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Consumers seem more attracted to the more expensive versions of Apple’s latest iPhones than the cheaper ones.
Jack Taylor / Getty Images
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delivered a beautiful result for the most recent quarter, surpassing Wall Street’s expectations for each major product line, with exceptionally excellent figures for the iPhone. And yet the stock is in the red, even if the S&P 500 jumps.
The company has had double-digit growth in each product category, with record revenue in each geographic market. It reported a huge surge in sales in China and achieved gross margins that were more than a full percentage point higher than expected. The company continues to repurchase large quantities of shares:
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(tick: FB) announced a $ 25 billion buyback program on Wednesday, but Apple bought back just as much in the December quarter.
And yet the share was lower on Thursday, while the S&P 500 rose by 1.7%.
The decline came despite glowing reviews for Wall Street in the quarter. Barron’s counted at least 16 analysts who raised their targets for Apple’s share price, and we may have missed a few.
It would appear that the spectacular run-up to the stock has at least temporarily exhausted investors. Apple shares doubled from the end of 2019 at $ 72.78 to the midday peak on Wednesday at $ 145.09, adding more than $ 1 billion in market capitalization in the process. The business is definitely experiencing a wonderful moment, but the price may be a little ahead.
Bernstein analyst Toni Sacconaghi pointed out in a research note that Apple beat expectations for both earnings and earnings per share during the quarter. He’s definitely right about that. Apple had revenue of $ 111.4 billion, up 21% from the previous quarter, and earnings of $ 1.68 per share. The results shattered the respective street consensus forecasts of $ 102.8 billion and $ 1.40 per share. It was driven by $ 65.6 billion in iPhone revenue, up 17% from a year earlier, and $ 6 billion ahead of the Street Consensus.
Sacconaghi said it is being hit by consumer preference for the Pro and Pro Max versions of the iPhone 12. This has increased the company’s iPhone revenue and gross margins because the most popular phones are more profitable. He also mentions “the uniform strength of all hardware products, as Apple has benefited from allocating consumer spending during the pandemic.”
But Sacconaghi remains cautious. While raising its target price to $ 132, from $ 120, it keeps its Market Perform rating on the stock. “Apple has had a tremendous run and is trading in line with big tech companies with higher growth rates,” he wrote. “By 3421 consensus of 2021 EPS, the first quarter saw more limited opportunities for upward changes, and if the company faces very difficult compensations and a more subdued iPhone cycle next year, we struggle to see the case for material better performance than current levels. “
Many other analysts disagree.
Jefferies analyst Kyle McNealy reiterated a buy rating while raising its price target to $ 160, from $ 140. “We think the street still underestimates Apple’s opportunity with 5G,” he wrote. “In our opinion, there is still a lot to do, because we are only in the first inning of Apple’s 5G adoption cycle.” And he believes the 5G shift will drive continued power in the Wearables and Services segments.
Brian White, with Monness Crespi Hardt, reiterates his Buy call and raises its target price to $ 170, from $ 144. “Apple’s strong balance sheet, iconic brand, fast-growing services business, pipeline of innovations and tough stance on personal privacy, will make the company stronger out of this crisis, ”he said in a research note.
Raymond James analyst Chris Caso made a similar point – that the 5G iPhone cycle will take a while longer and that it will benefit Apple’s other businesses.
“The company has delivered in all areas, including iPhones, Macs, laptops and services,” Caso wrote. ‘And a richer iPhone mix had the profit on margins we expected. While Apple delivered this cycle, we have long considered it a 2-year 5G cycle, with better global 5G coverage that offers greater incentive for upgrades, along with what we expect to be a new form factor. ‘
He said he expects the service business to benefit from it, as Apple sells more devices, which increases the number of uses, and adds new service offerings. He achieved a better performance rating on the stock and raised his target for the price to $ 160, from $ 150.
Record the news of the short press
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Stock (GME), Evercore ISI Amit Daryanani said in his quarterly review that “there is no need for Reddit listings with achievements like this.” He said the company’s forecast of a seasonal decline in revenue from the December quarter did not reflect the easing of the Covid-19 crisis, or the advent of additional stimulus controls.
Both factors can be a significant driver of profit, Daryanani said. And he noted that the company not only generated higher-than-expected gross margins, but that it would maintain the new level in the current quarter. He reiterated his Outperform rating while raising his target price to $ 163, from $ 160.
But maybe Apple could actually use some Reddit mentions. The stock fell about 2% to $ 139.28 on Thursday.
Write to Eric J. Savitz at [email protected]