Apple's quarterly results leave analysts unimpressed
Shares in Apple tumbled over 5% in early trading in New York on Wednesday, after the iPhone maker’s revenue outlook for the quarter fell short of expectations.
Apple Inc.
$181.56
10:25 06/05/24
Dow Jones I.A.
38,765.49
04:30 15/10/20
Nasdaq 100
18,040.32
10:25 06/05/24
The California-based group reported third quarter earnings of $1.85 per share, marginally ahead of the $1.81 consensus analysts estimate, while revenue amounted to $49.6bn, just ahead of with forecasts of $49.4bn.
Shipments of the iPhone, Apple's biggest product by sales and revenue, came in at 47.5m, marginally above expectations calling for a 47.2m figure, but down from the 61.2m unit Apple shipped in the previous quarter.
Deliveries for Apple Watch, the company’s latest product, also fell short of forecast, coming in at 2.2m compared with the 3m Wall Street had expected.
“We attribute the shortfall to supply, distribution, and app compatibility limitations early in the product cycle,” analysts at Morgan Stanley said in a note on Wednesday.
The brokerage, however, added it expects the product to perform better once software upgrades and second generation hardware are launched, and held its rating at 'outperform' with the second half somewhat de-risked now.
But analysts at Cowen & Co downgraded the stock from ‘outperform’ to ‘perform’ citing the "tepid" iPhone number and "mounting China demand concerns and supply-side field work [that are] suggesting new iPhone builds are down cycle/cycle for the first time". Cowen's target price was trimmed from $140 to $130, much lower than most.
On Tuesday, Apple’s chief executive, Tim Cook, insisted the company had performed strongly in China, where revenue more than doubled to $13.2bn in the third quarter, despite concerns over the country’s sluggish growth.
However, Cowen’s analysts indicated iPhone sales were disappointing even when adjusted for channel inventory. "Normally, this would not concern us but evidence of a widespread demand reset from China is mounting," they said in a note, adding the 47.5m units sold were short of the higher-range of analyst forecast, which called for a reading in the 50m region.
Apple received slightly better comments from analysts at London's Cantor Fitzgerald, who suggested the better-than-expected earnings did enough to offset the disappointment of sluggish iPhone sales.
In a note to investors, the broker cited potential new areas of innovation, such as streaming TV, and a rapidly expanding digital business as the reasons why Apple’s future had “never been brighter”.
Cantor reiterated their ‘buy’ rating on the stock and raised its earnings per share projections.
Apple shares were down 4.65% to $124.66 at 1559 BST on Wednesday.