Apple’s Q119 earnings: A slew of hidden good news

“Beautiful the results and outlook were not,” D.M. Martins Research writes for Seeking Alpha. “This Tuesday, January 29th, Apple (AAPL) reported one of its least impressive quarter of the past couple of years at least. The company only beat revenue and earnings estimates because the bar had been lowered substantially, following the earnings pre-announcement of early January.”
“To make matters worse, the outlook for fiscal 2Q19 also failed to inspire. Revenue projection at the mid-point of the guidance fell nearly $2 billion short of consensus, and what I calculate to be management’s EPS prediction of $2.33 landed way short of the Street’s average estimate,” Martins writes. “But the less attentive investor may have missed what I believe were a few positive factors that did not make the headlines this Tuesday.”
“Fiscal 1Q19 was the first time that Apple chose to disclose its service margins,” Martins writes. “The segment’s disclosed 62.8% margin fell a hair short of my more optimistic estimate of 65% published here, on Seeking Alpha, back in August. Yet, it (1) grew at a very encouraging pace of 450 bps YOY that surpassed my expectations, and (2) looked robust enough to support my projection that service profits could approach half of Apple’s smartphone profits by the end of fiscal 2020. This quarter, it may have just become easier to convince skeptics of the appeal of Apple’s service business.”
Read more in the full article here.
MacDailyNews Take: Martins also covers the fact that the reasons for Apple’s soft results were mostly confined to China, so when a U.S.-China trade deal finally comes to fruition, holders of Apple shares may stand to benefit.