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Apple Hits Record High After iPhone-Driven Q1 Earnings Beat; Coronavirus Concerns Linger

Apple issued a wider-than-normal sales forecast after its Street-busting first quarter earnings late Tuesday, as CEO Tim Cook and his team count the potential costs of the rapidly-spreading coronavirus in one of the tech giant's most important markets.

Apple Inc. APPL shares opened at a fresh all time high Wednesday after the tech giant smashed Wall Street forecasts for sale and earnings last night, but concerns for the impact of the coronavirus in perhaps its most important market put a cap on early trading gains.

Apple posted earnings for the three months ending on December 28 of $4.99 per share,  a 19.4% increase from last year that came in well ahead of the Street consensus forecast of $4.55. Net profit was tabbed at a U.S. corporate record high o $22.2 billion, 

Group revenues, Apple said, rose 9% from last year to $91.8 billion, again smashing the analyst consensus of an $88.4 billion tally, thanks mainly to a 7.6% jump in iPhone revenues, which hit $56 billion.

Looking into the company's March quarter, Apple said it sees revenues in the range of $63 billion to $67 billion. It's firmly ahead of the Street consensus of $62.4 billion, but is also a much wider range than the company typically provides. 

Apple CEO Tim Cook said the extra leeway reflects the uncertain impact on manufacturing and sales in China amid the rapidly spreading coronavirus, which has already overtaken the 2003 SARS outbreak in terms of reported cases and claimed the lives of at least 132 people.

"We're working very closely with our team and our partners in the affected areas, and we have limited travel to business-critical situations as of last week," Cook told investors on a conference call late Tuesday. "The situation is emerging, and we're still gathering lots of data points and monitoring it very closely. As (CFO Luca Maestri) had mentioned, we have a wider-than-usual revenue range for the second quarter due to the greater uncertainty."

"With respect to the supply chain, we do have some suppliers in the Wuhan area. All of these suppliers, they are our alternate sources. And we're obviously working on mitigation plans to make up any expected production loss," Cook added. "We factored best thinking in the guidance that we provided you. With respect to supply sources that are outside the Wuhan area, the impact is less clear at this time." 

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"The reopening of those factories after Chinese New Year has been moved from the end of this month to February, 10 depending upon the supplier location, and we've attempted to account for this delayed start-up through our larger range of outcomes," Cook noted.

Apple shares were marked 2.9% higher in early trading Wednesday to change hands at $326.98 each, an all-time high that extends the stock's six-month gain to around 56% and values the Cupertino, California-based tech giant at just over $1.4 trillion.

"Apple’s very strong C4Q is clearly a positive, though with the stock up >30% over the past 90 days a fair amount of this was likely priced in. Investor attention is already shifting toward the highly-anticipated launch of a 5G iPhone in 2H20," said Credit Suisse analyst Matthew Cabral. "Key debates include the impact on the replacement cycle and Apple’s pricing strategy given an expected uptick in costs."

Phone revenues, Apple said, rose 7.6% to $55.96 billion, reversing a recent trend of declining growth after the launch of three new handsets -- the iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max -- in September of last year.

Services revenues were 17% higher from the same period last year at $12.72 billion. Revenue from the sale of wearable devices such as the AppleWatch and AirPods hit $10 billion, a record high, that topped analysts' estimates by $500 million, Company gross margins also improved by 40 basis points to 38.4%, Apple said.

"If you look at the Apple or the wearables as a category within the Wearables, Home and Accessories revenue, wearables grew 44%, so it was very strong," Cook told investors late Tuesday. "Both Apple Watch and AirPods did very well in terms of collecting new customers. Apple Watch in particular, 75% of the customers are new to the Apple Watch. And so, it's still very much a selling to new customers at this point."

Apple's installed base, a measure of the total number of product units it has in active use, rose to 1.5 billion, the company said, while subscribers to its myriad services hit 480 million, a 33.3% improvement from the same period last year.

Outside of iPhones, Apple noted that Mac sales slipped 3.5% from last year to $7.16 billion, while iPad sales dropped 11.1% to $5.98 billion. China revenues, Apple said, were up 3.1% to $13.58 billion.