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Apple turns around its iPhone sales slump

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NewsHubApple ( AAPL ) reversed a three-quarter-long decline in iPhone sales to report record quarterly revenue Tuesday evening. Investors cheered the news, as sentiment had dimmed recently, and pushed the shares up 3.1 percent in after-hours trading.
If the gains carry into the open of cash trading on Wednesday morning, Apple’s stock will push to a new record high.
For the company’s fiscal first quarter, earnings came in at a better-than-expected $3.36 per share on revenues of $78.4 billion (beating estimates of $77 billion).
iPhone shipments were strong at 78.3 million vs. 74.8 million last year and the 77 million that analysts expected. The much derided, headphone-jack-less iPhone 7 defied its critics and returned to being Apple’s single most important business segment to year-over-year growth.
iPad shipments were weak, however, at 13.1 million vs. 16.1 million last year and 15.5 million expected. China revenue was soft as well, down to $16.2 billion vs. $18.4 billion last year. Apple’s net cash hoard also rose to a new record of $159 billion, most held offshore.
Questions continue to linger, however, over the health of the iPhone business after a number of quarters of disappointing results and a recent Japanese press report that production could be cut by 10 percent due to sluggish sales. The iPhone 7 continued with the iPhone 6 form factor that was first introduced in 2015.
The eagerly anticipated “iPhone 8” launch, expected later this year, is widely viewed as a high-stakes update to the way Apple’s handsets look and feel.
Management also issued lowered guidance, looking for fiscal second-quarter revenues of between $51.5 billion and $53.5 billion vs. the $54.05 billion analysts expected. And net income still fell by 2.6 percent from last year despite that record quarterly revenue take. The earnings per share metric got a boost from the 4.8 percent drop in the number of shares outstanding (due to stock buybacks).
So profitability remains a concern, given that’s the fourth consecutive quarter of falling net income.

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