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Consumers seem to be more attracted to the more expensive versions of the latest Apple iPhones than to the cheaper ones.
Jack Taylor / Getty Images
Apple
produced an astonishing result for the last quarter, exceeding Wall Street expectations for each major product line, with particularly high figures for the iPhone. And yet the stock is red, even as the S&P 500 jumps.
The company recorded a double-digit increase in each product category, with record revenues in each geographic market. It reported a huge return to sales in China and achieved gross margins that were over a full percentage point higher than expected. The company continues to redeem large amounts of shares:
Facebook
(ticker: FB) on Wednesday announced a $ 25 billion buyback program, but Apple bought that amount of shares only in the December quarter.
And yet Thursday’s stock fell, while the S&P 500 rose 1.7%.
The decline came despite bright reviews for the Wall Street quarter. Barron’s counted at least 16 analysts who raised their targets for Apple’s stock price and may have missed a few.
It would seem that the spectacular running of the stock has at least temporarily exhausted investors. Apple shares have doubled since the end of 2019, to $ 72.78 by the end of Wednesday’s lunch, to $ 145.09, adding to this process a market capitalization of over 1 trillion dollars. The business is certainly having an amazing time, but the price may be a little ahead of the fundamentals.
Bernstein analyst Toni Sacconaghi pointed out in a research note that Apple easily exceeded expectations for both revenue and earnings per share. He’s definitely right about that. Apple posted revenue of $ 111.4 billion, up 21% from the previous quarter, and earnings of $ 1.68 per share. The results crushed the consensus street forecasts of $ 102.8 billion and $ 1.40 per share. This was due to the iPhone’s revenue of $ 65.6 billion, up 17% from a year earlier and $ 6 billion from a consensus on the street.
Sacconaghi said he was struck by consumers’ preference for the higher-priced Pro and Pro Max versions of the iPhone 12. This led to both the iPhone’s revenue and the company’s gross margins, as more sophisticated phones are more profitable. He also noted the “uniform strength of all hardware products, as Apple benefited from the reallocation of consumer spending dollars during the pandemic.”
But Sacconaghi remains cautious. While he moved his target price to $ 132 from $ 120, he kept his Market Perform rating on shares. “Apple has evolved tremendously and trades in line with large technology companies with higher growth rates,” he wrote. “At the consensus of 20 times for 2021 EPS, more limited opportunities for upward revisions after the first quarter and, the company facing very tough companies and a more disabled iPhone cycle next year, we strive to see the argument for material performance at current levels.
Many other analysts disagree.
Jefferies analyst Kyle McNealy repeated a buy rating, while raising his price target to $ 160 from $ 140. “We think the street still underestimates Apple’s 5G opportunity,” he wrote. “In our opinion, there is still a lot to follow, as we are only in the initial half of Apple’s 5G adoption cycle.” And he believes that 5G change will increase the continuous force in both the wearables and services segments.
Brian White, along with Monness Crespi Hardt, repeated his Buy call and raised his target price to $ 170 from $ 144. “Apple’s strong balance sheet, iconic brand, fast-growing service business, line of innovation and strong position on personal privacy will allow the company to emerge stronger from this crisis,” he said in a research note.
Raymond James analyst Chris Caso made a similar point – that the iPhone 5G cycle will last for a while and will benefit other Apple companies.
“The company has delivered on all fronts, including iPhone, Mac, portable devices and services,” Caso wrote. “And a richer mix of iPhones had the advantages on the edges we expected. While Apple delivered this cycle, we have long considered this to be a 2-year 5G cycle with better overall 5G coverage that provides a greater incentive for upgrades, along with what we expect to be a new form factor. ”
He said he expects the service business to benefit as Apple sells more devices, increases the number in use and adds new service offerings. He maintained an Outperform rating per share and raised his price target to $ 160 from $ 150.
Rendering the news of the short gathering
GameStop
stock (GME), Evercore ISI Amit Daryanani said in the quarterly analysis that “there is no need for Reddit mentions with such performance.” He said the company’s forecast for a seasonal decline in revenue in the December quarter did not reflect a easing of the Covid-19 crisis or the arrival of additional stimulus controls.
Both could be “considerable factors” for earnings, Daryanani said. And he mentioned that the company not only produced higher gross margins than expected, but said that they will support the new level in the current quarter. He repeated his Outperform rating, raising his target price to $ 163 from $ 160.
But maybe, in fact, Apple could use some Reddit mentions. Shares fell about 2% to $ 139.28 on Thursday.
Write to Eric J. Savitz at [email protected]