Investors were excited about Apple Inc.’s (NASDAQ:AAPL) latest earnings, sending shares up some 7% in Wednesday's trading.
Upon first glance, the numbers weren’t great.. Revenue was $42.4 billion for the quarter, a decline of nearly 15% compared to the same quarter a year ago. Sales of iPads, iPhones, and iMacs all trended lower. Additionally, metrics like gross margins were also also markedly lower.
So why did shares increase?
Investors were excited about the upcoming iPhone 7 release, and it appears Apple is too. The company issued strong guidance for the rest of the year, indicating management is bullish on its newest handset. Additionally, new models of other products are scheduled to hit shelves later on this year including updated versions of Mac computers and iWatches.
Apple also reported a sharp increase in research and development spending, an increase of approximately 25% to hit more than $2.5 billion for the quarter. Investors are hoping this increased R&D spend will lead to greater innovation in the future.
Apple has become a value stock, trading at less than 12 times trailing earnings as investors discount its ability to grow substantially in the future. Thus, all the company really has to do is maintain earnings and investors are happy. A potential bump from a new iPhone release is just gravy.
Even after increasing nearly 7% in Wednesday’s trading, Apple shares are still down nearly 16% over the last year. Shares yield 2.2%.
