ii view: Apple stock rallies as iPhone sales impress

Shares in America's biggest company by market value are up by more than a quarter in 2023 having fallen by a similar amount in 2022. We assess prospects after latest results.

Second-quarter results to 1 April

• Revenue down 3% to $94.8 billion (£74.9 billion)
• Adjusted earnings per share unchanged at $1.52 (£1.20)
• Dividend of $0.24 per share, up from $0.23 in the previous quarter
• Returned over $23 billion (£18 billion) to shareholders, down from $25 billion in Q1

Chief Executive Tim Cook commented: 

“We are pleased to report an all-time record in Services and a March quarter record for iPhone despite the challenging macroeconomic environment, and to have our installed base of active devices reach an all-time high. We continue to invest for the long term and lead with our values, including making major progress toward building carbon neutral products and supply chains by 2030.”

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ii round-up:

US stock market mammoth Apple Inc (NASDAQ:AAPL) detailed quarterly sales and earnings which beat Wall Street forecasts despite reporting a second consecutive decline in overall revenues. 

Total sales fell 3% year-over-year to $94.8 billion (£74.9 billion), surpassing previously lowered estimates of nearer $93 billion, with earnings remaining flat at $1.52 per share, although ahead of forecasts at $1.43. 

Shares in the S&P 500 company rose by around 2.7% in afterhours US trading having come into this latest news up by just over a quarter year-to-date. That’s similar to fellow tech titans Microsoft Corp (NASDAQ:MSFT) and Amazon.com Inc (NASDAQ:AMZN) and ahead of a near one-fifth gain for rival smartphone software maker and Google owner Alphabet Inc Class A (NASDAQ:GOOGL). The S&P 500 index is up by close to 6% in 2023. 

Sales for Apple’s core iPhone device, accounting for around 52% of total revenues, climbed 1.5% to $51.3 billion, with sales for Services and including Apple Music up 5% to $20.9 billion, a new all time high. 

Sales for its Mac computers, however, fell by close to a third to $7.2 billion, with iPad sales retreating 13% to $6.7 billion. Wearable and Accessory sales were almost flat year-over-year at $8.7 billion. 

On a regional basis, sales for its home US market fell 8% to $37.9 billion, with sales for both China and Japan down 3% and 7% respectively to $17.8 billion and $7.2 billion. Sales in Europe rose 3% to $23.9 billion, with sales for its Asia and Pacific region up 15% to $8.1 billion and boosted by growing second hand sales in India. 

Apple is thought to be building closer ties with India given increasingly strained relations between the West and China.  

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Apple returned over $23 billion to shareholders during the quarter, down from $25 billion in the prior quarter and $29 billion the quarter before that.

Broker Morgan Stanley repeated its ‘overweight’ stance on Apple following the results, flagging an estimated fair value target price of $185 per share.  

ii view:

Coming to the stock market in 1980, Apple today designs, makes and markets mobile products, personal computers and media devices. It also sells a variety of related software, services, peripherals, and third-party digital content and applications via iTunes and its App Store.

For investors, higher borrowing costs and below inflation pay rises offer a challenging backdrop for consumers to spend on its high-end priced products. The West’s relationship with China, Apple’s third biggest market away from the Americas and Europe, remains strained. Costs generally for businesses remain elevated, while environmental concerns and the required use of resources in making its products also warrant consideration.   

On the upside, the tying in of customers to its services generates high customer loyalty, with its device base reaching another all-time high during this latest quarter. The move to 5G phones and faster data download speeds does give reason for customers to upgrade, potentially to its upcoming iPhone 15, while its strength of brand and geographical diversity are impressive. 

On balance, and while its exposure to pressured consumer spending should not be ignored, Apple continues to remain worthy of a position in diversified long-term investment portfolios. 

Positives:

• Diverse geographical markets
• Strong customer loyalty

Negatives:

• Dependency on iPhone sales
• Strained relations between the West and China

The average rating of stock market analysts:

Buy