Apple Utilizing Cash To Push Stock Up

There were a lot of worries about Apple’s iPhone sales headed into this quarter as a few suppliers missed their estimates because of the iPhone. This caused analysts to lower their estimates for iPhone sales heading into this quarter. Overall, Apple reported decent results, but the iPhone shipments missed even the lowered bar. This was smoothed over by a generous capital return plan which sent shares 3.66% higher after hours on Tuesday. This is causing some to claim Apple has gone from a smartphone company to a financial engineering company. I disagree with that slightly. Apple is simply utilizing the tools it has at its disposal to make shareholders happy. It’s leveraging its past success to push the stock up.

The company needs to deal with the fact that the smartphone market is mature. It’s really tough to find high ROI projects to invest capital in which is why I think this buyback is the right decision. I think the company needs to invest heavily into AI, but there will be capital left over no matter what it invests in unless it makes a major acquisition which would probably be a mistake. Those asking Apple to buy Netflix are completely wrong because Netflix has massive unfunded content costs that Apple won’t want to take on. Furthermore, since Apple hasn’t bought the firm in the past 5 years, it won’t suddenly change its mind.

The Specifics Of The Quarter

Apple beat EPS estimates by 6 cents as it reported $2.73 in earnings. Revenue was $61.1 billion which was better than the $60.82 billion that was expected. iPhone sales were 52.2 million which missed estimates for 52.54 million. To me, this is a big miss because estimates had been falling for the past few weeks. The bar was lowered, but apparently not enough. Fiscal revenue guidance was $51.5 billion to $53.6 billion. The mid point is above the expectation for $51.61 billion in revenues. The net income was $13.82 billion which is up 25% from last year.