Apple shares rise to record high on strong Q4 earnings

A customer shopping at an Apple store in San Francisco. Apple said it sold 46.7 million iPhones in the fourth quarter ended Sept 30, above analysts' estimates of 46.4 million. Analysts have been eager to see whether Apple can meet demand for the iPho
A customer shopping at an Apple store in San Francisco. Apple said it sold 46.7 million iPhones in the fourth quarter ended Sept 30, above analysts' estimates of 46.4 million. Analysts have been eager to see whether Apple can meet demand for the iPhone X during the crucial holiday quarter.PHOTO: AGENCE FRANCE-PRESSE

Earnings demonstrate how firm is driving growth across ever-expanding product line

SAN FRANCISCO • Apple reported on Thursday stellar fourth-quarter earnings and offered a rosy forecast for the holiday shopping season, allaying investor concerns about production delays on the new iPhone X and demonstrating remarkable strength across its growing line of products and services.

Apple shares rose 4 per cent in after-hours trading to hit an all-time high, with analysts lavishing praise on Apple chief executive Tim Cook and speculating on when Apple might become the first public company worth a trillion dollars.

The earnings demonstrate how Apple is able to drive growth across an ever-expanding product line that now includes five different iPhone models along with the iPad, the Mac, the Apple Watch and a suite of fast-growing services offerings.

"We had good success through the different iPhones," Mr Cook said on a call with analysts. "We tried hard to have an iPhone that is as affordable as possible for people that really want an iPhone, but may have a more limited budget."

Just a few weeks ago, Apple appeared to be facing a rare stumble with a delay in the iPhone X launch and rumours of production problems that could limit supply.

But Apple executives on Thursday shrugged off the concerns as chief financial Officer Luca Maestri said the company was "quite happy" with how manufacturing of the iPhone X was progressing.

Analysts have been eager to see whether Apple can meet demand for the iPhone X during the crucial holiday quarter, with most saying it will likely take it until next year or early spring to do so.

Apple forecasts fiscal first-quarter revenue of US$84 billion (S$114 billion) to US$87 billion, at the high end of analysts average expectations of US$84.18 billion, according to Thomson Reuters .

"A trillion-dollar market cap may now be in Cook's sights in the light of these results and guidance around iPhone X," said Mr Daniel Ives, an analyst at GBH Insights.

The company's market capitalisation of about US$868 billion already makes it the world's most valuable publicly traded company.

There are still questions around supplies of the new phone and longer-term demand.

Mr Bob O'Donnell, head of Techanalysis Research, cautioned that if Apple is not able to fill demand for iPhone X over the holiday quarter, it would push buyers to wait until Apple's March quarter, by which time they may have spent their money elsewhere.

Apple said it sold 46.7 million iPhones in the fourth quarter ended Sept 30, above analysts' estimates of 46.4 million, according to financial data and analytics firm FactSet. However, average selling prices of US$618 fell short of forecasts of US$638.

The company's net income rose to US$10.71 billion, or US$2.07 per share, in the quarter, from US$9.01 billion, or US$1.67 per share, a year earlier. That beat the average analyst estimate of US$1.87 per share.

Apple forecasts a gross margin of 38 per cent to 38.5 per cent, higher than many analysts expected.

Mr Maestri attributed the margin strength to Apple's growing services business, which brought in US$8.5 billion in revenue compared with analyst estimates of US$7.5 billion. That included a favourable US$640 million adjustment, though Apple officials did not elaborate.

The US$28.85 billion revenue from iPhone sales accounted for nearly 55 per cent of total revenue, which rose 12.2 per cent to US$52.58 billion.

Analysts on average were expecting total revenue of US$50.7 billion, according to Thomson Reuters.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 04, 2017, with the headline 'Apple shares rise to record high on strong Q4 earnings'. Print Edition | Subscribe