28 January 2021

Apple Shares Slide Despite Sales Topping $100 Bn

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the markets today

     

What’s happening: Shares of Apple Inc fell in extended trading on Wednesday, despite the iPhone maker exceeding sales and profit expectations for the holiday quarter.

What happened: Strong performances in every category helped Apple record blowout results for the latest quarter, with robust sales in China providing an additional boost.

The consumer electronics giant’s shares still lost steam in after-hours trading on management’s cautious outlook.

How were the results: The Cupertino, California-based company’s quarterly revenues surpassed $100 billion for the first time in history.

  • Sales grew by 21% to reach a whopping $111.44 billion, beating market views of $103.28 billion.
  • Net income surged to $28.76 billion, or $1.68 per share, up from $22.24 billion, or $1.24 per share, in the year-ago quarter. The figure exceeding the consensus estimate of $1.41 per share.

Why it matters: Apple, which has a mammoth market valuation of $2.4 trillion, delivered a stellar performance last year, despite the closure of many of its outlets due to the pandemic. Learn- and work-from-home trends amid shelter-in-place orders prompted consumers to upgrade their devices, boosting the company’s sales.

Apple was expected to deliver a strong performance following the announcement of its new iPhone 12, although this was shipped weeks later than normal, with manufacturing being impacted by the pandemic. The company also unveiled other products, including Apple Watch and MacBook notebooks.

Apple witnessed much higher demand for iPads and Mac laptops, helping the company report record sales for last quarter.

China proved to be a strong market for the company’s iPhone, with sales in the region surging 57% to $21.31 billion. Revenues in the Americas region grew to $46.3 billion, from around $5 billion in the year-ago quarter.

Strong iPhone sales of around $66 billion drove the blockbuster results for the latest quarter, allowing the company to record 59% growth in total revenues.

Apple’s iPad sales hit $8.44 billion, exceeding market estimates of $7.58 billion, while Mac sales came in at $8.68 billion.

Apple also reported a strong number of active devices for the fiscal first quarter. The company now has 1.65 billion active users, including an installed base of over 1 billion iPhones.

While the iPhone maker did not issue any official guidance for the fourth consecutive quarter, management projected a deceleration in sales growth in AirPods and other wearables categories. Apple also guided to some decline in growth in the services segment, citing tough year-over-year comps.

How shares responded: Apple’s shares plummeted 3.2% to $137.50 in after-hours trading, following the release of quarterly report. The stock jumped 85% in 2020, versus a 46% spike in the Nasdaq 100. Apple’s shares added another 7% year to date.

What to watch: Markets will monitor Apple’s performance as the restrictions ease and offices and educational institutions reopen. Any news of resurgence of covid-19 cases in various parts of the world may support the stock.

The Markets Today

     

Crude oil will be in focus today after recording some gains in the previous session.

Context: Oil prices settled mostly higher on Wednesday after the EIA (Energy Information Administration) reported a massive drawdown in crude inventories last week.

Details: After hitting record lows in April, oil prices have been on an uptrend due to demand recovery, mainly in China, and significant output cuts by the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) group.

Market sentiment remains weak, however, given rising covid-19 cases globally, with the number of confirmed cases exceeding 100 million. The spread of the virus in the US, the EU and China has been a major dampener. However, China, which is the second largest oil consumer, reported just 75 new cases on Wednesday, triggering some hope.

US crude oil stockpiles declined by 9.9 million barrels during the previous week to 476.7 million barrels, their lowest level since March, according to the EIA’s report released on Wednesday. The recent reading was significantly higher than the projections of an increase of 430,000 barrels. The decline in inventories supported oil prices yesterday.

Meanwhile, US gasoline stockpiles rose by 2.5 million barrels to 247.7 million barrels last week, versus the consensus estimate of an increase of 1.8 million barrels.

US WTI (West Texas Intermediate) crude gained 0.5% to close at $52.85 on Wednesday. Brent crude fell 10 cents to settle at $55.81 per barrel after rising as high as $56.49 per barrel earlier in the session.

What to watch: Traders will look out for a slowdown in covid-19 cases given the vaccination drives launched by various countries. Markets also await the rig count report from Baker Hughes, scheduled for release on Friday. Crude oil futures traded lower in the Asian session this morning, suggesting downside during the American session.

Other Markets: US trading indices closed lower on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 2.05%, 2.57% and 2.80%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s economic optimism index, foreign exchange reserves and MPC meeting summary, Spain's unemployment rate, Italy’s consumer confidence index and manufacturing confidence index, UK’s car production, South Africa’s producer prices, Eurozone’s economic sentiment indicator, consumer confidence indicator, industry confidence indicator, services confidence indicator and consumer confidence price trends, Brazil’s unemployment rate and value of loans, Mexico’s balance of trade, Germany’s consumer price index, Argentina’s consumer confidence, Canada’s value of building permits and average weekly earnings, Saudi Arabia’s value of loans and money supply M3, Russia's unemployment rate, retail sales, real wage growth and gross domestic product as well as the US GDP growth rate, goods trade balance, wholesale inventories, initial jobless claims, new home sales, EIA’s natural gas stocks change and Kansas City Fed's manufacturing production index.

 

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