A month has passed since Apple’s last earnings report (AAPL). The shares lost about 11.7% in that period, falling below the S&P 500.
Will the recent negative trend continue to lead to the next earnings release, or is Apple about to break? Before delving into how investors and analysts have reacted lately, let’s take a quick look at your most recent earnings report to better understand the important factors.
First quarter results from Apple, iPhone & Services Aid Top Line
Apple reported earnings in the first fiscal 2021 quarter of $ 1.68 per share, which surpassed Zacks’ consensus estimate by 19.2% and increased 34.4% year over year.
Net sales increased 21.4% year-over-year to $ 111.4 billion, which exceeded the Zacks consensus estimate by 8.7%.
Services, along with iPad, Wearables and Mac, continued their momentum in the quarter under review. Service revenue (14.1% of sales) grew by 24% over the previous year to US $ 15.76 billion.
Product sales (85.9% of sales) increased 21% year-over-year to $ 95.68 billion.
Strong growth in aid revenue in China and Japan
Apple achieved double-digit growth and new records in each of its five geographic segments. The company’s installed base of active devices exceeded 1.65 billion in the reported quarter.
Sales in the Americas increased 11.9% year on year to $ 46.31 billion and represented 41.6% of total sales.
Europe generated $ 27.31 billion in sales, an increase of 17.3% on a year-over-year basis. The region accounted for 24.5% of total sales.
Greater China sales increased 57% over the same quarter last year, to $ 21.31 billion, accounting for 19.1% of total sales.
Sales in Japan increased 33.1% year-on-year, to $ 8.29 billion, accounting for 7.4% of total sales.
The rest of Asia-Pacific generated sales of $ 8.23 billion, an increase of 11.5% year-over-year. The region was responsible for 7.4% of total sales.
IPhone sales increase Y / Y
IPhone sales increased 17.2% over the same quarter last year to $ 65.59 billion and represented 58.9% of total sales. The robust year-over-year growth was driven by strong demand for the iPhone 12 family.
Notably, the iPhone’s active installed base now stands at over 1 billion.
Apple cited a recent survey report by 451 Research, which stated that customer satisfaction was 98% for the iPhone 12 family in the reported quarter.
The Services Momentum Continues
Services remained dynamic in the reported quarter. Apple set a quarterly record for the App Store, cloud services, music, advertising, AppleCare and payment services.
Apple TV +, Apple Arcade, Apple News +, Apple Card, Apple Fitness + and Apple One package also contributed to overall growth. These new services continue to add users, content and resources.
Apple now has more than 620 million paid subscribers in its service portfolio, an increase of 35 million sequentially and 140 million year on year.
iPad and Mac Jump on Strong Demand
IPad sales of $ 8.44 billion increased 41.1% year on year and accounted for 7.6% of total sales. Sales grew strongly in double digits across all geographic segments, including a historical record in Japan.
Mac sales of $ 8.68 billion increased 21.2% over the same quarter last year and accounted for 7.8% of total sales. Year-over-year growth was driven by strong adoption of the new MacBook Air, MacBook Pro and Mac Mini with Apple’s new M1 chip.
Apple cited a recent survey report by 451 Research that said overall consumer satisfaction was 94% for the iPad and 93% for the Mac in the quarter under review.
Robust wearable performance
Sales of wearables, home and accessories increased 29.6% year-over-year to $ 12.97 billion and represented 11.6% of total sales.
In addition, the Apple Watch adoption rate has grown rapidly. Notably, more than 75% of customers who purchased the Apple Watch during the reported quarter were customers for the first time.
Operational Details
Gross margin expanded 140 basis points on a year-over-year basis to 39.8%. In addition, gross margin increased 160 bps sequentially due to higher sales and a strong revenue mix.
The gross product margin grew 530 bps sequentially to 39.8%, driven by leverage and mix. The gross service margin was 68.4%, an increase of 150 bps sequentially.
Operating expenses increased 11.9% year over year to $ 10.79 billion due to higher expenses with research and development (R&D) and sales, general and administrative expenses (SG&A) which increased 16% and 8.4%, respectively.
The operating margin expanded 220 bps on a year-over-year basis to 30.1%.
Balance sheet
As of December 26, 2020, cash and marketable securities were $ 195.57 billion compared to $ 191.83 billion on September 26, 2020.
Term debt on December 26, 2020 was $ 107.04 billion, up from $ 101.56 billion on September 26, 2020.
Apple returned $ 30 billion in the reported quarter through dividend payments ($ 3.6 billion) and share repurchases ($ 24 billion).
Guidance
Apple did not provide revenue guidance, given the uncertainty surrounding the impact of the coronavirus pandemic. However, management expects revenues to grow year after year.
In addition, Apple expects the year-on-year growth in Wearables, Home and Accessories to slow in the first quarter. In addition, services must face a difficult comparison year after year.
Gross margin is expected to be very similar to what was reported in the December quarter. Operating expenses are expected to be between $ 10.7 billion and $ 10.9 billion.
How are the estimates moving since then?
It turns out that the revision of the estimates showed an upward trend during the past month. The consensus estimate changed 5.22% due to these changes.
VGM Scores
Currently, Apple has a high growth score of A, although it is far behind the momentum score with a D. Tracing a somewhat similar path, the stock received an F grade on the value side, placing it on the lowest quintile position for this investment strategy.
Overall, the stock has an aggregate VGM score of C. If you are not focused on a strategy, this score is the one you should be interested in.
Panorama
Estimates have largely tended upward for the stock, and the magnitude of these revisions looks promising. It is no surprise that Apple has a Zacks Rank # 1 (Strong Buy). We expect a return above the stock average in the coming months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 best stocks for the next 30 days. Click to get this free report
To read this article on Zacks.com click here.