Apple, Inc.
Ives Pleasantly Surprised: "Gold-medal performance in our view," said Wedbush analyst Daniel Ives in a post on X, formerly Twitter, referring to Apple's performance in the third quarter. In a note released immediately after the results, Ives said revenue exceeded expectations and iPhone sales also came in above the consensus.
"We were not expecting anything special this quarter," Ives said, adding that iPhone 15, however, remained strong.
China revenue was down 6.5% year-over-year, and the decline was a more modest 3% excluding currency headwinds, the analyst said. "We believe growth in China will return to the Cupertino story in the September quarter," he said.
"Overall this was a flex the muscles moment for Cook & Co. despite negative sentiment building around the iPhone growth story."
Ives also highlighted Services revenue which grew in line with the guidance for double-digit growth. He sees the segment remaining the "bedrock of growth in the Apple story."
The analyst commended the healthy gross margin, at 46.3%, which was a tick higher than what the Street was bracing for. He attributed the strength to increasing ASPs continue to drive margins up.
Weighing in with his thoughts on the conference call, Ives said, "This was an upbeat conference call in our view as stronger
September guidance is just the opening act for the main event which is an AI-driven super cycle starting with iPhone 16 launching in mid-September."
The analyst expects AI technology that will be introduced into the Apple ecosystem will bring monetization opportunities on both the services as well as hardware products, adding $30 to $40 per share. Apple guided revenue growth to be similar to the June quarter levels, ahead of the 4.3% expected by the Street and Services revenue growth will also be similar to the levels seen in the June quarter, he noted.
"Our view is betting against Cook and Cupertino into an AI-driven supercycle led by iPhone 16 and Apple Intelligence is the wrong move for investors as the renaissance of growth returns to the Apple story," he added.
Wedbush maintained an Outperform rating and lifted the price target for the stock from $275 to $285.
Overall Solid Quarter, Says Munster: Apple beat earnings and revenue expectations by 4% and 1.6%, respectively, said Deepwater Asset Management Managing Partner Gene Munster on X. "Overall it was a solid quarter," he said.
China revenue fell 6.5% year-over-year versus the Street forecast for a more modest 0.7% drop, he said. The non-China business therefore has done the heavy lifting with 7% growth compared to the overall growth of 5%, he said. CEO Tim Cook said on the call that China softness was in part due to the country being the most competitive market in the world and the macro environment, he noted.
The tech venture capitalist shrugged off the China weakness as he noted that this geography faced a tougher comparison. Going forward, things get easier for Apple in the country, he added.
"Apple's flywheel is flying," said Munster, referring to the active installed base that hit a new record.
Munster termed the company's guidance as solid, with the September quarter revenue guidance 0.5% above the consensus. The expectation among some that the new iPhone cycle which starts in the back half of the month of September would have inched guidance even higher is noise, he said.
"Big picture is it's all about FY25 and FY26 iPhone, Mac and iPad powered by Apple Intelligence," the analyst said.
Delving into the AI features' launch timeline, Apple reiterated its previous comments from the June Worldwide Developers' Conference about a staggered launch, Munster noted. The launch will start with developers followed by a partial rollout, some features like languages happening over the course of the year and ChatGPT integration by end of the calendar year, he said, citing management commentary.
Apple shares, which closed Thursday's session down 1.68% to $218.36, were last seen trading up 0.68% at $219.84 in the after-hours session, according to Benzinga Pro data.
