Apple shares surge 6 per cent on earnings report and historic $110 billion buyback.

Apple’s (AAPL) stock surged by over 6 per cent in after-hours trading on Thursday after the tech giant surpassed analysts’ subdued expectations for quarterly revenue and announced the largest share buyback program in US history.

While the tech giant reported a 4 per cent revenue decline to $90.75 billion compared to the previous year, it managed to slightly beat the consensus estimate of $90.3 billion. Earnings per share also came in higher than expected at $1.53, surpassing the $1.50 estimate.

Apple made a splash by announcing a massive $110 billion (£87bn) share buyback, the largest in its history, and a 4 per cent boost to its quarterly dividend.

“We raise our fair value estimate for wide-moat Apple to $170 per share from $160, behind higher expectations for iPhone and services revenue in the medium term. Apple’s March-quarter results were aligned with our model, although June-quarter guidance was below our rosy expectations. We expect a soft fiscal 2024 for Apple, driven by headwinds to iPhone revenue in China and slower iPhone refreshes globally,” said William Kerwin, Equity Analyst at Morningstar.

“However, we raised our forecast for iPhone revenue growth in fiscal 2025 in anticipation of a stronger refresh cycle for the iPhone 16 in fall 2024 (Apple’s first fiscal quarter.) We expect Apple’s generative artificial intelligence product announcements this year will drive improved growth next year. Shares rose after hours in line with our valuation raise, which we attribute to lower iPhone downside out of China than investors may have feared. Shares look fairly valued to us.”

However, not all the numbers were rosy. iPhone sales dropped by 10 per cent to $46 billion, and sales in China slipped to $16.3 billion against $17.8 billion a year ago.

This downturn marked the sharpest decline since the third quarter of 2020 when the pandemic caused disruptions in iPhone 12 releases.  

Sales in the wearables segment, covering products like Apple Watches and AirPods, also fell short of expectations, landing at $7.91 billion compared with analyst estimates of $8.08 billion.

Aside from financial challenges, Apple faces scrutiny from regulators and struggles to keep up with rivals like Microsoft and Google in AI development.

The company’s ambitious electric car project was recently shelved, and its mixed-reality headset, the Vision Pro, hasn’t gained significant traction in sales yet.

Nonetheless, Apple remains optimistic, forecasting new product launches to counter its rocky start to the year.

It expects modest growth in hardware and strong performance in services, with services revenue hitting a record $23.9 billion, exceeding analyst forecasts of $23.27 billion.

Following the earnings report, Apple’s shares surged by as much as 7.9 per cent in extended trading, a much-needed boost after a 10 per cent decline so far this year.

This contrasts sharply with its impressive 48 per cent surge in 2023, marking its best annual increase since 2020.

“We maintain our NEUTRAL rating and $200 price target following a solid quarter, highlighted by a beat on top and bottom-line results, along with better than feared performance out of Mainland China,” said Alex Platt, Research Associate at D.A. Davidson.

“Looking forward to the coming weeks, we expect Apple to deliver meaningful announcements surrounding the implementation of generative AI across their ecosystem, which we believe can help catalyze a major upgrade cycle within product categories such as the iPhone. Additionally, Apple announced an increase to its quarterly dividend and as well as $110B in share repurchases.”

Source: https://uk.finance.yahoo.com/news/apple-shares-surge-6-per-050059277.html