Published On: Wed, May 1st, 2019

Apple results beat sets eyes back on $1 trillion

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FILE PHOTO: Members of the media film the new iPhone 7 at an Apple store in Beijing
FILE PHOTO: Members of the media film the new iPhone 7 at an Apple store in Beijing, China, September 16, 2016. REUTERS/Thomas Peter/File Photo

May 1, 2019

By Akanksha Rana

(Reuters) – Apple Inc shares rose almost 5 percent on Wednesday, pushing the iPhone maker’s market valuation back towards $1 trillion as its quarterly report and upbeat forecast calmed investors worried about slowing growth.

Apple breached the trillion-dollar valuation in August last year, but later gave up the gains as signs emerged of weak demand for its newest iPhones, especially in China, the world’s biggest smartphone market.

The company’s shares were trading around $210 in early trading after closing at $200.67 on Tuesday ahead of the quarterly report and valuing the company at around $970 billion, based on 4.6 billion shares outstanding.

That leaves it trailing Microsoft in the race to be the world’s biggest company by market value, substantially because the number of Apple shares has fallen steadily as it returns billions of its profits to investors by buying back its own stock.

For comparison, the company’s last regulatory filing in January showed there were more than 4.715 billion shares outstanding at the end of December.

Apple said its buybacks last year amounted to more than $70 billion, or around five times its own spending on research and development.

Apple’s research budget still remains one of the world’s largest, with many of its Wall Street backers pointing to the risk that the iPhone may not be as popular going forward as it has been over the past decade.

For now, while iPhone sales fell again in the second quarter, the company’s services revenue beat Wall Street expectations and it forecast an upbeat third quarter.

At least six brokerages hiked their price targets on the stock, with Jefferies making the most aggressive move by raising its target by $50 to $210.

“Apple reported a clean March quarter and bullish June quarter outlook which against a backdrop of negative investor sentiment sets up for shares to move higher,” Morgan Stanley analysts said.

Analysts said iPhone demand in China was getting better as Apple cut prices, upgraded its device financing program and benefited from improved trade dialogue between the United States and China.

“With a mature smartphone market, we believe Apple has locked up strong share of the premium tier market and will continue to dominate high-end smartphones sales and capture the vast majority of smartphone profits for the next several years,” Canaccord Genuity analysts said.

(Reporting by Akanksha Rana in Bengaluru; Editing by Saumyadeb Chakrabarty and Patrick Graham)

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