between $52.5 billion and $54.5 billion for the June quarter would represent an 8% decline from the March quarter. The key here is that Apple normally sees a 15% decline from the March quarter to the June quarter, and Ms. Huberty asked why Apple was expecting such markedly better-than-normal results.

Apple CFO Luca Maestri cited Wearables and Services revenue growth as contributing to that guidance, but he also said Apple expected improved iPhone sales. Both the question and the answers quickly garnered coverage from the financial press.

Apple Trade-in Program

Apple CEO Tim Cook spoke at length about the effect its trade-in program is having on increasing iPhone sales. He referenced it himself in his opening comments, and then was asked about it by analysts during the Q&A portion of the call. Though he didn’t offer details (as expected), he described a situation where Apple’s trade-in program appeared to be making it easier for customers to upgrade to new devices. He also touted Apple’s increased ability to recycle older devices with this program, but Wall Street’s focus was on the idea that the trade-in program was boosting iPhone sales.

Odds and Ends

Other tidbits to come out of Apple’s conference call with analysts include:

  • Tim Cook blamed a 5% decline in Mac revenues mostly on processor supply constraints.
  • When asked whether Apple would be introducing more subscription services, Tim Cook declined to answer directly, but noted, “We’re always working on something new.” That’s Cook Code for “Yes, more services, yo.”
  • iPad sales revenues rose 22% year-over-year to $4.87 billion. Apple attributed sales of high-end iPad Pro models to the sharp increase.

$AAPL After Hours

Shares of $AAPL traded higher in the after hours market, as investors greeted Apple’s announcement warmly. The stock hit some $211.50, a gain of $10.83 (+5.40%), during the after-hours session. Trading during this session is often exaggerated compared to the regular session the next day, but it should be noted that the financial press’s coverage of Tuesday’s results have been positive.

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