Shares of investor favorite Apple (AAPL) continued their rally off the mid-June lows (up some 25%). With mounting concerns over the global consumer, Apple’s fiscal Q3 earnings release seemed to surprise more than a few, notes Jason Clark, contributing editor to The Prudent Speculator.
The iPhone maker said adjusted EPS was $1.20 on revenue of $82.96 billion, versus Wall Street consensus expectations of $1.16 and $82.76 billion, respectively.
Not only did the company beat revenue expectations overall, it also did better for the iPhone and iPad, though it missed fairly badly on the Mac and Wearables-Home-Accessories.
Service revenue was a slight miss. The company didn’t give revenue guidance for the current quarter, but said growth overall would accelerate in comparison with the third quarter. Services growth, however, could decelerate.
CEO Tim Cook confirmed earlier-in-the-month reports about a spending and hiring slowdown, saying the company would be “deliberate” given the current economic situation. While macro headwinds hit parts of Apple’s business, the company seemingly implied that the iPhone had become more immune than other products.
When questioned about AR and VR products in the future, he was evasive and focused on the existing AR capabilities in the iPhone and iPad.
Apple has long been known for its tight grip on supply chains, so the continued admission of challenges on that front is a big deal. That said, the iPhone line continues to surprise and has seemingly become more of a need than a want in the eyes of global consumers.
Long-time fans of Apple, we still see the shares offering compelling upside potential and continue to have them as a core holding in all of our portfolios outside of our Small-Mid-Cap Dividend strategy.
We continue to like the cash rich balance sheet and the flexibility and potential it offers, while also being quite constructive on the deepening entrenched Apple ecosystem. Our target price for AAPL is now $187.
