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Apple Stock: Analysts Raise Target Price after Q4 Results

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Apple (AAPL) shares are trading 1.7% higher in pre-market today. The company announced its fourth-quarter results on Wednesday after the market close.

The company reported sales of $64.04 billion in the September quarter with an EPS of $3.03. In the fourth quarter of 2018, Apple reported sales of $62.9 billion and an EPS of $2.91. Analysts expected the company to post sales of $62.99 billion and an EPS of $2.84.

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Apple not only beat analysts’ sales and earnings estimates, but it also provided a strong forecast for the upcoming holiday quarter. In the first quarter of fiscal 2020, Apple expects sales between $85.5 billion and $89.5 billion with gross margins between 37.5% and 38.5%. Analysts expect the company to post sales of $86.92 billion in the December quarter.

What drove Apple sales in Q4?

Apple reported its highest-ever fourth-quarter revenues in 2019. The revenue growth was driven by the Services, iPad, and Wearables segments. The company’s iPhone business segment saw its revenues fall 9.2% YoY (year-over-year).

Overall, iPhone sales were $33.36 billion and accounted for 52% of the company’s total revenues. MacBook sales fell 4.8% to $7 billion, while iPad revenues rose 17% to $4.66 billion. Apple’s Wearables, Home, and Accessories sales rose 54.5% to $6.52 billion, which we anticipated.

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Everyone was watching the company’s high growth Services business and it didn’t disappoint. The Services sales rose 18% to $12.51 billion and accounted for 19.5% of the company’s revenues. Apple CEO Tim Cook said, “We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad.”

The company claimed that the September quarter saw record sales for Wearables. Apple Watch and AirPods drove the growth. The App Store and Apple Music also generated record sales, while Apple Pay transactions doubled YoY.

If you disregard iPhone sales, which still account for most of Apple’s sales, the overall revenue growth was 17%.

Strong international sales

In the September quarter, the company set a new revenue record for the North America region and emerging geographies like Asia-Pacific. Apple expects improved revenue trends from China heading into fiscal 2020.

International sales accounted for 55% of the company’s revenues in the fourth quarter. The Americas and Rest of Asia Pacific (excluding Greater China and Japan) regions were two major revenue drivers.

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Key numbers 

Although iPhone revenues fell 9% in the September quarter, it was significantly lower than the 15% decline in the first three quarters of fiscal 2019. The iPhone 11 is Apple’s best-selling device. The iPhone will likely drive record sales in the holiday quarter.

Apple Services grew by double digits across geographies. Cook said, “We are well on our way to accomplishing our goal of doubling our fiscal year ’16 Services revenue during 2020.”

Apple Pay transactions exceeded 3 billion in the fourth quarter, which is more than PayPal. Apple Pay is available in 49 countries. Notably, Apple Pay has more than 6,000 issuers on the platform. In 2019, Apple’s revenues from the US topped $100 billion for the first time. Services sales reached $46 billion, which is the size of a Fortune 70 company.

Apple continued to increase shareholder value. In the fourth quarter, the company repurchased shares worth $18 billion and paid $3 billion in dividends. The company declared a cash dividend of $0.77 per share, which amounts to annual payments of $3.08 per share.

Analysts increased Apple’s target price

Due to the stellar performance and an upcoming record quarter, several analysts revised the stock’s 12-month target price.

  • Needham increased the target price from $250 to $280 and reiterated a “strong buy” rating.
  • Nomura Instinet increased its target price from $205 to $225 and reiterated a “neutral” rating.
  • Wells Fargo increased the target price from $215 to $245 and maintained a “market perform” rating.
  • KeyBanc thinks that the stock is fully valued at the current price and maintained a “sector weight” rating.
  • Citi (C) has a target price of $250 and it maintained a “buy” rating.
  • Morgan Stanley (MS) increased the target price from $289 to $296 and maintained an “overweight” rating.
  • Cowen increased the target price from $250 to $290 and maintained an “outperform” rating.
  • Jefferies maintained a “buy” rating and has a target price of $285 for the stock.
  • Canaccord increased the target price from $260 to $275 and maintained a “buy” rating.
  • Wedbush increased its target price from $265 to $300 and maintained an “outperform” rating.
  • DA Davidson increased the target price from $270 to $300 and maintained a “buy” rating.
  • Barclays increased the target price from $224 to $236 and maintained an “equal-weight” rating.
  • Piper Jaffray increased the target price from $243 to $270 and maintained an “overweight” rating.

Currently, Apple stock is trading at $248.31. The company has a market cap of $1.12 trillion.

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