After beating on revenues and earnings despite a steep drop in both revenues and iPhone orders and projecting a third consecutive quarter of declining profits, Apple is up nearly 8% pre-market as traders clearly liked what Tim Cook did in the quarter.
The company helped during the conference call, when the CFO said iPhone SE were attracting more new customers than expected, adding that the company now has $214.8 billion in cash outside U.S. The company also explained that seemingly having given up on “wearables“, it is now investing heavily in augmented reality and working with Chinese government to restore iTunes, movies, books.
As the chart below shows, AAPL has now filled the gap lower from its Q1 earnings release:
More importantly, Wall Street liked the results too. Here is a summary of what some of the key analysts thought:
GOLDMAN SACHS (Simona Jankowski)
- “Modest beat” likely to drive some near-term relief in stock, given underweight positioning heading into results
- Several key positives in results, including $3.6b reduction of channel inventory, “better than feared” guidance and “impressive” services growth of 19%
- Reiterates buy, PT $124
BARCLAYS (Mark Moskowitz)
- IPhone units and gross margin were “better than feared” and should boost stock; Barclays had anticipated “one more downward reset” of consensus ests.
- AAPL not out of the woods in terms of questions related to global smartphone saturation and longer replacement cycles
- Co. may need to use cash at some point to make “more substantial acquisition”
- Reiterates overweight, PT $115
CITI (Jim Suva)
- Results should alleviate fears
- 4Q gross margin forecast is positive in light of new iPhone coming in quarter, which has traditionally pressured margins
- Channel inventory is now at “the low end of normal,” which sets up supply chain well for iPhone 7
- Also “very positive” on opportunity in India
- Reiterates buy, raises PT to $120 from $115
DEUTSCHE BANK (Sherri Scribner)
- “Generally a good quarter” given “very low” expectations
- Positives include iPad units growing for first time in 10 quarters, good services growth and inventory reduction
- Negatives include iPhone SE drag on iPhone ASP and 33% y/y China rev. decline
- Reiterates hold, PT $105
CREDIT SUISSE (Kulbinder Garcha)
- “Solid results” and $3.6b inventory reduction suggests underlying EPS higher than reported
- IPhone expected to have weaker product cycle in N-T due to macroeconomic weakness and muted iPhone 7 demand
- Sees iPhone recovery in longer-term, driven by iPhone 8 “super cycle”, SE strength and aging installed base
- Reiterates outperform, PT $150
PIPER JAFFRAY (Gene Munster)
- Guidance suggests “business is perhaps not as bad as expected”
- Investor expectations for new iPhone “extremely low”; any meaningful incremental news may be positive for stock, especially improvements in battery life
- AAPL has “two upcoming shots” at return to growth: iPhone 7 this fall and 10th anniversary iPhone in fall 2017
- Reiterates overweight, lowers PT to $151 from $153
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