Apple Inc. (Nasdaq: AAPL) reported fiscal second-quarter earnings late Tuesday, barely beating on earnings and barely missing on revenue. Despite ho-hum top- and bottom-line numbers, AAPL stock surged 4 percent in after-hours trading following the announcement, as capital returns and guidance came into focus.
Apple announced an additional $100 billion to its share buyback program, simultaneously announcing it would complete its previous $210 billion stock buyback program in the current quarter.
[Read: 5 of the Best Stocks to Buy for May.]
No doubt that immense demand didn’t hurt the AAPL stock price Tuesday afternoon. Going into the announcement, Apple stock was down 2 percent in 2018 and up a modest 15 percent in the last year.
Here’s a closer look at the iPhone maker’s March quarter:
Apple earnings: fiscal Q2 by the numbers. Apple reported earnings per share of $2.73, higher than the $2.69 per share analysts expected. Revenue rose 16 percent to $61.14 billion, essentially in-line with the consensus estimate of $61.15 billion.
One of the more closely watched numbers in the report, iPhone unit sales, clocked in at 52.2 million, up just 3 percent from the same quarter last year. Analysts were looking for 53 million.
Sales estimates have been tumbling in recent months, as weak numbers from iPhone suppliers indicated demand for the smartphones wasn’t nearly as robust as originally expected. The iPhone X, replete with facial recognition technology, 3D touch, augmented reality features and an expensive edge-to-edge OLED screen, appears to have been priced a little higher than consumers cared for at $999.
“There seems to be a general concern that the iPhone X has not sold as well as expected,” says K C Ma, professor of finance at Stetson University.
That concern is certainly validated in the numbers, where the average selling price (ASP) of the iPhone was around $728 — a severe drop from the $796 ASP in the holiday quarter.
Capital return: Apple’s biggest strength? No company is as cash-flush as Apple, and its decision to boost its buyback program by $100 billion — and raise the quarterly dividend by 16 percent to 73 cents a share — is arguably the reason AAPL stock is soaring Tuesday.
Guidance was also moderately better than expected.
Apple guided for revenue between $51.5 billion and $53.5 billion in the June quarter, for a midpoint of $52.5 billion. Prior to that announcement Wall Street was expecting revenue of $52.04 billion in the June quarter.
Unfortunately for shareholders, while the Trump administration certainly helped Apple’s stock price with the corporate-friendly tax cut bill, other policies could severely impact the long-term success of the Cupertino, California-based tech giant.
[See: 7 of the Best Stocks to Buy for 2018.]
There will be no Round 2 of tax cuts, at least not for years. But other policies: protectionist trade (which could start a trade war with China) and nationalistic immigration policies (which will limit Apple’s talent pool and innovation), could have longer-term and more severe consequences.
The bottom line. While it’s tough to do wrong with one of the world’s strongest brands, a cash cow machine, and hundreds of billions of dollars in your pocket, AAPL needs to get back to the sort of innovation it was doing under Steve Jobs — because being the “iPhone company” won’t be a growth engine forever.
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Apple Inc. (AAPL) Stock Soars on $100 Billion Buyback originally appeared on usnews.com
