Apple’s Earnings: What You Need to Know

Apple posted earnings and the market said “iLike.”

Apple’s stock jumped more than 6%, and by Wednesday morning, it traded at more than $157 a share. The news pushed the Dow Jones Industrial Average index (DJIA) over 22,000, a record high.

Why Apple has bite

Apple Inc. is more than just a maker of sleek iPads and flashy iPhones. It’s also one of the most successful companies in the world.

Apple has a market cap of around $800 billion, making it one of the most valuable companies globally, and putting it in a league with Amazon, Google and Microsoft. It’s also sitting on a cash pile worth $261 billion. For perspective that’s about the size of the entire Gross Domestic Product (GDP) of Portugal.

With that kind of cash sitting around, Apple could pay its investors a dividend, plow money back into its operations, or it could easily acquire other companies. To get a sense of the size of the companies it could acquire, it could purchase both car makers Ford and General Motors without having to borrow a dime.

A better-than-expected third quarter earnings report on Tuesday sent Apple stock soaring to a new high.

Here are highlights from the earnings report:

  • Apple reported revenue of $45.4 billion, an increase of 7% compared to the same quarter last year.
  • Its gross margin, which is a gauge of how much profit it makes from sales, came in at the high end of its forecast for the quarter at 38.5%.
  • Unit sales of iPads increased 14% to 11.4 million; by contrast iPhone sales increased a scant 1% to 41 million compared to the third quarter of 2016. Both figures, however, reportedly beat analyst estimates for the quarter.
  • What really sent the stock up, according to some reports, was the company’s guidance, or forecast, for its fourth quarter. Apple forecasts revenue of between $49 billion and $52 billion, an increase of up to 24%. Some financial analysts, weighing in after the call, reportedly said an increase of that size could be driven at least in part by the launch of the iPhone 8, which is expected to retail for $1,000 or more. (Apple executives pointedly avoided talking about the release of a new iPhone in its call with investors on Tuesday.)

Fun fact: In contrast to other companies reporting their second quarter earnings now, Apple’s fiscal year ends September 30. So it’s reporting earnings for the third quarter.

For more on what a quarter is, and what’s in an earnings report, click here.

Key Takeaways:

Apple’s third quarter earnings report was better than expected, fueled by increasing profit margins, and strong sales of its leading products like iPads and iPhones.

The report drove its stock to a record high, and similarly pushed the DJIA into record territory. Investor and consumer attention turns to new product releases–such as the potentially pricey iPhone 8–before the end of the year.






Author:
Jeremy Quittner is the financial writer for Stash.



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