The shares are outpacing the market despite missed iPhone and service sales forecasts
Apple is near the centre of the U.S.-China trade dispute yet its shares rose sharply on Wednesday. A day after Beijing-Washington talks came to a mysteriously abrupt end yet again, it’s an endorsement of Apple’s Q3 results.
The group beat top- and bottom-line forecasts. Guidance also topped expectations.
(Consensus forecasts from Bloomberg)
- Q3 revenue: $53.8bn; estimate $52.35bn
- Q3 EPS: $2.18 vs. $2.09 forecast
- Q4 total revenue guidance: $61bn-$64bn, midpoint $62.5bn, vs. Wall St’s $61.04bn average
- Q3 37.6% gross margin near midpoint of Apple’s 37%-38% range
- Q4 gross margin guidance: 37.5%-38.5%
There were two key let-downs.
- Apple missed sharply lowered iPhone revenue forecasts, generating $25.99bn against Wall Street’s $26.54bn view
- An even bigger fail was that services growth fell short, with sales of $11.46bn vs. $11.88bn consensus
Furthermore, the quarter has not removed Apple’s main economic and geopolitical risks. U.S. President Donald Trump made it clear this week he won’t exempt Apple products manufactured in China if the U.S. imposes further tariffs. So far, Apple goods made there aren’t among the $200bn of items taxed at 25%. Tim Cook was cryptic on the topic last night, failing to clarify whether a new Mac Pro would be U.S.-made. That’s indirect pressure on the White House.
Still, executives on the call telegraphed more optimism, including on China, than heard for a while. A more sure-footed Apple, plus signs that its strategic shift is bearing fruit, continues to be applauded by Wall Street tonight. With Q3 misses apparently forgiven, Wall Street’s signal of regained confidence is worth noting.
Most positively, Apple is establishing a fresh rising trend for the year after the downshift from 1st May’s high. There is good corroboration from perfect support at 61.8% of the March-to-December decline. With Wednesday’s advance, AAPL gaps and sets a new 2019 peak, breaking out of a two-month wedge. There should be range support beneath the prior year top of $215. Assuming the latest gap is closed, basing at late-April/early June $208 highs would suggest swift resumption of the advance. Below would be more cautionary. Buyers would then need to watch reaction at the key rising trend line.
Apple Inc. – daily [31/07/2019 19:41:21]
Source: Bloomberg/City Index
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.