Post Earnings Coverage as Apple Shares Surge after Topping Market Estimates

LONDON, UK / ACCESSWIRE / July 28, 2016 / Active Wall St. announces its post-earnings coverage on Apple Inc. (NASDAQ: AAPL). The company announced its third quarter financial results after the closing bell on Tuesday, July 26, 2016. Apple’s earnings and revenue topped analysts’ expectation, however sales of its flagship smart-phone declined for a second consecutive quarter. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the quarter ended on June 25, 2016 Apple reported net income of $7.8 billion, down from $10.68 billion in the year earlier period. Earnings per share declined to $1.42 from $1.85 in the same quarter last year. Revenue dropped 14.6% to $42.36 billion from $49.6 billion a year earlier. Analysts estimated Apple to post earnings of $1.38 per share on revenue of $42.1 billion.

“We are pleased to report third quarter results that reflect stronger customer demand and business performance than we anticipated at the start of the quarter,” said Apple’s CEO Tim Cook in a statement.

Hardware Stumbles

Each one of Apple’s major hardware businesses posted a decline in Q3 FY16, marking the second quarter in a row of falling sales. Apple sold 40.4 million iPhone units in Q3 FY16, down from 47.5 million units in Q3 FY15. This followed a decline in Q2 FY16 that broke an eight-year run of growing iPhone sales. Volume for Macs dropped 11%, marking a third-straight quarter of decline. iPad revenue, on the other hand, increased 7%, unit sales fell for a 10th consecutive quarter, down 9% to 9.95 million. Apple did not break out its smartwatch sales.

In an interview, Mr. Cook said iPhone demand was better than what the sales number displayed, as the inventory of the smart-phone declined by more than four million units in its retail channels. The weak numbers can also be attributed to the handsets’ position at the end of its product cycle. In the coming September, Apple is expected to announce upgrades to its iPhone hardware and software, which occurs every two years. A number of Apple consumers keep a hold on purchasing new phone before the announcement of big release so that they can lay hands on the newest model.

The SE case

The sales figures comprise the numbers of its latest phone, the iPhone SE, a low-priced four-inch smart-phone which the company introduced in March 2015, priced at $399 for the 16GB model, compared with $649 for the iPhone 6S. The introduction of iPhone SE appeared to cannibalize sale of its bigger, expensive models. The iPhone SE’s lower price pushed down the average selling price of all iPhones to $595 in Q3 FY16 from $662 a year earlier.

Fortune 100 Services

A bright spot was Apple’s revenue for services, which includes subscriptions to App Store, Apple Music streaming service, iTunes and iCloud. The company noted that services revenue grew 19% on y-o-y basis to $5.98 billion. Cook said he expects services to be “the size of a Fortune 100 company by next year.”

Outlook

ForQ4 FY16, Apple is projecting to generate revenue between $45.5 billion and $47.5 billion, which would mark another decline from last year. Analysts estimated revenue of $45.7 billion for the same period.

Stock Performance

Apple’s shares surged 6.50% on July 27, 2016, a day after its earnings release, closing at $102.95, with a total volume of 91.03 million shares. The stock price has gained 11.85% in the past one month.

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