Financial Performance

Apple Shares Fall 6.5% on Disappointing Outlook

The company's revenue projection for the holiday season fueled concerns that slowing growth "could translate into a new growth paradigm.”
Matthew HellerNovember 2, 2018

Apple’s fourth-quarter earnings beat analysts’ estimates due to hikes in iPhone prices but its outlook for the holiday season disappointed investors, sending its shares down more than 6% in after-hours trading Thursday.

The company reported earnings of $2.91 per share on revenue of $62.9 billion, up 20% from the year-ago quarter. Analysts had expected earnings of $2.78 per share on revenue of $61.57 billion.

iPhone unit sales were practically flat year-over-year, extending the streak of only modest growth in recent quarters. But revenue of $37.2 billion for the quarter topped estimates, benefiting from an average selling price of $793, well above the $751 projection.

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Revenue from Apple’s services segment rose 27% to a record $9.98 billion.

“We’re thrilled to report another record-breaking quarter that caps a tremendous fiscal 2018, the year in which we shipped our 2 billionth iOS device, celebrated the 10th anniversary of the App Store and achieved the strongest revenue and earnings in Apple’s history,” CEO Tim Cook said in a news release.

But Apple shares fell 6.5% to $207.81 in the extended trading session, reflecting investor disappointment over the company’s first-quarter outlook.

Apple projects sales for the all-important holiday quarter of $89 billion to $93 billion, whereas analysts had been calling for revenue of $92.9 billion.

“With revenue at $88.3 billion and 38.4% gross margin in Q1 2018, the company would grow Q1 2019 revenue by only 3%,” Seeking Alpha noted, adding that the “slowing growth is worrying as it could translate into a new growth paradigm.”

As CNN reports, the holiday-season forecast provided “the first real glimpse into expected demand for Apple’s new lineup of iPhones.” The pricier iPhone XS and XS Max went on sale in the final days of the September quarter and the more affordable XR went on sale last month.

A year ago, Apple’s holiday season was boosted by the launch of the priciest model, the iPhone X, in October. CFO Luca Maestri also noted in an earnings call that “foreign exchange headwinds” could have a roughly $2 billion negative impact on Apple’s first-quarter sales.

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