29 April 2021

Apple Shares Steaming Hot After Quarterly Results

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the markets today

     

What’s happening: Shares of Apple rose in extended trading on Wednesday, after the company smashed expectations for its fiscal second quarter.

What happened: With people continuing to learn and work from home, Apple benefited during the quarter from 5G iPhone upgrades and higher purchases of iPads and Macs.

The iPhone maker warned, however, that the global chip shortage could negatively impact sales of iPads and Macs in the ongoing quarter.

How were the results: The Cupertino, California-based company reported a sharp rise in quarterly sales, topping market estimates.

  • Revenues grew by a whopping 54% to $89.6 billion, from $58.3 billion in the same quarter last year, convincingly beating the consensus estimate of $77 billion.
  • Profits came in at $1.40 per share, exceeding market views of 98 cents per share.

Why it matters: Apple benefited from the pandemic-led trends, as people bought more electronic devices and signed up for various paid applications, mostly related to music and fitness. The company’s sales were also buoyed by the release of its 5G iPhone models.

With consumers upgrading their devices to 5G technology, iPhones became the strongest driver of growth for the company.

Apple’s sales in China almost doubled in the fiscal second quarter and surpassed Street expectations in almost every category. Driven by higher iPhones sales, the company’s revenues from the greater China region surged 87.5% to $17.7 billion in the quarter.

Apple’s iPhone sales stood at $47.9 billion, exceeding market views of $41.4 billion. The company’s sales of Macs and iPads benefited significantly from remote learn and work trends amid the pandemic. Sales of Macs and iPads came in at $9.1 billion and $7.8 billion, surpassing market expectations of $6.8 billion and $5.6 billion, respectively.

Management announced the authorisation of a $90 billion share buyback plan, a day after Alphabet said it plans to repurchase $50 billion in stock. Apple also hiked its dividend by 7% to 22 cents per share.

Despite the boom in its business, Apple's App Store has been facing antitrust scrutiny due to its in-application payment rules and privacy policies.

Apple’s CFO Luca Maestri also warned that chip shortage could cost the company between $3 billion and $4 billion in sales in the fiscal third quarter.

How shares responded: Apple’s shares gained 2.3% to $136.70 in after-hours trading on Wednesday, following the release of upbeat quarterly results. The stock has surged around 93% over the past year, versus a 61% gain in the Nasdaq 100 index.

What to watch: Investors will keep an eye on the impact of chip shortage on Apple’s sales. Markets will also monitor the release of new device models.

The Markets Today

     

European stocks will be in focus today ahead of a basket of economic reports from the region.

Context: European markets closed mostly higher on Wednesday with investors monitoring earnings reports from several companies.

Details: Investors in Europe monitored the slew of earnings releases from various companies, including Deutsche Bank, GlaxoSmithKline, Sanofi, Banco Santander, and Lloyds Banking Group.

Deutsche Bank posted its strongest quarterly profits in seven years, driven by a solid performance by its investment banking unit. The German lender’s stock jumped more than 10% to lead the Stoxx 600 index. Shares of Lloyds gained more than 3% after the company topped market expectations for its quarterly profits.

Investor sentiment was also impacted by the US Federal Reserve’s latest interest rate decision, which kept the fed funds rate unchanged.

The pan-European Stoxx 600 rose slightly by 0.02% on Wednesday, with banking shares gaining around 1.5%. Industrial stocks bucked the trend, falling around 0.7% in the session.

London’s FTSE 100 index gained 0.27% on Wednesday, while the German DAX 30 and French 40 added 0.28% and 0.53%, respectively.

What to watch: Markets await data on household credit growth, loans to non-financial corporations, money supply M3, consumer confidence indicator, economic sentiment indicator, industry confidence indicator, services confidence indicator and consumer confidence price trends from the Eurozone.

The consumer confidence indicator is expected to increase by 2.7 points to -8.1 in April, while economic sentiment indicator is projected to improve to 102.2. The industry confidence indicator, which rose for the fourth straight month to 2 in March, is expected to rise further to 4 in April. The services confidence indicator is projected to improve to -8.7 in April, from -9.3 in March.

Rising covid-19 cases remain one of the top concerns for markets, with global infections surging past 149.2 million.

Other Markets: US indices closed lower on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.48%, 0.08% and 0.42%, respectively.

Support & Resistances
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market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s import prices, unemployment rate, unemployment change and consumer price index, Spain's unemployment rate, consumer prices and industrial confidence indicator, Turkey’s economic optimism index and foreign exchange reserves, UK’s car production, Italy’s producer prices, South Africa’s producer prices, Brazil’s value of loans, Canada’s average weekly earnings, Argentina’s consumer confidence as well as America’s US GDP growth rate, initial jobless claims, pending home sales and the EIA’s natural gas stockpiles.

 

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