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It seems that consumers are more attracted to the more expensive versions of the latest Apple iPhones than to the cheaper ones.
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apple
produced an astonishing result over the last quarter, surpassing Wall Street expectations for all major product lines, with particularly sterling figures for the iPhone. And yet stocks are in the red, even when the S&P 500 jumps.
The company had double-digit growth in all product categories, with record revenue in all geographic markets. It reported a huge rebound in sales in China and reached gross margins above a full percentage point of what was expected. The company continues to buy large quantities of shares:
Facebook
(ticker: FB) on Wednesday announced a $ 25 billion buyback program, but Apple bought back so many shares in the December quarter alone.
However, shares fell on Thursday, while the S&P 500 rose 1.7%.
The decline came despite brilliant reviews of the Wall Street quarter. De Barron it had at least 16 analysts raising their targets for the price of Apple shares, and we may have missed some of them.
It seems that the spectacular rise in stocks has at least temporarily exhausted investors. Shares of Apple doubled from the end of 2019, to $ 72.78, to Wednesday noon high, to $ 145.09, which added more than $ 1 trillion in market capitalization. The business is having an impressive time, but it is possible that the price is well ahead of the fundamentals.
Bernstein analyst Toni Sacconaghi noted in a research note that Apple virtually exceeded quarterly expectations for both revenue and earnings per share. He is certainly right about that. Apple reported revenue of $ 111.4 billion, up 21% from the previous quarter, and earnings of $ 1.68 per share. The results crushed the respective street forecasts of $ 102.8 billion and $ 1.40 per share. This was driven by the iPhone’s revenue of $ 65.6 billion, 17% more than the previous year and $ 6 billion ahead of the consensus view of the street.
Sacconaghi said he was surprised by consumers’ preference for the higher-priced Pro and Pro Max versions of the iPhone 12. This increased both the iPhone’s revenue and the company’s gross margins for the more sophisticated phones. they are more profitable. He also cited “the uniform strength of all hardware products, as Apple benefited from the reallocation of consumer dollars during the pandemic.”
But Sacconaghi remains cautious. Although it moved its target price up to $ 132, from $ 120, it maintained its Stock Profitability Market score. “Apple has had a huge career and operates online with large technology companies with higher growth rates,” he wrote. “With a consensual 2021 EPA 34 times, more limited opportunities for upward revisions after the first quarter and, the company that has very tough competencies and a quieter iPhone cycle next year, we’re struggling to get a higher performance of the material than the current levels “.
Many other analysts disagree.
Jefferies analyst Kyle McNealy repeated a Buy rating, while raising its target price to $ 160, from $ 140. “We believe the street still despises Apple’s opportunity with 5G,” he wrote. “In our opinion, there’s a lot more to come, as we’re only in the early stages of Apple’s 5G adoption cycle.” And he believes the 5G change will drive continued strength in both the Wearables and Services segments.
Brian White, with Monness Crespi Hardt, repeated his call to buy and reached his target price of up to $ 170, from $ 144. “Apple’s strong balance sheet, iconic brand, fast-growing service business, line of innovations and strong stance on personal privacy will allow the company to emerge from this crisis more strongly,” he said. in a research note.
Raymond James analyst Chris Caso said the iPhone 5G cycle will last a while and will benefit Apple’s other businesses.
“The company delivered on all fronts, including iPhones, Macs, laptops and services,” Case wrote. “And a richer mix of iPhones had the edge advantage we had expected. While Apple did this cycle, we’ve long considered it a 2-year 5G cycle, with better overall 5G coverage than it provides. a greater incentive for upgrades, along with what we hope will be a new form factor. ”
He said he hopes the service business will benefit as Apple sells more devices, increasing the number of uses and adding new service offerings. It maintained a higher rating on the shares and raised its price target to $ 160, from $ 150.
Reproduction of the news of the small entry
GameStop
(GME), Everit ISI, Amit Daryanani said in its quarterly review that “there needs to be no mention of Reddit with performance like this.” He said the company’s forecast for a seasonal drop in revenue for the December quarter does not reflect a decline in the Covid-19 crisis or the arrival of additional stimulus controls.
Both factors could be “important drivers” of earnings, Daryanani said. And he noted that the company not only produced higher-than-expected gross margins, but also stated that they would maintain the new level in the current quarter. He repeated his Outperform score, raising his target price to $ 163 ($ 160).
But maybe, in fact, Apple could use some mentions of Reddit. Shares fell about 2% to $ 139.28 on Thursday.
Write to Eric J. Savitz at [email protected]