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How Are Analysts Reacting to Apple’s Q3 Results?

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Apple (AAPL) impressed investors with its results for the third quarter of fiscal 2019. Strength in non-iPhone businesses helped the company in surpassing analysts’ expectations in the third quarter, which ended on June 29. Apple stock was up 4% as of 12:52 PM today as the company’s revenue was back on track after two straight quarters of decline. Aside from the strong growth in non-iPhone revenue, investors and analysts also took note of the improving trend in iPhone sales.

The tech giant generated revenue of $53.8 billion, reflecting year-over-year growth of 1.0% in the third quarter. This growth was mainly the result of a 48% rise in wearable, home and accessories revenue and a 12.6% increase in the services business. For a detailed analysis of the company’s third-quarter revenue, read What Brought Apple’s Revenue Back on a Growth Track in Q3?

The third-quarter EPS was down 6.8% to $2.18 due to higher expenses. Analysts expected EPS of $2.10 on revenue of $53.4 billion.

Apple’s stock price target raised

Several analysts raised their price target for Apple stock following the results, including:

  • Bank of America Merrill Lynch: $240 from $230
  • CFRA: $240 from $235
  • Instinet: $185 from $180
  • Independent Research: $230 from $217
  • Cowen and Company: $250 from $220
  • Citigroup: $250 from $205
  • Wedbush: $245 from $235
  • DA Davidson: $270 from $245
  • Piper Jaffray: $243 from $230
  • Evercore ISI: $238 from $227
  • JP Morgan: $243 from $239
  • Bernstein: $205 from $190

As of the time of this article, the average 12-month price target for Apple stock was $220.44.

Shareholder returns

On a year-to-date basis, Apple stock rose 32.4% as of July 30. With today’s jump in Apple’s stock price, its market capitalization crossed $1 trillion.

Apple returned $21 billion to shareholders in the third quarter in the form of dividends and share repurchases. In particular, the company repurchased 88 million shares for $17 billion in the third quarter. Share repurchases help in boosting the EPS by bringing down the average share count. As at the end of the third quarter of fiscal 2019, Apple’s diluted share count reduced 6.6% on a YoY basis.

In May, Apple announced additional share repurchases of $75 billion. The company also declared a 5% increase in its quarterly dividend to $0.77 per share. The company made dividend payments worth $3.6 billion in the third quarter. As of July 30, Apple’s dividend yield was 1.5%.

Impact of US-China trade war

Last week, Apple stock was in the news when Trump in a tweet made it clear that his administration will not grant a tariff waiver on Mac Pro parts manufactured in China. In the third-quarter conference call, Apple CEO Tim Cook stated that the company has been manufacturing Mac Pro in the US and intends to continue to do so. He also said that the company is investing in manufacturing capacity.

Apple’s iPhone is already losing market share to players like Huawei and Xiaomi in major markets like China. Additional tariffs and delay in the resolution of the US-China trade conflict might adversely impact Apple’s competitiveness.

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