The stock of Apple Inc (Nasdaq: AAPL) fell 5.60% or $6.46 to close at $108.86 following the release of fiscal 2020 fourth-quarter earnings that declined from the comparable period last year. The downtrend was also fueled by the sharp drop in iPhone sales and lack of guidance for fiscal 2021 first-quarter ending December.
The Cupertino, California-based Apple reported fourth-quarter revenues of $64.698 billion, an increase from $64.040 billion in the similar period last year.
For the quarter ended September 26th, 2020, the company’s net income was $12.673 billion, or $0.73 per share, compared with $13.686 billion, or $0.76 a share, in the quarter ended September 28th, 2019.
Analysts had anticipated the company to post earnings of $0.70 per share on revenues of $63.70 billion.
Commenting on the results, Tim Cook, CEO of Apple, said, “Apple capped off a fiscal year defined by innovation in the face of adversity with a September quarter record, led by all-time records for Mac and Services. Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive.[…]”
Segment-wise,
- Products revenues were $50.149 billion, down $1.380 billion from last year.
- Services revenues were $14.549 billion, compared with $12.511 billion in the prior-year period, and surpassed the $14.08 billion anticipated by Wall Street analysts.
Specifically, iPhone revenues were $26.44 billion, down 20.7% on a y-o-y basis. Analysts were anticipating iPhone revenues of $27.93 billion. Other products revenue increased 20.9% y-o-y to $7.88 billion and exceeded Consensus estimates of $7.40 billion.
Mac revenues were $9 billion, an increase of 28% on a y-o-y basis, and above the $7.93 billion anticipated by analysts. iPad revenues rose 46% y-o-y to $6.80 billion and surpassed the $6.12 billion anticipated by the market.
In September, Apple rolled out new Apple Watch Series 6 models, which comes under the Wearables, Home, and Accessories category. Even headphones, AirPods and Beats come under the category, which recorded a growth of 20% on a y-o-y basis.
The company’s gross margin was 38.2%, a notch higher than the 38.1% gross margin expected by analysts.
Luca Maestri, the company’s CFO, said, “Our outstanding September quarter performance concludes a remarkable fiscal year, where we established new all-time records for revenue, earnings per share, and free cash flow, in spite of an extremely volatile and challenging macro environment. […] We also returned nearly $22 billion to shareholders during the quarter, as we maintain our target of reaching a net cash neutral position over time.”
The company recorded weak sales in China. In particular, Greater China (includes Hong Kong and Taiwan) sales were $7.95 billion, down 28% from $11.13 billion in the earlier year.
Regarding the drop in China revenues, Cook issued the following clarification: “A larger percentage of China revenue is made up of new iPhones. And so that’s the reason the number for the total quarter started with a minus sign. But given what we see in the early going with the new iPhones, we’re confident we’ll grow in Q1.”
Even though iPhone revenue declined from last year, investors and analysts are more bothered about the performance of the iPhone 12, which was introduced earlier last month. The company is launching more models for the upcoming month, implying that sales of newly introduced versions are not counted during this quarter. Specifically, Cook gave a hint about the launch of Mac computers that utilize chips designed by Apple.
Cook also clarified that even though iPhone 12 is 5G enabled, it is not outrunning the establishment of 5G networks. Cook said, “There are obvious places in the world where it’s more ahead than in others. But we feel like we are entering sort of at exactly the right time.”
Similar to the previous quarter, a strong work-from-home scenario enabled the company to realize a sharp rise in the sales of Macs and iPads.
On Friday, the company unveiled bundles of its subscription services, named Apple One. Depending on the region, the contents of bundles slightly differ, but primarily include iCloud storage, Apple TV+, streaming video and Apple Music.
The company refrained from issuing an outlook for the first quarter of 2021, a matter of concern for analysts. Notably, Apple did not offer an outlook for the last two quarters due to uncertainty associated with the COVID-19 pandemic.
The price chart indicates that the stock is declining after failing to cross above the resistance level of 120. The next support is anticipated only near 90. Additionally, the stochastic oscillator is also descending towards the bearish zone. Therefore, we are anticipating the stock to remain in a downtrend in the days ahead.
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