Daily Management Review

Apple's forecast disappoints investors


11/02/2018


In the fourth fiscal quarter of 2017-2018, Apple Inc. increased its net profit by 41%, revenue - by 20%. However, forecasts for the current quarter, which is usually Apple’s most profitable time due to the pre-Christmas sales peak, disappointed investors.



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At the same time, the existing results were in many respects record for July-September, thanks in part to the good performance in the segment of various services, including the App Store.

Apple stock quotes fell 6.5% during trading after the close of the main session on Thursday. If the pace of decline continues to be traded on Friday, Apple’s capitalization will remain above $ 1 trillion ($ 1073.3 billion at the end of trading on Thursday), but a stronger fall will lead to the loss of a significant milestone.

According to the company’s press release, its net income for the quarter that ended Sept. 29 was $ 14.125 billion, or $ 2.91 per share, compared with $ 10.714 billion, or $ 2.07 per share, for the same period last year.

Revenue grew by 20%, to a record $ 62.90 billion for the September quarter from $ 52.58 billion. The rate of increase in the indicator has been accelerating for the eighth consecutive quarter.

Analysts polled by FactSet, on average, estimated the company's profit and revenue below - $ 2.78 per share and $ 61.5 billion, respectively.

"We are pleased to announce another record quarter, which is completing the incredible fiscal year 2018, during which we shipped $ 2 billion iOS device," said Apple CEO Tim Cook.

According to Apple's forecast, its revenues will range of $ 89 billion to $ 93 billion in the first fiscal quarter, against $ 88.3 billion in October-December 2017. The consensus forecast for this indicator was $ 92.9 billion before reporting. Apple expects gross margin from 38% to 38.5%.

Before the release of Apple’s results, Morgan Stanley analyst Katy Huberty called Apple’s October-December earnings forecast "the most important driver of investor sentiment."

IPhone sales in the past quarter jumped by 29%, the highest rate per year, thanks to new iPhone XS and iPhone XS Max that entered the market. Apple has released 46,9 million iPhones. At the same time, sales of smartphones again fell short of the expectations of experts (consensus forecast of 47.5 million).

However, the company's revenue in this segment jumped by 29%, to $ 37.2 billion, due to the increase in the average cost of the iPhone to $ 793. The average forecast of analysts was $ 35.6 billion for revenue at an average price of $ 751.

Revenue in the services segment, including the App Store and Apple Music, rose to a record. This figure increased by 17%, to $ 9.98 billion. However, experts' expectations were even higher - $ 10.2 billion. At the moment, this is the company's second largest source of revenue after the iPhone.

In Greater China, Apple increased revenues from $ 9.8 billion to $ 11.4 billion, which somewhat mitigated investor concerns related to the US-China trade war and slowing growth in the Chinese economy.

During the newsgroup, Apple made an extremely important statement: it will stop publishing data on sales of devices in units since the current quarter. A number of analysts recommend investors to take this as a sign of the expected reduction in sales and the company's desire to hide the failures.

Since the beginning of 2018, the company's market value jumped by a third, while the Dow Jones stock index rose 8.3%.

source: bloomberg.com






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