dChan - Q Origins Project Archive

Apple Surges On Blockbuster Guidance Despite Tumbling iPhone Sales, China Revenues

First, two quarters ago, Apple shocked investors when it said it would no longer disclose the number of iPhone it was selling - a clear signal that the selling was slowing dramatically. Shocked investors sold off the stocks… then BTFD with gusto sending AAPL sharply higher. A few months later, on January 3 2019, Apple once again shocked the market when it slashed its revenue guidance by8% for only the first time since this century (naturally, it blamed China). As AAPL stock tumbled, it reveberated across all capital markets, and even prompted a flash crash cascade in most yen and pound pairs. However, just like a quarter earlier, Apple's "shock" was quickly overcome, and the after hours plunge actually marked the max pain for longs, and as the chart below shows, AAPL has soared 46%. And to think all it had to do was slash revenue guidance.

So with enough action to make an algos' silicon head spin, everyone was asking just what disaster Apple would announce today to send its stock back to all time high?

Well, the stock is certainly spiking after hours, but this time there was no disaster, or even disappointment; in fact, the company just reported Q2 numbers that beat across the board, while the company guided above the consensus range for Q3, and also announced a new $75 billion stock repurchase authorization.

Here are the details:

Q2 Revenue of $58.0BN, down from $61.1BN a year ago, but above the $57.49BN expected. This was another total annual revenue decline for Apple.

Q2 EPS of $2.46, down from $2.73 a year

ago, but also above the $2.37 expected

Q2 iPhone Revenue of $31.05BN, Exp.

$30.50BN, down 17% Y/Y from $37.6BN

Q2 China revenue $10.22BN, down 22%

from $13.0BN Y/Y

Q2 Service Revenue $11.45BN, up 16%

from $9.850BN

Q2 Gross margin $21.82BN

cap#2

The company also announced that it is boosting its dividend to 77c/share from 73c/share. In short, ok numbers, but nothing breath-taking, especially when one considers the company's guidance cut last quarter.

(in other words we are going to increase the amount of money, in divdends, we pay to retail and institutional shareholder's so they do not sell our stock-bribing them)

But what the market was far more impressed by was the company's Q3 guidance, where it now sees revenue between $52.5 and $54.5BN, solidly above the consensus estimate of $52.22BN, on gross margin of 37-38%, in line with the 38% expectation.

(this is like saying that of course I have money…I still have checks)

Another potentially troubling development: while Service revenue grew to a new record high of $11.45BN, up from $10.9BN in Q1, this was only a 16% increase Y/Y in service revenue, a clear secular decline in service revenue growth. Which begs the question: is Apple, the "service company" also peaking soon?

To summarize: iPhone sales tumbled 17% but this was offset somewhat by the surge in service sales. How long this trade off will continue is the $1 trillion question.

Also notable: another category that saw a decrease was the Mac, coming in at $5.5 billion. That's down from $5.8 billion in the year-ago quarter. The good news is the iPad, once heralded as the Mac's replacement, is up.

So far this year, Apple has updated one Mac, the iMac desktop, but that's a low volume seller.

To offset the ongoing China weakness and potential service revenue growth concerns, and to make buying the stock after hours easier, Apple went back to doing what it has done best under Tim Cook: not innovate of course, but buyback its stock: in Q2 the company announced an additional $75 billion in share repurchases.

Breaking down the numbers in detail, it is perhaps not a surprise that China revenues crashed 22%. even as Europe and Rest of Asia were also disappointing; only Japan and the Americas posted a modest improvement.

An interesting observation: AAPL's net cash dropped again, and is now down to just $113BN, the lowest since 2012.

cap#3

https://www.zerohedge.com/news/2019-04-30/aapl-surges-blockbuster-guidance-despite-tumbling-iphone-china-revenues