Apple’s (NASDAQ:AAPL) strong quarterly earnings guidance sets the expectations for consistently strong growth ahead. With the iPhone 11 refresh this time, odds are better that the upgrade cycle will find more success than past updates. Users have many reasons to update to the latest device. And even if sales stall, Apple proved once again its service revenue will more than cover for the shortfall.
Apple reported Q4 sales rising by 2%. Wearables, Home and Accessories revenue beat the $5.94 billion consensus at $6.5 billion. Despite all the U.S./China trade troubles, Greater China revenue dipped only slightly, to $11.2 billion, compared to $11.4 billion Y/Y.
Apple issued revenue, gross margin, and operating expenses above the consensus estimates. Costs for content may grow at a faster rate as Apple commits to the TV+ streaming service. This drag on profits is necessary to build the subscription base. Looking ahead, the growth in iPhone 11 sales and the introduction to free streaming will increase user stickiness to the ecosystem. Apple’s services revenue will have a better chance to keep growing with this trend.
Android device suppliers, competitors to the Apple ecosystem, are not taking much market share from Apple. Device prices are not low enough to convince Apple users in need of an upgrade to switch.
Your Takeaway
Apple stock is likely to continue its uptrend until at least its next earnings report.
Tech Insider
