Apple falls to $95 after cash flow misses estimates and iPhone sales dip

Apple kicked off its new fiscal year with slightly higher sales and profits despite what management termed as a "very difficult macroeconomic environment".

After the close of trading on 26 January the Cupertino, California-based tech giant said sales for the first quarter of the fiscal year ending on 26 December had increased 1.7% to $75.9bn - a record - driving a 2.2% rise in net income to $18.4bn.

Larger than expected share buybacks on the other hand boosted EPS to $3.28 from $3.06 one year ago.

However, on average analysts had been expecting earnings per share of $3.23 on sales of $76.6bn.

Furthermore, Apple´s free cash flow printed at $23.85bn for the latest quarter, comfortably below the $33.8bn which analysts at Morgan Stanley had been anticipating.

Management noted that if not for the stronger US dollar then revenues - Apple derives about two-thirds of its sales from overseas - would have risen by 8%.

To take note of, the company's guidance for sales and margins in the following quarter also fell short of analysts' forecasts.

In its first quarter, revenues from iPhone sales grew by just 1.0% year-on-year to $51.64bn (Morgan Stanley: $52.5bn), as growth in shipments stalled.

Sales to fall year-on-year for first time since 2003

Second quarter revenues were seen at between $50bn to $53bn (consensus: $55.47bn), about 11% less than a year before for the first decline since 2003.

At between 39% and 39.5% the company´s forecast for its gross margins were also below what analyst were expecting.

Despite all of the above, in a research report sent to clients analysts at Morgan Stanley said "we are positively biased given better than feared March guidance, a growing user base, accelerating Services revenue and new iPhones later this year."

Analsysts Katy L HUbertm Jerry Liu, Elizabeth Elliott and Alicia Tam also pointed out a few "positive data points" in the report "beyond the weak macro".

Those were March quarter iPhone shipments were not as bad as feared, Apple´s services business was more attractive than they had thought, India was a new focus and Apple had hedged its exposure to Yuan weakness versus the US dollar.

"Investors price in weaker iPhone demand this cycle but remain optimistic about iPhone 7 and increasingly new markets like autos," Morgan Stanley also said.

As of 14:33 GMT shares in Apple were lower by 3.94% to $96.05.