NEW YORK (TheStreet) - Wall Street approved of Apple's (AAPL) - Get Apple Inc. Report impressive quarterly results last night in which the smartphone giant said it shipped 39.3 million iPhones last quarter, above what analysts had expected.
Apple earned $1.42 a share on $42.12 billion in revenue for its fiscal fourth quarter. Analysts surveyed by Thomson Reuters expect the company to earn $1.30 a share on $39.86 billion in revenue for the fiscal fourth quarter.
The Cupertino, Calif.-based tech giant shipped 39.3 million iPhones, 12.1 million iPads and 5.5 million Macs in the quarter. Gross margins for the quarter were 38%, compared to 37% in the year ago quarter.
For the holiday quarter, Apple forecasts generating between $63.5 billion and $66.5 billion in revenue, with gross margins between 37.5% and 38.5%.
Apple shares were surging 3.3% to $103.05 before the markets opened. Here's what analysts had to say.
Bill Choi, Janney Capital Markets (Buy, $117 fair value estimate)
F1Q guidance is for $63.5-66.5B compared to our prior $63.74B and the $63.44B consensus. GM is expected to be 27.5-38.5% (up from 37-38% last 3 guides), as mix and commodity pricing help. Implied EPS is $2.41 at the mid-points, just above our prior $2.34 and the $2.40 consensus, as heavy opex is expected. It appears that the company's backlog is skewed towards the 6 Plus and that the higher ASPs on the newest iPhones are making up for the higher costs of launching new form factors. We expect demand to skew more heavily towards the 6 Plus in China, where Apple launched both new phones on all three carriers this month.
While we remain concerned that iPad sales are unlikely to grow robustly, the continuing success of the flagship iPhone more than compensates, especially in light of the much higher margins on phones. The company is planning to increase its channel inventory by 1 week for both products to 5-7 weeks, boosting sell-in by at least 3M iPhones for FY15.
iPhone units were stronger than expected in September at 39.3mn units, up 12% qoq, up 16% yoy, and going forward management noted that the iPhone 6/6 Plus had driven meaningful growth in all countries where it had been launched. We believe there is significant backlog and the real issue is supply. We now project volumes of 61mn/193mn /194mn units in the December quarter, FY15, and FY16, respectively.
While Apple guided for [gross margins] of 38%, which is flat qoq, we believe the rising iPhone 6 Plus mix and better memory mix is being partly offset by transition costs and currency. Based on our proprietary segmentation analysis, we see [gross profit] dollars growing 26% FY14-15 driven by unit growth of 24.0mn and ASPs rising. Our ASP assumptions are $681/$645/$603 for December quarter, FY15, and FY16, respectively. This means that Apple could see iPhone GP dollars grow by $11.4bn from the FY14 levels. We now project GMs at 38.7%/39.5%/38.1% for the December quarter, FY15, and FY16 periods, respectively.
Jim Suva, Citigroup (Buy, $120 PT)
Investors do not fully grasp the positive impact from the very recent change in carrier behavior that is allowing consumers to upgrade their smart phones before the typical 2 year contract is over thereby creating an environment of Device Acceleration for Apple. We believe investors are underappreciating the positive impact of the iPhone 6 as robust demand due to Apple's innovation continues to outpace supply with stronger y/y pricing and margins that are only starting to gain traction. The stronger than expected just reported September quarter set the base to provide upside in the December and March quarters. Reiterate our Buy rating and $120 target price.
Andrew Uerkwitz, Oppenheimer (Outperform, $115 PT)
After delivering two well-executed product launches for consumers, Apple delivered for investors: Apple F4Q14 revenues/diluted GAAP EPS of $42.1B/$1.42 vs. our $42.3B/$1.40E and consensus of $40.0B/$1.31E. The results were driven by stronger-than-expected iPhone and Mac sales. iPhone 6 and 6 Plus supply has been the strongest in iPhone history but are still in shortage thus far, while Mac NB saw strength during "back-to-school" sales and in international markets. We raise our FY15E revenues/EPS slightly from $208.1B/$7.31 to $208.7B/$7.36. Reiterate Outperform with $115 PT as we see the momentum building after the strong showing.
Michael Walkley, Canaccord Genuity (Buy, $120 PT)
Apple reported strong September quarter results above our and consensus estimates. Consistent with our surveys indicating very strong global iPhone 6 demand with limited supply, Apple issued strong Q1/F'15 EPS guidance slightly above our estimates as Apple is currently selling all iPhone 6 devices it can produce. ...We maintain our expectations for a record iPhone 6 upgrade cycle driven by strong replacement sales to existing iPhone customers and strong high-end smartphone market share gains due to our surveys indicating a greater mix of Android smartphone consumers switching to the iPhone 6 smartphones than during the iPhone 5 series launches. Mac sales were also above our expectations as Apple gained material PC market share during the important back-to-school season. We reiterate our BUY rating and increase our price target to $120 from $115.
"We rate APPLE INC (AAPL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 6.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although AAPL's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Computers & Peripherals industry and the overall market, APPLE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 44.56% is the gross profit margin for APPLE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.69% is above that of the industry average.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 34.46% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AAPL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full analysis from the report here: AAPL Ratings Report
-Written by Laurie Kulikowski in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.