Due to COVID-19’s impact, expectations were low ahead of Apple’s (AAPL) 2Q:FY20 earnings results. But boosted by a growing Services segment, and despite dipping sales for iPhones and Macs, Apple delivered the goods.
In a solid report, Apple announced revenue of $58.31 billion, up year-over-year by 1% and beating the Street’s call for $54.54 billion. Additionally, EPS of $2.55 beat the consensus estimate of $2.26. Although iPhone sales dropped by 7% to $29 billion, in what amounts to a new quarterly record, the company’s services segment reported quarterly revenue of $13.3, an increase of 17% year-over-year. The wearables, home, and accessories segment sales grew to $6.3 billion (up 23%).
Moreover, Apple also reported its installed base of active users reached a new all -time high. Although no exact figure was provided, the growing user base has helped accelerate new paid subscriptions; Following 9 consecutive quarters of adding 30 million new paid subscriptions across all platforms, Apple added 35 million new subs this time around.
As expected, Apple didn’t provide any guidance, but the promising report is reason enough for Monness analyst Brian White to boost revenue forecasts for the next quarter.
The 5-star analyst raised 3Q:FY20’s expected revenue from $51.85 billion up to $53.53 billion, along with raising the EPS forecast from $1.93 to $1.99.
Looking further ahead to Apple’s anticipated September launch of its flagship product, the iPhone 12, White acknowledges the launch may be delayed but “would be surprised,” should it be pushed back to next year.
White remains firmly with the bulls, and summarized, “Although we expect Apple to remain challenged in the current economic environment, we believe Apple’s strong balance sheet, iconic brand, rapidly growing services business, pipeline of innovations, hardline stance on personal privacy and leadership role during this crisis will allow the company to emerge from this downturn stronger than it entered.
Accordingly, White reiterated a Buy on Apple, along with a $370 price target, which implies nearly 26% upside from current levels. (To watch White’s track record, click here)
White’s bullish stance on Apple is in line with Wall Street’s view. Apple has a Strong Buy consensus rating, based on no less than 27 Buy ratings set in recent weeks. Shares are trading for $293.16, and the stock’s recent strong gains have pushed that price close to the average price target of $320.07, leaving a 9% upside from current levels. (See Apple stock analysis on TipRanks)
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