Apple Up 6% On Blowout Quarter; Strong iPhone Demand

Shares in Apple (AAPL) rose 6.4% in Thursday’s after-hours trading, after the iPhone maker delivered impressive results for the fiscal third quarter.

Specifically, Q3 GAAP EPS of $2.58 beat Street estimates by $0.51, while revenue of $59.69B surged 10.9% year-over-year, and beat Street estimates by $7.13B. That included the all-important iPhone Revenue of $26.42B (vs consensus at $22B, and up 2% year-over-year) while Services Revenue also held up strong at $13.16B (vs consensus at $13.13B). Wearables were ~$0.5B above consensus.

Notably China delivered $9.3 billion in revenue, up 2% y/y (6% in constant currency-an eye popping number) as this key region was considerably better the Street’s expectation. Meanwhile gross margin of 38% was in line with the Street’s 38.0% estimate.

“Apple’s record June quarter was driven by double-digit growth in both Products and Services and growth in each of our geographic segments,” said Tim Cook, Apple’s CEO. “In uncertain times, this performance is a testament to the important role our products play in our customers’ lives and to Apple’s relentless innovation.”

Meanwhile Luca Maestri, Apple’s CFO added: “The record business results drove our active installed base of devices to an all-time high… We grew EPS by 18% and generated operating cash flow of $16.3 billion during the quarter, a June quarter record for both metrics.”

Following the report Wedbush analyst Daniel Ives reiterated his buy rating on the stock with a $450 price target. “Overall these were “blow out” results which in our opinion will add another leg to the Apple long term growth story” he cheered on July 31. He believes that during 2021 Apple will be the first $2 trillion valuation given the 5G tailwinds and services momentum potential over the coming years.

“We are seeing a continued demand snapback in China as evidenced by these results despite some speed bumps and the stage is setting up for a massive pent up iPhone 12 cycle heading into the Fall in this key region as well as globally” Ives told investors.

In a bullish move, RBC Capital analyst Robert Muller ramped up his price target from $390 to $445 following the print. He notes that AAPL expects its new iPhone model supply to be available “a few weeks later” compared to last year’s late September launch, but says the difference is ‘immaterial’ given the (presumable) generational upgrade to 5G should the phone launch in mid/late October.

“Recall that iPhone X, a highly anticipated form factor upgrade, was released in early November and drove a still-record quarterly iPhone revenue result. Despite anticipation of a 5G upgrade, AAPL expects recent iPhone performance (which topped expectations) will continue through next quarter” Muller explained on July 30.

Overall, Apple scores a cautiously optimistic Moderate Buy Street consensus with an average analyst price target of $379. Shares in Apple have surged 31% so far this year. (See AAPL stock analysis on TipRanks).

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