Yahoo Finance Apple Stock Moves Higher on Strong Earnings Report (AAPL)
Apple (AAPL) stock spiked by more than 6.5 percent in after-hours trading Tuesday after the technology juggernaut reported quarterly earnings and revenue figures that were down from a year ago, but still managed to exceed analysts' dour expectations.
And perhaps just as importantly, Apple managed to sell 40.4 million iPhones, besting the FactSet's estimated consensus by 400,000 units.
"It's clear the introduction of the $399 iPhone SE has buoyed iPhone sales, and it's a good option for students or anyone who wants to be in the iPhone app-ecosystem without paying a high premium," says Mark Spoonauer, editor in chief of Tom's Guide. "The question is where Apple goes from here to get upgraders and Android switchers excited about phones again. Some say there's no room left to innovate in this oversaturated market, and the iPhone 7 needs to prove the doubters wrong."
Tuesday's earnings statement for the fiscal third quarter followed a miserable second quarter that saw Apple post its first year-over-year revenue decline since 2003. And while investors were celebrating Tuesday's report, the numbers show that Apple's business remains in decline.
[Read: Why Warren Buffett Snapped Up Apple Stock (AAPL).]
Revenue fell more than 18 percent to $40.4 billion from $49.6 billion in the year-ago quarter. Earnings per share dropped 23 percent to $1.42 from $1.85 a year ago.
Both topped analyst expectations, which called for Apple to report EPS of $1.38 on revenue of $42.09 billion. Going into the report, AAPL stock had fallen more than 22 percent over the last year and was down 8 percent in 2016, so Tuesday's results are a welcome breath of fresh air for shareholders.
Investors applauded the classic bullish "beat and raise" scenario, as the Cupertino, California-based company guided for fiscal fourth-quarter revenue between $45.5 billion and $47.5 billion; the midpoint of $46.5 billion is above the $45.7 billion analysts expected.
Year-over-year iPhone revenue fell 23 percent while Mac revenue fell 13 percent. iPad and services revenue increased 7 and 19 percent, respectively.
Revenue also fell in all five geographic categories the company reports; the Americas and Europe fell 11 percent and 7 percent, respectively, while the most notable decrease came from greater China, where revenue cratered 33 percent from last year.
China and Watch: two catalysts that weren't. China hasn't been the growth engine some expected. Famed activist investor and corporate raider Carl Icahn announced in April that he'd sold his entire multibillion-dollar position in Apple, citing concerns that the Chinese government wielded too much power and could make it hard to do business in the country.
Peripheral products and services like the Apple Watch and Apple Pay haven't been material either, putting the onus on the iPhone to bear the weight of the proverbial Apple cart. The Apple Watch hasn't even been popular enough to be broken out into its own reporting category, and is still lumped in with the vanilla "other products" segment.
Sales of the Apple Watch, which was the first new product line from the company since the passing of Steve Jobs, have been objectively disappointing. The first wearable fitness device from the tech giant has several different pricing tiers: The 38mm Apple Sport is priced the most cheaply at $299, and the 38mm Apple Watch Edition, replete with an 18-karat gold case, retails for $17,000.
Those offerings, it seems, are too pricey for most consumers.
Fitbit (FIT), which has huge market share in wearables, doesn't retail anything for more than $250, and sells several trackers for less than $100. The smartwatches featured on Alphabet's (GOOG, GOOGL) Android Wear website range from $149 to $499.
About 57 percent of Apple's revenue still comes from the iPhone, which looks to remain the dominant revenue driver until the company can come up with another awe-inspiring product or service.
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As it enters a period of lower growth, Apple has been increasingly pressured to return money to shareholders via dividends or share buybacks. It's done both, but still has over $231 billion in cash and long-term investments on its books.
The vast majority of Apple's cash hoard is held overseas, which makes that cash pile far less meaningful. CEO Tim Cook has vowed that Apple won't repatriate its hundreds of billions of dollars held in foreign countries as long as Uncle Sam charges a 40 percent fee for bringing it back to the U.S.
Barring major changes to the corporate tax code, it seems unlikely the repatriation tax will disappear anytime soon.
Moving forward. In the meantime, investors are looking ahead to the iPhone 7 as the next major catalyst for AAPL stock. The next iteration of Apple's cash cow is expected in mid-September, at the tail end of the current fiscal quarter. The biggest rumored change to the upcoming iPhone model is the abandonment of the headphone jack -- wired headphones will now plug directly into the Lightning port -- while the 16GB storage model may also be abandoned in favor of 32 GB.
Longer-term, an Apple Car may be the company's driving force for growth, despite the fact that Apple has refused to even confirm the initiative, dubbed "Project Titan." The purported electric and semi-autonomous vehicle would go head-to-head with the likes of Tesla Motors (TSLA), and Tesla CEO Elon Musk has even claimed Apple poached engineering talent from his company.
That said, early chatter in Silicon Valley surrounding Project Titan has been decidedly negative; there was reportedly a hiring freeze in January and talks with two major auto manufacturers have reportedly fallen apart.
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Thankfully, the iPhone isn't losing ground as quickly as most expected, so the core smartphone and tablet business may be enough to sustain Apple shares until the next big thing comes along.
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