It was big morning for US tech stocks with results from Apple, Twitter, eBay and AT&T hitting Wall Street with varying impact in late trading or after hours. And the reaction, especially to Apple’s report, won’t bolster investor confidence in the sector or in the wider economy.
With the US Federal Reserve and the Bank of Japan to produce monetary policy decisions tomorrow, the mood on Wall Street has turned negative with the early futures trading showing losses in the wake of the Apple report, reversing the small gains for the Dow and the S&P 500 and leaving the Nasdaq in the red.
It was Apple which investors were looking for and its March quarter figures didn’t disappoint those who had been looking at the company to report weak results. In fact the company missed on most forecasts and is looking at a weak performance this quarter.
Some of the figures Apple reported worse than expected, and the company revealed a boost to dividend and its ongoing share buyback to support the share price. But the shares dropped 7.9% to drop close to $US96, the first time they have been under $US100 since February.
Our market will start with a gain of around 20 points, but it will be the reaction to the Apple figures (and those from Twitter, which were also weak) in Asia and then Europe tonight that will drive market sentiment.
Apple’s quarterly profit fell 22.5% as revenue fell for the first time since 2003 and iPhone sales dropped for the first time ever.
Apple said net income in its fiscal second quarter totalled $US10.52 billion, compared with $US13.57 billion, or $2.33 a share, in the same period a year earlier. Revenue fell 13% to $US50.55 billion from $US58 billion.
Twitter shares fell 11% in after hours trading after it produced weaker than forecast results. eBay did better than forecast and the shares rose 5%, while shares in telco, AT&T traded with a small fall of 1.3% after it did better.
In a sign of the concern at Apple at the weakness of the results the company lifted quarterly dividend and increased its share buyback by $US50 billion to a massive $US250 billion.
Investor attention was on the number of iPhones sold, but after an unbroken eight-year run of growing iPhone sales since its introduction in 2007, Apple said it sold 51.19 million iPhones, down 16.3% from the 61.17 million units it sold a year earlier.
Investors also didn’t like the forecast for the current quarter. Apple said it sees revenue coming in between $US41 billion and $US43 billion. Analysts had forecast revenue of $US47.3 billion. It also projected gross profit margin of 37.5% to 38%, well under the analysts’ figure of 39.3%.
Sales to Greater China, which includes Hong Kong and Taiwan, fell 26% to $US12.49 billion. In the same quarter a year earlier, Apple’s Greater China sales rose 71% – and that’s the cause of the much of the company’s problems. Sales in the Americas fell 10%. The quarterly figures didn’t include sales from Apple’s latest iPhone SE, a cheaper handset with a smaller 4-inch display to replace the iPhone 5S. It began shipping on March 31.
iPad sales fell for a ninth-straight quarter. Apple said it sold 10.25 million iPads during the quarter, down 19%. Mac sales fell 9%. Services and “Other products” – which includes the Apple Watch – were only bright spots, with gains of 20% and 30% year on year. Still, they’re down 1% and 50% from the December quarter.
