- iPhone rebounds in face of wider smartphones malaise
- Services becoming increasingly meaningful
- Stock up 28% since flagged as Shares top pick for 2023
After the sharp rallies post Microsoft (MSFT:NASDAQ) and Meta Platforms’ (META:NASDAQ) earnings investors might be a little miffed at Apple’s (AAPL:NASDAQ) modest 2% share price rise in response to its own January to March quarterly update.
Perhaps they were hoping for a ‘home run’ as AJ Bell’s investment director Russ Mould said today, but make no mistake, these are very solid results that handsomely beat analyst consensus.
- EPS: $1.52 per share vs $1.43 expected (6.3% beat)
- Revenue: $94.84 billion vs $92.96 billion expected (2% beat)
- Gross margin: 44.3% vs 44.1% expected (0.45% beat)
IPHONE BUCKS SMARTPHONE MALAISE
The smartphone industry contracted over the past year, yet the iPhone managed to buck that trend and register some growth. The iPhones rebound balanced out less-than-stellar sales of Macs and iPads, and while the ever-lucrative services segment (including Apple TV, Music, and iCloud) may not have exceeded expectations, it still managed to chalk up sales growth of 5%.
Here’s how Apple’s individual product lines did versus StreetAccount consensus expectations, according to CNBC:
- iPhone revenue: $51.33 billion vs $48.84 billion expected
- Mac revenue: $7.17 billion vs $7.80 billion expected
- iPad revenue: $6.67 billion vs $6.69 billion expected
- Services revenue: $20.91 billion v. $20.97 billion expected
- Other Products revenue: $8.76 billion vs $8.43 billion expected
While so far resisting the temptation to over-egg AI, Apple is weaving bits and pieces into its kit and services, spicing up user experience and rejigging product use cases. As for the future, there’s plenty of AI under the hood of Apple’s self-driving car project, something that’s been getting investors quietly excited for some time.
APPLE’S AI ANGLES
There’s also a lot of buzz around reports it’s working on an AI-powered health coach and slowly slipping into the banking business. On 24 April, Apple launched a high-yield savings account with Goldman Sachs, offering US clients a 4.15% annual yield and seamless integration with its Wallet app. If they’re not trembling yet traditional banks soon will be.
With a $90 billion share buyback program thrown into the mix, it’s no surprise investors sent the stock up to $169.74, according to pre-market data. That’s a 28% rally since we pitched Apple as a top pick for 2023.
‘The danger for Apple, and something which could really take a bite out of its share price, is widespread cancellation of subscriptions accompanied by falling hardware sales,’ said AJ Bell’s Mould.
Readers can decide how likely that is for themselves.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Steven Frazer) and the editor (Tom Sieber) own shares in AJ Bell.
