Photographer: Anthony Kwan/Bloomberg
Despite a 10% dip in quarterly profit and still-struggling iPhone sales, Apple beat Wall Street expectations with its after-market earnings release on Tuesday.
Coupled with the announcement of a $0.77 dividend, up 5% from a year ago, Apple's lukewarm earnings release was met with a small post-market rally for shares, which were up 5% immediately following the announcement. They closed at $200.67 on Tuesday, about 2% lower than the day prior.
The Cupertino, California tech giant reported earnings per share of $2.46, compared to average Street expectations of $2.36 per share. Revenue for the quarter was $58 billion, down 5% on a quarterly basis, but still solidly above analysts forecasts of $57.6 billion.
“Our March quarter results show the continued strength of our installed base of over 1.4 billion active devices, as we set an all-time record for services, and the strong momentum of our wearables, home and accessories category, which set a new March quarter record,” said CEO Tim Cook in a statement released alongside earnings.
The top-line decline was marked by a more than 9% fall in Apple's revenue from products, which was $46.6 billion in the quarter, compared to $51.3 billion a year prior.
That faltering revenue is in spite of the firm's strongest iPad growth in six years, and an uptick in iPhone prices. Many analysts have blamed those high prices for the firm's dismal performance in China, and some are even calling for price cuts.
“While some investors will fret around price cuts and what it means for top-line growth in the next few quarters and losing perception as a luxury smartphone, taking a step back it's all about the installed base for Apple,” wrote Wedbush analysts Daniel Ives and Strecker Backe in a Friday note that maintained their outperform rating.
As iPhone sales fall, some analysts are turning their attention to Apple’s pivot to services, which claimed $11.5 billion in sales for the quarter. That's up more than 16% compared to last year, and ahead of the earnings release, analysts were eyeing the firm's buzzy streaming-video push.
Apple announced the launch of its Steven Spielberg-endorsed streaming service, Apple TV Plus, at a March special event. Slated for a fall debut, the move will bring original shows and movies into the existing Apple TV application, akin to YouTube’s premium subscription service, which hosts exclusive content in addition to ad-free video browsing.
Apple’s set to enter a very crowded space that’s easily dominated by Netflix, which has seen its stock soar 39% in 2019, and to a lesser extent, Hulu. That’s not to mention the huge competition coming from other market leaders eager to jump into the booming streaming space: Blue-chip Disney’s set to launch Disney Plus, backed by a decades-old catalogue of classics, and Viacom recently announced it’s adding its major networks to Pluto TV, the streaming service it acquired earlier this year.
A March analyst note from JPMorgan issued a buy rating on Apple but noted the challenges it could face in monetizing original content given its relatively limited scope in the face of Netflix, Amazon Prime and HBO.
Analysts, however, are still solidly bullish on Apple stock: Several issued positive ratings ahead of the Tuesday earnings release, and less than 10% of analysts covering the stock have sell ratings.
Apple shares are up 33% year to date.
