Apple (AAPL) began 2019 on a negative note after cutting its first-quarter revenue guidance on January 2. In a letter to investors, CEO Tim Cook cited falling iPhone sales, especially in the Chinese market, as the reason for the downward revision in guidance. This news hurt investor sentiment, and AAPL fell 10% on January 3. Nonetheless, the stock managed to yield solid over 20% returns in the first quarter. Let’s see why.
Key factors in Q1 2019
Apple stock ended the first quarter of 2019 with 20.4% gains, compared to 13.1%, 16.5%, and 11.2% gains in the S&P 500 Index (SPY), the NASDAQ Composite Index (QQQ), and the Dow Jones Industrial Average, respectively.
Despite a terrible beginning to January, the stock saw bullish price movements ahead of its December-2018-quarter earnings report, released on January 29. High expectations for the company’s services segment could be one of the key factors that boosted investor confidence. Apple ended January with 5.5% gains, followed by 4.0% gains in February.
Similarly, the stock jumped 9.7% in March. Most of these March gains were driven by investors’ high hopes for Apple’s March 25 special event, which ended up receiving a mixed reaction from investors.
On March 25, Apple announced the expansion of its services segment and unveiled four services—Apple TV+, Apple News+, Apple Arcade, and Apple credit card. Legendary investor Warren Buffett’s investment firm, Berkshire Hathaway (BRK-B), owns over a 5% stake in Apple. But last week, he didn’t seem very impressed with Apple’s new services announcements. See Did Warren Buffett Just Call Apple TV+ a Mistake? to learn more.
Nonetheless, many Wall Street analysts have expressed optimism about Apple’s new services, and we’ve seen upgrades on the stock help keep investor optimism alive, which helped Apple gain over 20% last quarter.