The bullish sentiment toward Apple (AAPL – Free Apple Stock Report) continues to build following the tech giant's release of results for the fourth quarter of fiscal 2019 (ended September 28th). The Dow component, up over 50% in value year to date, was already on quite a roll coming into the print. And Apple did not disappoint, posting a nice earnings beat and providing a rosy outlook for the upcoming holiday shopping season.
For the September interim, share net clocked in at $3.03, 4% above the year-earlier tally and well ahead of our $2.83 call and Wall Street's consensus view of $2.84. This was despite a 9% drop in iPhone revenue, reflecting the maturity of the broader smartphone space and the limited ability of the company to hike unit prices much further.
Offsetting the iPhone slowdown, as has been the recent trend, were strong showings from the services and wearables businesses. In fact, services revenue advanced a better-than-expected 18% during the fourth quarter, to a record $12.5 billion, thanks to brisk demand for subscriptions, like iCloud storage packages. And the wearables category, including AirPods and the Apple Watch, experienced a hefty revenue gain of 54%, to $6.5 billion.
Looking ahead, Apple CEO Tim Cook voiced optimism that the key December period would be a good one. The smartphone franchise will probably stabilize with the help of the newly launched, competitively priced iPhone 11 series, which looks to have gotten off to a very good start. The services business should remain a big growth catalyst, especially with highly anticipated forays into gaming and streaming TV on deck. And the wearables segment should continue to shine, with the Apple Watch, backed by a whole new host of health-oriented applications, finally making deep inroads.
All in all, it was a fine quarter for Apple, one that should keep the bulls happy. We are maintaining our fiscal 2020 earnings estimate at $13.60 a share, which would represent a 14% increase over fiscal 2019's final mark. Plus, we still like the good-quality Dow name for conservative buy-and-hold investors, even after the stock's impressive run this year.
About the Company:Apple Inc. is one of the world’s largest makers of PCs and peripheral and consumer products, such as the iPod digital music player, the iPad tablet, the iPhone smartphone, and the Apple Watch, for sale primarily to the business, creative, education, government, and consumer markets. It also sells operating systems, utilities, languages, developer tools, and database software.
– Justin Hellman
