The Apple share price has undergone a fairly decent rebound since the March lows, however it has lagged behind a number of its FAANG peers, probably as a result of the fact it is still predominantly considered a hardware company, even though services continues to make up a progressively bigger proportion of its revenue than was the case a few years ago.
Earlier this week, Samsung saw its profits rise in its most recent quarter to the tune of 3% to $5.2bn, but a good chunk of this was driven by sales of its memory chips, and lower marketing spend. Its outlook for the upcoming quarter was quite bleak in terms of sales of mobile phones and TVs, and as a result the company declined to provide forecasts for the rest of the year.
In its Q1 numbers three months ago, Apple posted a record net income and revenue of $91.8bn and $22.2bn respectively, helped by a decent performance at the end of last year.
Q2 revenue beats revised expectations
Yesterday’s Q2 performance came in some way short the first quarter though, with $58.31bn of revenue, but it still beat revised expectations of $54.25bn, and also beat the same quarter last year, though it is important to remember that prior to the disruption in China, Apple had expected to see Q2 sales of $65bn.
The standout performer was in services, which saw a 17% increase in revenue to $13.35bn from Q1’s $12.72bn with wearables, home and accessories contributing $6.28bn of that total. It would appear that while wearables saw the company post a record quarter in that area, along with the wider services division, the launch of Apple TV+ has been a little underwhelming. It also appears that iPhone sales were hit by the coronavirus as revenue here slid by 7% to $28.96bn.
Apple launches iPhone SE
This decline in sales, while expected due to coronavirus, still speaks to a trend that was already in place, and may also help explain Apple’s decision to launch the new iPhone SE this month, one of its cheapest ever iPhone models. This deviation away from the higher end is probably not surprising given the intense competition in the market, but it could well alienate some of its more affluent users who have paid a lot more for some of the same features which are now available in this smaller budget model, including the latest A13 bionic chip.
The continued lack of a 5G model is probably less of an issue now, given the economic disruption taking place, however it is still an area where Apple is expected to launch an iPhone by the end of this year.
Lack of guidance as Apple share price slips
Given the upcoming economic disruption, it was perhaps not surprising to see the company decline to offer any guidance for the year, however they can’t be too pessimistic about the future if they feel they can boost the dividend and spend another $50bn on buybacks, even though it is quite clear given the ongoing disruption globally, this next quarter will probably come in short of the same period last year.
Nonetheless investors appeared a little unsettled by the reluctance to provide any sort of guidance, with Apple’s share price slipping back in post-market trading, despite CEO Tim Cook saying that sales were recovering in the second half of April, after a very poor start to the month, and that manufacturing output was slowly returning to normal in China.
In addition, Apple stores also remain closed in large parts of the world, with little sign of when a lot of them might reopen, which in turn its likely to hit sales.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
