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Apple: Q3 Blowout And Stock Split (NASDAQ: AAPL)



After the bell on Thursday, we received fiscal results for the third quarter from technology giant Apple (AAPL) for the end of June. There has been a great deal of uncertainty over the name over the past few months, as the coronavirus pandemic has prompted management to refuse any official guidance. While the shares were included exclusively in this report, an inflation report combined with the announcement of the division of shares sent the shares to a new maximum within the time trading.

So much for all these worries about Apple’s declining revenue over the previous year. As the table below shows, all five key revenue segments show growth relative to the corresponding results for the third quarter of 201

9. Management actually called for a decent drop in iPhone revenue, so the 1.7% increase was actually a pleasant surprise. All other segments show double-digit increases, led by the iPad with over 31% growth and the Mac approaching 22%. Perhaps the only disappointment here was the service segment, which appeared only about or slightly below most analysts’ estimates. The dollar values ​​below are in the millions, excluding the amounts per share.

(Source: Third quarter revenue report linked above and Apple IR website, see here)

Service margins show an impressive increase of 309 basis points, while product margins continue their downward trend. Leakage of more than $ 7 billion in the top line would obviously be filtered to the income statement. The lower tax rate combined with the buyout certainly helped the EPS figure to go over 50 cents on the street. Even with the increase in the number of analytical analyzes in recent weeks, this report was one of the best we have seen from the company.

As expected, Apple’s management did not give any guidance for the fiscal period of Q4 for September. However, there was confirmation that the launch of the iPhone will be delayed a bit, which means that there will be no new phones until early mid-October. I’m sure analysts will be in a hurry to raise ratings significantly after this huge Q3, but we can see that revenue / profits miss next time if expectations rise too much.

As we look at the stock itself, management has slowed the buyback a bit by buying back shares worth about $ 16 billion. I mentioned this possibility in my visualization article that the huge rally could provoke some conservatism. The surprise here was that a split for four per share was announced, which will again send the actual number of shares, which remained much higher, but Apple shares will then move to about $ 100 based on current prices. Interestingly, this will actually lead to a drop in Apple’s weight in the Dow Jones Industrial Average (“Dow 30”), as this index is based on the stock price.

Apple shares surpassed $ 400 in the after-hours session, putting a new continuous high in the process and there will be many analysts who do not look good as a result. Shares were included in this report for earnings above the average price target on the Street, as many analysts had targets in the low to average $ 300. We will certainly see many goals overcome after this report, and the division of shares is likely to lead to more purchases. Although we will have to wait a little longer than usual for the next set of iPhone launches, Apple has put to bed this week all sorts of fears that the business is really hurt by the coronavirus.

Disclosure of information I / we have no positions in the mentioned shares and we have no plans to initiate positions within the next 72 hours. I wrote this article myself and it expresses my own opinions. I do not receive compensation for this (other than the search for alpha). I have no business relationship with any of the companies whose shares are mentioned in this article.

Additional disclosure: Investors are always reminded that before making any investment, you must do your own due diligence on each name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial advisor before making investment decisions. Any material in this article should be considered general information and should not rely on a formal investment recommendation.




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