Apple rises 4% after beating Q3 forecasts, analysts spy new products

Apple stocks gained in after-hours trading on the back of better-than-expected results for its spring quarter and after guiding higher for the next three months - a possible indication of new product roll-outs ahead.

The company posted better than expected results for the three months to June, typically the slowest period of the year for the manufacturer, reporting quarterly revenues of $53.3bn, for an increase of 17% from the year-ago quarter.

The results beat the FactSet consensus for $52.3bn in sales.

On the back of that, net profit rose 25% to $11.5bn, which also beat the Street estimate for $10.8bn.

Earnings per share grew by an incredible 40% year over year to $2.34 from $1.67 in 2017, also beating the consensus estimate for $2.16.

The tech titan's shares tacked-on 4.0% after the close of markets in New York on Tuesday, pushing its market capitalisation to roughly $970bn and the stock price to a fresh 52-week high.

On the downside, Apple only sold 41.3m iPhones last quarter, together with 11.6m iPads and 3.72m Macs.

That was shy of the consensus forecast for 42m iPhones, but nevertheless did manage to slightly beat the 41m sold between April and June 2017.

Critically, iPhones were flogged at $724 apiece, up from an average of $606 a year before and above analysts' projections for an average unit price of roughly $690.

Sales of the iconic smartphones accounted for almost $30bn of the company's income over the reporting period, with the sale of iPads generating $4.7bn and the venerable Macs $5.3bn. In addition, sales of other products accounted for a further $3.7bn and service sales just over $9.5bn.

The latter was up from $7.3bn one year ago thanks to the cut that the company takes from third services providers such as Netflix for example - not to mention from streaming music.

“We’re thrilled to report Apple’s best June quarter ever, and our fourth consecutive quarter of double-digit revenue growth,” said Tim Cook, Apple’s CEO.

"Our Q3 results were driven by continued strong sales of iPhone, Services and Wearables, and we are very excited about the products and services in our pipeline."

Apple’s CFO, Luca Maestru chimed in, saying: "Our strong business performance drove revenue growth in each of our geographic segments, net income of $11.5 billion, and operating cash flow of $14.5 billion.

“We returned almost $25 billion to investors through our capital return program during the quarter, including $20 billion in share repurchases.”

Apple also provided guidance for its fiscal 2018 fourth quarter, telling shareholders to expect sales of between $60bn and $62bn, which was better than the $59.6bn forecast from analysts polled by Thomson Reuters.

Apple was the last of the FAANGs out with its results for the last quarter and like Alphabet and Amazon delivered positive results. In contrast, Facebook and Netflix both disappointed analysts this time around, especially the social network which experienced its worst one-day share price drop ever in its history last week as a result, falling 20%.

UBS spies 'Foldable' on the horizon

Following the company's results, analysts at UBS bumped up their target price on its shares from $210 to $215, highlighting the higher IPhone ASPs and higher guidance for gross margins.

However, it took note of the recent weakness in the yuan - a negative for the company - and the fact that operating expenditures were still rising at just about the same rate as sales despite the company's "massive scale".

Apple's sales in Greater China jumped last quarter from $8.0bn one year ago to $9.5bn.

Intriguingly, they also pointed out how the future release of foldable iPhones might be the next big catalyst for the company's sales of the product.

The increasing contribution from services was possibly also being under-appreciated, they said.

"In the meantime, AAPL should at least hold serve with iPhone bias more to the upside based on procurement, ASP still strong in the ~720-725 range for CQ3, and services set to do ~$3/share in C2020.

"While we are not sure AAPL investors are truly ready for SOTP, services could be ~$75/share meaning investors are still getting one of the planet's best and only hardware recurring revenue streams for ~7x C20 EPS."