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Apple Could Become First Trillion Dollar Company in a Week as Revenues Beat Forecast

Apple

Apple’s keenly awaited quarterly results yesterday saw the iPhone maker beat analyst forecasts to set up what many expect a share price push that could propel the company’s value to $1 trillion within days. The world’s most valuable company reported strong growth in revenues to finish what has been a volatile reporting season for the U.S.’s tech giants on a positive note.

The success of the company’s premium, £1000 iPhone X model, the series’ most expensive iteration to date, drove iPhone revenues to 20% growth on a 1% increase in total units sold. Across the company revenues were up 17% for the period and came in $1 billion ahead of the consensus forecast at $53.3 billion. That translated into a profit of $11.5 billion – 32% up on the same period last year.

The flagship iPhone X launched last November proved to be Apple’s best-selling model. Starting at $999, or around £1000 in the UK, the X has successfully pushed the boundary on what the iPhone’s loyal following is prepared to pay for a new smartphone. The premium paid for the X lifted the average iPhone unit sales price to $724 and total revenue from iPhone sales was $29.9 billion.

Guidance for the coming quarter, which runs from July through to the end of September was also more bullish than analysts had predicted. Apple is expecting revenues of $60 and $62 billion from a quarter dominated by what is a traditionally slow summer period for gadget sales. This reconfirmed the suspicion that the three new iPhone models expected to be launched before the end of the year will be released in September. Last year Apple moved away from its traditional September launch by splitting the release dates of its new iPhone 8 and X models. The former was put on sale in September as usual but the latter held back to November.

With growth of the premium smartphone market thought to be peaking, Apple is relying on its Services unit, which includes the App Store, iCloud data storage service and iTunes, as an engine for future revenue growth. Yesterday’s report provided evidence that the company is on track here with the unit’s revenue growing by 31% to $9.5 billion. The headline figure also surpassed forecasts but was boosted by the one-off windfall of $236 million that was the result of lawsuits being decided in Apple’s favour.

The combined strength of results across Apple’s key verticals pleased markets, driving the company’s share price up 4% in after-hours trading. Several analysts had speculated that a strong report that comfortably beat forecasts could propel Apple’s market capitalisation to $1 trillion within a week, making it the first company in the history of the stock market to reach the milestone. Attention will now turn to whether that becomes a reality over the coming days.

As part of the bigger picture, tech sector investors will hope Apple’s strong report will ease the nervousness that has seen a wider sell-off of the FAANG and big tech stocks since Facebook’s share price plunged 20% last week after reporting disappointing growth figures. The nervousness had started to spread despite Amazon reporting record quarterly revenues shortly after. With weak results now shown to be confined to the Twitter and Facebook, the two big social media flagships, the hope will be that markets retain their confidence in the remainder of the FAANGs and FANG+ index that has attracted so much capital over recent months.

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Paul

The author Paul