Apple Inc (NASDAQ:AAPL) printed second quarter earnings on Thursday after market, beating consensus profit expectations by +7% with EPS of $1.52 vs the expected ~$1.42 per share. Group revenue came in at $97.28 billion, outpacing forecasts with a ~$3.3 billion beat. The Products segment beat estimates with revenue of $77.46 billion vs consensus ~$73.9 billion, while the Services segment came in-line with expectations at $19.82 billion. The firm’s gross margins came in at 43.7%, outpacing the streets ~43.1% forecast.
Q1 2022 hedge fund letters, conferences and more
In summary of product performance: iPad’s lagged with sales falling slightly over the year, the iPhone segment grew slightly year on year and Mac computers remained the best performer out of the suite.
AAPL shares have outperformed peer tech giants in the recent sell off, falling a mere -10% since the beginning of 2022. Over the last year, the stock remains up +22.6% and remains a standout performer in the market. The stock rallied +4.5% yesterday over the day leading into the results but have since traded -2.2% after hours on concerns of supply constraints.
On the earnings call, CFO Luca Maestri, spooked investors when warning the market of supply chain challenges which he believes could impact revenue by up to $8 billion during Q3. While $8 billion seems like a large hit to revenue, it does not keep us up at night knowing the supply chain issues will eventually subside and return to normality.
Apple did not provide guidance for Q3 during the result and attributed it to pandemic uncertainty.
Dividend Upgrade And New Buyback:
In addition to the results, AAPL increased their quarterly dividend by 5% to 23 cents from 22 cents prior. This raises the new annualized dividend yield to ~0.56%. Management also increased their share buyback program by an additional $90 billion, over the existing program currently running. The share buyback should continue to add support to the share price over the next year.
AAPL will next report earnings for the third quarter in early August. The market (before revisiting estimates) was expecting
Analyst Commentary:
Katy Huberty from Morgan Stanley believes the March results were better than expected with demand remaining strong. The firm revised June sales estimates ~3% lower and cut the price target to $195 from $210, solely driven by Covid supply constraints.
Michael Walkley from Canaccord Genuity believes Apple is positioned well to continue to benefit from the 5G upgrade cycle and anticipates strong growth trends. They remain ‘buy’ rated with a firm $200 target.
Chris Caso from Raymond James is not concerned about production issues but will be keeping a close eye on currency issues and broader fears regarding consumer demand.
Analysis:
AAPL currently holds a consensus ‘overweight’ rating with an average target price of $190, implying +16% upside to the current stock price. It is still too early to see how brokers have adjusted target prices but suspect there may be some valuations cut in-line with management’s commentary.
We noticed AAPL has a Quality/Value/Momentum score of 76.74. This is a score that combines the ranks of cash generating efficiencies, relative valuation, and six-month momentum into one score. You can find out more by - clicking here.
We have included a chart below that shows several valuation metrics, shown against the share price. The chart shows that the firms PE Ratio has been falling as the stock price has been rising over the past 5 years. If you want to find our more - click here.
We also saw that AAPL has a Put/Call ratio of 0.91, indicating bullish sentiment in the stock. The Put/Call Ratio shows the total number of disclosed open put option positions divided by the number of open call option options. Since puts are generally a bearish bet and calls are a bullish bet, put/call ratios greater than 1 indicate a bearish sentiment, and ratios less than one indicate a bullish sentiment. We have included a chart below that shows how the ratio has tracked over the past year. You can find out more about this ratio by - clicking here.
Article by Fintel
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