Apple Inc (NASDAQ:AAPL) reported second-quarter earnings Thursday after the market, beating consensus earnings expectations of +7% with EPS of $1.52 versus the ~$1.42 per share expected. Group revenue was $97.28 billion, beating forecasts with a beat of around $3.3 billion. The product segment beat estimates with revenue of $77.46 billion against consensus of around $73.9 billion, while the service segment was in line with expectations at $19.82 billion. dollars. The company’s gross margins were 43.7%, beating forecasts of approximately 43.1%.
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In summary of product performance: iPads lagged with sales down slightly year-on-year, the iPhone segment grew slightly year-over-year, and Mac computers remained the top performers in the after.
AAPL shares have outperformed peer tech giants in the recent selloff, falling just -10% since the start of 2022. Over the past year, the stock has remained up +22.6% and remains a remarkable player in the market. The stock was up +4.5% yesterday in the day leading up to the results, but has since traded -2.2% after hours due to supply constraint concerns.
During the earnings call, Chief Financial Officer Luca Maestri spooked investors by warning the market of supply chain challenges he said could impact revenue of up to $8 billion in during the third trimester. While $8 billion seems like a big blow to revenue, it doesn’t keep us up at night knowing that supply chain issues will eventually subside and return to normal.
Apple doesn’t provide guidance for the third quarter when the result and attribute it to the uncertainty of the pandemic.
Dividend update and new redemption:
Adding to the results, AAPL increased its quarterly dividend by 5% to 23 cents from 22 cents previously. This brings the new annualized dividend yield to around 0.56%. Management also increased its share buyback program by an additional $90 billion, over the existing program currently underway. The share buyback should continue to support the share price over the next year.
AAPL will release its next quarterly results in early August. The market (before revising the estimates) was expecting
Morgan Stanley’s Katy Huberty said March results were better than expected as demand remained strong. The company revised June sales estimates to around 3% lower and cut the price target to $195 from $210, solely due to Covid supply constraints.
Canaccord Genuity’s Michael Walkley believes Apple is well positioned to continue to benefit from the 5G upgrade cycle and anticipates strong growth trends. They remain rated “buy” with a firm target of $200.
Raymond James’ Chris Caso isn’t concerned about production issues, but will be keeping a close eye on currency issues and broader consumer demand fears.
AAPL currently holds a consensus rating of “overweight” with an average target price of $190, implying a +16% upside from the current stock price. It’s still too early to see how brokers have adjusted target prices, but they suspect some valuations may be cut in line with management comments.
We noticed that AAPL has a Quality/Value/Momentum score of 76.74. This is a score that combines the Cash Generating Efficiency, Relative Valuation, and Six-Month Momentum rankings into a single score. You can find out more by – click here.
We’ve included a chart below that shows several valuation metrics, presented relative to the stock price. The chart shows that the PE ratio of companies has fallen as the stock price has risen over the past 5 years. If you want to know more – Click here.
We also saw that AAPL has a Put/Call ratio of 0.91, indicating bullish sentiment on the stock. The Put/Call ratio shows the total number of disclosed open put options positions divided by the number of open call options. Since puts are generally a bearish bet and calls are a bullish bet, put/call ratios greater than 1 indicate bearish sentiment, and ratios less than one indicate bullish sentiment. We’ve included a chart below that shows how the ratio has tracked over the past year. You can read more about this ratio in – click here.
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