Apple's Big Earnings Beat: What Wall Street's Saying

Apple's earnings beat and strong guidance was largely driven by stronger-than-expected iPhone and wearables sales, with services just missing the mark. Analysts were encouraged.
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Apple investors applauded a solid December quarter, which showed better-than-expected hardware sales across the board. Analysts noted the Services revenue miss, but still grew a touch more positive. 

The stock rose 1.5% to $322.40 a share Wednesday morning. 

Earnings per share came in at $4.99, beating Wall Street estimates of $4.54 and grew 19% year-over-year. Revenue was $91.18 billion, beating analysts estimates of $88.478 billion and grew 8.3%. Meanwhile, iPhone revenue was $55.9 billion, beating estimates of $51.4 billion and grew 7%. Analysts were expecting more revenue declines for the iPhone.

Services revenue came in at $12.7 billion, missing estimates of $13 billion. Wearables, home and accessories revenue was $10 billion, beating estimates of $9.85 billion.

Here's what analysts were saying:

Cowen, Outperform, Price Target Raised From $350 to $370

"Bulls will point to a healthy iPhone/5G cycle that could drive fiscal year 2020/2021 units back above 200 million. Bears would note that Services came in a tad light; but the $50 billion plus business is still growing mid-to-high-teens percentage year-over-year. With the low-cost SE2 expected to launch in calendar year first half 2020 and 5G to benefit calendar year 2021, we believe the iPhone/wearables driven earnings expansion story still has room to play out. The gradual pivot to a content/recurring revenue business is a powerful long-term earnings driver. We raise our fiscal year 2020/2021 forecasts."

- Krish Sankar 

Goldman Sachs, Neutral, Price Target Raised From $192 to $300 

"We move our forward estimates up as iPhone demand continues to surprise on the upside. However, we continue to believe consensus forecasts assume an optimistic scenario for the end of this year. Services missed our forecast and decelerated both quarter-over-quarter and year-over-year though commentary on why this was the case was unclear on the call in our opinion. We raise our 12-month price target to $300 to acknowledge the recent stock re-rating with the view that shorter term consensus forecasts are achievable but balanced against our concern that late year expectations are too high. Our fiscal year 2021 EPS increases by 3% to $14.68 primarily driven by higher revenue. Our 12-month price target is based on 20 times 5-8 [futures quarters] calendar year 2021 EPS of $15." 

- Rod Hall

UBS, Buy, Target Unchanged at $355

"Services growth was also strong at 17% year-over-year with double-digit growth in all five geographies and there seems to be some acceleration in the number of paid subscriptions (expects to reach 500 million plus in March quarter and 600 million plus by year-end). Guidance includes some accommodation at the low-end of the range for an evolving coronavirus situation in China as it appears that retail traffic has slowed in the last few days even outside of Wuhan.  For calendar year 2021, we increase our revenue estimate to $309.7 billion from $305.9 billion and keep EPS unchanged at $16.56 (higher revenue offset by higher share count)." 

- Timothy Arcuri 

Morgan Stanley, Overweight, Price Target Unchanged at $368

"iPhone demand is sustainable while wearables and services grow double digits. Coronavirus may shift demand to future quarters but doesn't impact long-term valuation, in our view. We raise fiscal year 2020 EPS to $13.55. Services slowdown not a structural concern. The slowdown in reported growth is more likely explained by Y/Y declines in the amortization of the deferred value of Maps, Siriand iCloud services, which was ~$2.6B of revenue (or 6% of Services revenue) in FY18,and is a function of the trailing 8-16 quarters of device sales declines. The amortization of free services should prove less of a headwind in the coming quarters."

- Katy Huberty