What’s powering Apple shares to a record high

It has been a rough few days for big-cap technology stocks, as shares of names like Facebook, Twitter and Netflix have slumped following disappointing results.

For Facebook, the decline was triggered by the social network’s admission that its focus on data privacy, along with stalled user growth, will weigh on profitability. Pushing Twitter’s stock down was its tepid user numbers and a scandal around political conservatives accusing the platform of bias.

By contrast, strong results from Apple on Tuesday pushed the stock to a record high, raising hopes the iPhone maker will become the world’s first $1 trillion company and restore investor faith in the tech sector.

Apple reported earnings of $2.34 per share, versus the $2.17 expected, on revenues of $53 billion, which also topped estimates of $52.4 billion. The even better news: iPad shipments crushed estimates. Services and wearables revenues were strong as well, while sales in China grew despite the deepening trade rift with the U.S.

In a call with analysts to discuss Apple’s buoyant results, CEO Tim Cook expressed optimism for the subscriptions portion of the services business — he expects that area of the company to double between 2016 and 2020. Apple TV also was singled out for praise as well, with the new 4K comparable model gaining traction ahead of being offered by Charter Communications to its customers.

Apple’s quarter wasn’t an untrammeled success. iPhone shipments missed estimates, falling short of “peak iPhone” in 2015, when the iPhone 6 with its larger screen was a hit. Mac shipments also were down. But the company’s growing revenue was helped by the iPhone X’s higher average selling price relative to the iPhone 6 and 6 Plus.

Overall, investors seem comfortable looking past lukewarm iPhone sales to focus on the revenue benefits of Apple’s ecosystem and the growing importance of its services business. 

Looking ahead, management is optimistic heading into another iPhone refresh later this year. Three new models are expected, with an update to the iPhone X design, a larger iPhone X-like model, and an iPhone 8 replacement that looks like an iPhone X but still includes a LCD screen. 

Will it be enough to restore iPhone sales momentum and reignite investor interest in tech? That’s a tall task, especially with Chinese handset maker Huawei recently capturing a record 15 percent of the global smartphone market according to Strategy Analysts, displacing Apple as the world’s second-largest supplier (behind Samsung). 

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Categories: Technology

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