Apple's iPhone results may indicate China is buying more expensive ones models
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Apple had a pretty good quarter despite China's weakness, which was contrary to gloomy analyst forecasts. Here's what some of them thought the next morning.
Apple CEO Tim Cook and CFO Luca Maestri spoke with investors and analysts on their second-quarter 2024 earnings conference call on Thursday. For the quarter, Apple's revenue fell 4% to $90.7 billion from $94.8 billion a year ago and earnings per share increased by $1.53.
In the second quarter of 2024, iPhone brought in $45.96 billion, up from $51.3 billion in the second quarter of 2023. Mac saw slight growth, from $7.2 billion a year ago to $7.45 billion this year.
iPad revenue fell from $6.7 billion to $5.56 billion. Wearables, Home & Accessories saw similar growth, from $8.76 billion in Q2 2023 to $7.9 billion.
Services continues to be a growth segment, surpassing Q2 2023 at 20.9 billion dollars and increased to 23.9 billion dollars.
Apple's revenue and net profit as of the second quarter of 2024
Apple also announced an additional $110 billion in share repurchases. This is Apple's largest stock buyback announcement, and then the largest in US history.
Cook and Maestri also had to answer many questions about AI. Although there were many deviations, the CEO stated that Apple is already using AI in its products.
Immediately following the results, the share price received a significant boost from investors. In just 30 minutes of trading on the secondary market, Apple's price rose from $173.03 to $185.75.
After the results were released, analysts began expressing their passionate views on the results and the future of Apple.
TD Cowen
The results were in line with TD Cowen's own Wall Street consensus, which is “positive given stabilization of fundamental indicators and despite bearish sentiment in the market.” Continued service growth and cost controls helped support “near-record profits.”
Apple's 2024 second quarter as a Sankey chart
iPhone revenue was also in line when adjusted for “catch-up demand” by about $5 billion. Expanding finance and trade programs to more countries is “essential for accessibility,” with Latin America, India and Indonesia potentially contributing to medium-term growth.
In China, the 8% year-on-year fall was reflected by claims that mainland China was still growing and could therefore see “better performance” in the future.
Piper Sandler
Piper Sandler said the results were “relevant,” with the highlight being “the fundamental strength in the service sector.” business.”
While China is a concern for investors, analysts say the iPhone segment fell 8% sequentially in March. This is said to be an improvement from the 13% fall in December.
Apple revenue in Greater China
Services sales growth of 14% year over year “exceeded expectations,” with the Mac also “exceeding expectations.” ” iPhone and iPad performed “below expectations.” The strong after-sales performance was helped by the announcement of Apple's share buyback.
“In principle, we would like to see continued improvement in iPhone trends,” the company says, before repeat its “neutral” statement on the stock.
Counterpoint
After seeing sales decline 19% in China in March, Counterpoint offered some close. This year, iPhone sales in the region were more inclined towards new models, as well as an increase in the average sales point.
This combination could explain the decline in sales.
Apple's iPhone revenue
“Revenue growth is mainly influenced by changes in the product range,” the company says. Apple's global average price for March is expected to be $900, the highest for the quarter.
“The share of new models was about 80% in the first quarter of 2024, compared to only two thirds in the first quarter of 2023, leading to an increase in ASP”
Deepwater
Deepwater's Gene Munster commented that Apple's June quarter guidance was a win as the Street expected flat growth or worse. “The big picture is that things will get easier for Apple in the second half of the year,” he mused.
The continued growth of services was a sign that Apple was not really feeling the impact of EU changes affecting its digital offerings. Regarding the oft-discussed artificial intelligence, Munster says, “The speed with which Apple has changed its mind about GenAI is amazing and the right decision.”
The Justice Department investigation remains a dark cloud for the company, Munster said. However, if the investigation turns out to be minimal, he suggests Apple shares could trade above $200.
Wedbush
Wedbush's note calls China the “black cloud” behind Wall Street's expectations for a bad quarter. “Instead, Cook & Co. had a much better quarterly performance than expected, similar to Jalen Brunson,” the note begins.
The June forecast was the star of the show, with expectations for low single-digit growth amid Wall Street speculation of a decline. Signs that iPhone demand is “turning the corner in China” and strong service performance were cited as good indicators for the future.
On the AI front, Wedbush expects strong results from WWDC ahead of the “AI-driven supercycle” for iPhone 16 this fall. Analysts say Apple's strategy will include the AI App Store as a “fundamental starting point” for the coming years.
Morgan Stanley
On Friday, Morgan Stanley reacted to Apple's earnings by raising its target price for Apple shares to $216. This happened after it fell from $220 to $210 on April 22.
“Apple had an above-average June Q, eased concerns about iPhone sales in China, achieved record service sales and a GM record, authorized the largest additional buyback in history and hinted Gen AI announcements are coming in a few weeks.” , analysts write. “After this, it is difficult not to become more optimistic.” Morgan Stanley denied the decline in iPhone sales, saying that the decline was much smaller than expected. He also noted that from year to year. iPhone popularity is growing in mainland China, but he added that more needs to be done in the country.
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