Apple shares jump as earnings clear lowered bar

After warning that its fiscal first-quarter results would fall short, Apple followed through with today’s earnings release, which showed both lower revenues and profits. Still, its shares jumped after the results cleared Apple’s lowered bar for the three months ending in December.

“The stock has priced in a great deal of bad news and may well be able to weather the storm in tonight’s earnings report, said Art Hogan, chief market strategist at National Holdings Corp. “I suspect that we get a ‘sell-the-rumor, buy-the-news reaction.'”

That prediction proved accurate, at least at first blush, with Apple shares jumping in after-hours trade, lately up close to 4 percent.

Apple was among the large-cap tech stocks hit after chipmaker Nvidia on Monday cut its forecast for the fourth quarter, also citing slackening demand in China. Intel voiced a similar line last week in missing expectations for its fourth quarter.  

Apple is the latest multinational to point to an economic slowdown in China for weakened demand for its products.

The tech giant posted quarterly revenue of $84.3 billion, a decline of 5 percent from the year-ago quarter, with international sales accounting for 62 percent of its revenue. Profits slipped to $19.87 billion. Earnings per share came to $4.18, a penny above the consensus forecast.

The company reported iPhone sales fell 15 percent from the year-earlier period, while revenue from all other products and services increased 19 percent. Services revenue rose 19 percent during the year to $10.9 billion.

With iPhone weakness well-known, investors were focused on Apple’s services, where the company reported gross margin for that business for the first time, UBS analyst Timothy Arcuri and Munjal Shal wrote in a client note.

In a Jan. 2 letter to investors, Apple CEO Tim Cook said the company was lowering financial guidance for the fiscal first quarter ending Dec. 29, projecting revenue of about $84 billion. 

“We did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook wrote. “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

China is especially significant for Apple, given it garners about a fifth of its sales from the world’s second-largest economy, and its iPhones are assembled there.