(Bloomberg) -- The last 24 hours have been big for Apple Inc. Not only did the world's largest technology firm report earnings, but its most important product in years finally hit store shelves.
Analysts were hoping not only for strong results, but also strong guidance. Supported by resurgent iPad and Mac sales, the 10-year anniversary iPhone will help push revenue to a record high of $84 billion to $87 billion in the quarter ending in late December, Apple said in a statement. Analysts had predicted $84 billion, according to data compiled by Bloomberg.
The shares rose about 3 percent in extended trading on Thursday. If the stock nears that level on Friday, Apple will be within reach of a $900 billion market capitalization, solidifying its status as the world's most valuable public company.
Despite not getting as much color on the demand for the iPhone X as hoped, Wall Street is pleased with the report. Here's a wrap.
Citigroup, Jim Suva
“We were surprised by how Apple beat revenues and earnings-per-share expectations Thursday night as older and lower priced iPhone models held up much better than expected as consumers await the iPhone X. This is important because most of these sales are to new Apple users who in the future will likely purchase apps and other Apple services and eventually upgrade to newer models.”
“We are increasing our financial model slightly as detailed in this report as well as adjusting our valuation multiple to 15 times from 13.5 times as the entire equity market has increased in valuation and as a result we increase our target price to $200 from $170 previously and reiterate our Buy rating.”
Loup Ventures, Gene Munster
“Tim Cook is giddy, and he should be. This was the first time since December 2014 that Apple had growth in every product and every geography. Apple's results for September 2017 were generally as expected with two bright spots. First, Services growth was up 24 percent, an acceleration from 22 percent in June 2017 and above Street expectations of 17 percent. Second, mainland China grew 12 percent year-over-year.”
“The guidance for December 2017 provided the substance of tonight's surprise, with the midpoint of December 2017 revenue 1 percent higher than the Street, and gross margins 25 basis points above the Street (a rarity in a cycle change quarter). This guidance is noteworthy because it was likely driven by the iPhone 8 and older iPhones, not the iPhone X which remains in short supply. The iPhone X is of course the product that will make or break shares of Apple over the next year. We believe demand for the iPhone X will, over the next four quarters, play out to be slightly more favorable than increasingly optimistic analyst estimates.”
UBS, Steven Milunovich
“Apple reported a better-than-expected quarter at revenue of $52.6 billion versus consensus of $50.8 billion and an in-line Dec outlook of $84-$87 billion and gross margin of 38.0-38.5 percent. However, the company did not provide much insight into iPhone mix or timing of supply catching up to demand though it did say it is encouraged by both supply and
demand.”
“There is new energy in the story given the feature leap in iPhone 10, improving results for the Mac and iPad, and outstanding services and wearables results. Growth in Greater China (including services) is important with China a swing factor in fiscal 2018. We increase our fiscal 2018 earnings per share estimate from $11.40 to $11.65 with $12.50 in fiscal 2019.”
Deutsche Bank, Sherri Scribner
“While the results were solid, we believe investors' main focus is on whether Apple can sell a $1,000 premium phone in significant quantities, something we won't have a good sense of until later this year, at the earliest. Until then, we expect bulls and bears to remain in their own camps, with this quarter's results unlikely to sway views.”
“We continue to view Apple as a trading stock, and believe shares will trade at the higher end of their historical range while current market multiples are elevated and the iPhone X remains in short supply. We are raising our price target to $152 from $140 on higher market multiple, but maintain our Hold rating given our more conservative long-term view.”
Barclays, Mark Moskowitz
“We expect Apple's stock to retain its momentum status in the near term. Important questions were left unanswered related to the iPhone X adoption cycle, the bulls are likely to cheer the better December quarter guidance, strong services number and the rebound in China as placeholders for only better trend lines in the first half of calendar year 2018.”
“In our view, three big questions were not addressed: 1) Why doesn't Apple disclose pre-order iPhone X units number? 2) Are iPhone X wait times due to really strong demand or bigger than usual supply challenges? 3) Will price elasticity be in effect after the early adopters fade in coming quarters?”
Mizuho, Abhey Lamba
“Apple reported results above expectations as iPhone shipments printed largely in-line with estimates. The company guided December quarter in-line with consensus which was likely better than feared (given ongoing reports of production ramp issues).”
“We continue to think risk/reward on the stock is balanced at current levels given the uncertain supply/demand dynamic as well as potential for consumption delays as customers anticipate the next product cycle at lower price points. Given our view of valuation being fully reflective of near-term growth, we maintain our Neutral rating and $160 price target.”
There are currently 36 buys, 7 holds and no sell ratings on Apple with an average price target at $186.85, according to data compiled by Bloomberg.
--With assistance from Alex Webb
To contact the reporter on this story: Julie Verhage in New York at jverhage2@bloomberg.net.
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Cormac Mullen, Robert Brand
©2017 Bloomberg L.P.
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