Apple Gets A Round Of Applause

Apple Gets A Round Of Applause

about 4 years ago2 mins

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Apple – the world’s second-largest public company – reported better-than-expected quarterly results late on Tuesday. Investors duly Applauded, helping its stock initially rise 2% 🍎

What does this mean?

Sales of iPhones – including the first full quarter of the company's latest flagship product – impressed, as did those of wearables such as the now-ubiquitous AirPods. But revenue from Apple’s services segment, where Apple TV+ didn’t do much to hamper rival Netflix’s quarter, surprisingly missed expectations. That bodes ill for the company’s plans to shift its focus away from hardware and towards recurring subscription sales.

The big Apple’s earnings forecast for this quarter, meanwhile, was higher than investors had thought. Still, with China representing almost 20% of Apple’s overall business and a proliferating coronavirus there disrupting consumer spending, there’s perhaps a bigger risk than usual that the company falls short 🤧

Why should I care?

Apple scored just 15% of global smartphone shipments last year – but 66% of the total profit they generated. Put simply, iPhone revenue – which has already exceeded $1 trillion – has been the apple of Apple’s earnings’ eye ever since the device’s 2007 launch. That may explain why investors are so keen on signs of success in the company’s transition to extremely profitable services sales from those of merely highly profitable phones and computers 📱 For now, however, those signs remain elusive – and the costs involved continue to upset the apple cart: Apple’s profit margin has fallen for the last two years, and analysts reckon it’ll fall further this year too.

Apple’s not the only US company (or investor) counting on growth in China: famous “activist investor” Bill Ackman has bet a billion dollars on Starbucks winning big there. But despite also announcing better-than-expected quarterly earnings late on Tuesday, the coffee company’s stock price initially fell. What with the coronavirus closing cafes, Starbucks’ earnings this quarter, like Apple’s, probably won’t be as grande as previously predicted.

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