There are way more exciting things to Apple (AAPL) stock ownership than a looming 4-for-1 stock split, opines Bank of America Merrill Lynch tech analyst Wamsi Mohan.
To be precise, 10 exciting things in the eyes of Mohan who provided a tidy list on Friday after Apple’s blowout fiscal third quarter earnings release.
“(1) Product revenue growth despite COVID-19 related store closures and stay at home orders during fiscal third quarter reaffirms our confidence in installed base stickiness, (2) stimulus benefit shows continued price elasticity of demand for iPhones, (3) new iPhone delay creates weakness in September but upside to the December quarter, (4) management expects strong non-iPhone product performance to sustain into fiscal fourth quarter, (5) iPad and Mac installed bases attracting new users and growth continues to outperform expectations (6) Services grew slower than anticipated but margins have upward bias, (7) Apple saw new all-time revenue records in the App Store, Apple Music, Video, and Cloud services. (8) capital returns strong (returned $21 billion to shareholders in calendar first quarter with $15.9 billion in buybacks, $3.7 billion in dividends), (9) Apple announced a 4-for-1 stock split, (10) balance sheet remains solid with net cash of $81 billion and strong free cash flow generation,” Mohan writes.
The analyst reiterated his Buy rating on Apple’s stock and moved his price target up to $420 from $410.
SAN FRANCISCO, CA – FEBRUARY 01: The Apple logo is displayed on the exterior of an Apple Store on February 1, 2018 in San Francisco, California. Apple will report quarterly earnings after the closing bell. (Photo by Justin Sullivan/Getty Images)
Apple’s stock rose 7% to a record high Friday, inching the tech giant closer to being the first $2 trillion dollar market cap company. Mohan isn’t alone in his post-earnings optimism on Apple — most analysts have come out Friday with upwardly revised price targets and full-year earnings estimates.
“To me, this was just a massive blowout quarter,” Wedbush tech analyst Dan Ives told Yahoo Finance’s The First Trade.
Blowout indeed.
Apple posted fiscal third quarter earnings some 54 cents ahead of consensus estimates despite the global recession brought on by the COVID-19 pandemic. Total sales of $59.7 billion smashed forecasts for $52.3 billion. Apple saw growth in all its product segments and geographies. Apple CEO Tim Cook credited strength in the iPhone as the main driver for the big top and bottom lines.
“It was better than we thought largely because as we pointed out in the prepared remarks May and June were much better,” Cook told analysts on a conference call of the iPhone performance in the quarter.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.