Apple Beats Q4 EPS Estimates Despite Drop in iPhone Sales

Apple Beats Q4 EPS Estimates Despite Drop in iPhone Sales
November 1, 2019

 

iPhone manufacturer Apple Inc. (Nasdaq: AAPL) reported fiscal 2019 fourth-quarter profit and revenues that surpassed analysts’ estimates. The company also issued a robust revenue forecast for the forthcoming quarter, which includes holiday season, implying a robust demand for its iPhone 11 and streaming service Apple TV+. Following the results, Apple’s stock closed Thursday’s trading at $248.76, up $5.50 or 2.26% from the prior close.

Cupertino, California-based Apple reported Q4 revenues of $64.04 billion, up 2% from $62.90 billion in the comparable quarter last year. For the recent quarter, the tech company’s profit declined to $13.69 billion, or $3.03 per share, from $14.13 billion, or $2.91 per share, in the prior-year period. Analysts surveyed by Thomson Reuters anticipated earnings of $2.84 per share on revenues of $62.99 billion for the quarter.

Tim Cook, Apple’s CEO, highlighted the impressive performance of wearables in the fourth quarter of fiscal 2019. “We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables, and iPad. With customers and reviewers raving about the new generation of iPhones, today’s debut of new, noise-canceling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best lineup of products and services ever, we’re very optimistic about what the holiday quarter has in store.”

Revenue generated from iPhone sales – the most-watched measure in Apple’s results – declined to $33.36 billion in Q4 2019, from $36.76 billion in Q4 2018.  Even though iPhone revenue dropped 9% y-o-y, it is still higher than the $25.99 billion reported in the third quarter. Notably, it has been a year after Apple stopped revealing unit sales of iPhone, Mac, and iPad as it tries to move the spotlight to services revenue. However, market continues to give importance to iPhone sales than other business divisions.

Apple’s services business posted record-high revenues of $12.50 billion in the quarter ended September 2019, up from $10.6 billion in the September 2018 quarter. In the previous quarter, Apple’s services business posted revenues of $11.46 billion. The company ended fourth-quarter with “over 450 million paid subscriptions across the services on our platform, compared to over 330 million just a year ago.”

Other business divisions performed as follows:

  • Mac sales dropped to $6.99 billion, from $7.34 billion in the year-ago period.
  • iPad sales grew to $4.66 billion, from $3.98 billion in the comparable quarter.
  • Wearables, Home, and Accessories surged to $6.52 billion, from $4.22 billion in the previous year.

For the fourth quarter, gross margin fell slightly to 38%, from 38.3% in the similar period last year. Global sales represented 60% of revenue. Apple also declared dividend of $0.77 per share, payable on November 14th.

Going forward, the company anticipates Q1 2020 revenues of between $85.50 billion and $89.50 billion, compared with revenues of $84.30 billion in Q1 2019. Analysts expect revenues of $86.92 billion for the quarter.

Some prominent analysts are anticipating a sharp rise in iPhone sales, with the launch of 5G phones. Before Apple published its quarterly results, Nikkei Asian Review reported that the company intends to sell a minimum of 80 million new 5G iPhones, referring to an unnamed source acquainted with the plans.

A survey conducted by Piper Jaffray showed that 23% of 1,050 iPhone owners were looking forward to upgrading to a $1,200 5G iPhone, an increase from 18% reported few months before. The equity research firm stated that it anticipates iPhone unit sales to remain unchanged as many customers are waiting to upgrade with the launch of 5G phones.

The quarterly beat and optimistic Q4 results are anticipated to keep the stock bullish in the short-term.

Technically, the stock has broken the resistance at 210. The MACD indicator is making new highs. Additionally, the stock is also trading above its 50-day moving average. Therefore, we can expect the stock to remain bullish in the short-term.

aapl - technical analysis - 1st Nov 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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