Apple Stock Jumps As iPhones, Services Drive March-Quarter Beat

Apple (AAPL) stock surged Friday after the consumer electronics giant beat Wall Street’s targets for its fiscal second quarter on strong sales in iPhones and services. Apple also raised its quarterly dividend and share repurchase plan.

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The Cupertino, Calif.-based company late Thursday said it earned $1.52 a share on sales of $94.8 billion for the quarter ended April 1. Analysts polled by FactSet had predicted Apple earnings of $1.43 a share on sales of $92.9 billion. On a year-over-year basis, Apple earnings were unchanged while sales fell 2.5%. It was the second consecutive quarter of sales declines for Apple.

“We are pleased to report an all-time record in services and a March-quarter record for iPhone despite the challenging macroeconomic environment,” Chief Executive Tim Cook said in a news release.

Also, Apple increased its quarterly dividend by 4% to 24 cents a share. Plus, Apple’s board authorized an additional $90 billion for share repurchases.

Apple Stock Rises After Report

On the stock market today, Apple stock jumped 4.7% to close at 173.57. During the regular session Thursday, Apple stock fell 1% to close at 165.79.

Apple’s services revenue increased 5% year over year to $20.9 billion in the March quarter. But hardware revenue declined 5% to $73.9 billion.

In the March quarter, Apple’s iPhone revenue increased 2% to $51.3 billion, topping analyst estimates. Smartphones accounted for 54% of the company’s total sales in the period.

Meanwhile, Apple’s Mac computer sales tumbled 31% to $7.2 billion. Apple’s iPad sales declined 13% to $6.7 billion. And revenue from Apple’s wearables, home and accessories unit fell a fraction to $8.8 billion.

Apple Guides Low For June Quarter

Apple’s directional guidance for the June quarter was weaker than analysts had expected. The company’s outlook implied revenue of about $81 billion, down 2.5% year over year, for its fiscal third quarter. Wall Street had been modeling sales of $84.5 billion, up 1.8%.

Still, at least 10 Wall Street firms raised their price targets on Apple stock after the report. But one firm lowered its price target.

Apple’s March-quarter results showed the value of its massive installed base of users, which fueled services growth. More than 2 billion Apple devices are in use worldwide today, including “well over” 1 billion iPhones, Chief Financial Officer Luca Maestri said on a conference call with analysts.

The top three Apple services for growth in the March quarter were iCloud, Apple Music and advertising, Barclays analyst Tim Long said in a note to clients. He rates Apple stock as equal weight, or neutral.

Apple achieved all-time revenue records across App Store, Apple Music, iCloud and payment services in the March quarter, the company said.

Emerging Markets Driving Growth

Apple had a “stellar quarter” in emerging markets overall, Cook said on the call. It generated record sales in Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey and the United Arab Emirates.

Meanwhile, India is a “major focus” for Apple, Cook said. “India is an incredibly exciting market,” he said. “There are lot of people coming into the middle class and I really feel that India is at a tipping point.”

Apple stock is on the IBD Tech Leaders list. It has an IBD Composite Rating of 91 out of 99, according to IBD Stock Checkup.

IBD’s Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths. The best growth stocks have a Composite Rating of 90 or better.

Potential catalysts for Apple stock in the months ahead include the rumored introduction of a mixed-reality headset at the company’s Worldwide Developers Conference in June.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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