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What You Need To Know Wednesday: Apple, Boeing, Facebook And The Fed

Facebook ( FB ),  PayPal ( PYPL ) and Boeing ( BA ) report earnings on Wednesday. And with the market digesting Apple ’s ( AAPL ) earnings miss and a Federal Reserve decision on interest rates, it could be an interesting session. Here’s what you need to know: Facebook Facebook is expected to report earnings of 62 cents a share on revenue of $5.25 billion, both up 48% from last year, when it issues results after the close. Investors will pay close attention to the social networking giant’s ad revenue growth and its number of monthly active users, which jumped 14% to 1.6 billion last quarter. They’ll also want any clues about Facebook engagement amid reports that users are posting less and that younger people trend toward Snapchat. Shares breached support at the 50-day line Tuesday after finding support there the prior two sessions. The stock is now about 7% below a cup-with-handle buy point at 117.09. PayPal PayPal also reports after the close. Analysts project that earnings will grow 20% to 35 cents a share while revenue rises 19%to $2.5 billion. PayPal is working with Facebook, Starbucks ( SBUX ) and other big brands to help make customer transactions more seamless. PayPal stock is trading just below buy range from an alternate entry at 40.03. It’s also trading 6% below its all-time high as it works on a larger consolidation pattern. Boeing Boeing reports in the morning. Analysts see EPS falling 7.6% to $1.82 and revenue down 3.2% to $21.43 billion. Watch for comments on pricing for its commercial jets as low fuel prices allow airlines to fly older planes and seek discounts on new ones. Boeing stock is trading 11% below its 52-week high and hasn’t closed above its 200-day line this year. Fed Meeting A two-day Fed meeting ends tomorrow. The widespread expectation is for rates to remain unchanged for now, but Fed-watchers will pay close attention for clues about when the next rate hike may be. Apple Apple’s disappointing Q2 earnings report after the close Tuesday is likely to have a negative impact on the market. The consumer tech giant’s EPS fell 19% to $1.90 while revenue dropped 13% to $50.6 billion. Both missed Wall Street views, and so did Apple’s Q3 revenue outlook. Apple shares fell 8% in late trading Tuesday, with iPhone chip suppliers also selling off.

Apple Stock Dives After iPhone Sales Fall For First Time Ever

Apple ( AAPL ) late Tuesday reported its first-ever year-over-year decline in iPhone sales and its first quarterly revenue drop since 2003. To soften the blow, Apple increased its dividend and share buyback plan. CEO Tim Cook also said business was “healthy” and that Apple has an “amazing” product pipeline. But the stock still fell nearly 8% in after-hours trading following the earnings release. During the regular trading session Tuesday, Apple stock fell 0.7% to 104.35, closing just above its 50-day moving average. Key iPhone chip suppliers Broadcom ( AVGO ), NXP Semiconductors ( NXPI ) and Skyworks Solutions ( SWKS ) also fell after hours. For its fiscal second quarter ended March 26, Apple earned $1.90 a share on sales of $50.6 billion, both missing views. On a year-over-year basis, earnings per share fell 18.5% while sales dropped 13%. Analysts polled by Thomson Reuters expected Apple to earn $2 a share on sales of $51.97 billion in the March quarter. Apple topped estimates for iPhone sales in the quarter, but still saw a sharp drop. It sold 51.19 million iPhones in fiscal Q2, down 16% from a year earlier. Financial analysts on average were looking for Apple to sell about 50 million iPhones during the March quarter. Greater China sales, including Taiwan and Hong Kong, tumbled 26% to $12.49 billion, after soaring 71% in the year-earlier quarter. For the current Q3, Apple is targeting overall revenue of $42 billion, based on the midpoint of guidance, which is well below estimates. It did not give an EPS target. Wall Street was modeling for Apple to earn $1.76 a share, down 5%, on sales of $47.32 billion, also down 5%, in the June quarter. $50 Billion For Shareholders Apple said its board authorized an increase of $50 billion to the company’s program to return capital to shareholders. Under the expanded program, Apple plans to spend a cumulative total of $250 billion of cash by the end of March 2018. As part of the updated program, the share repurchase authorization was raised to $175 billion from the $140 billion level announced last year. Apple also increased its quarterly dividend by 10% to 57 cents a share. Apple has signaled a hiring slowdown by cutting all of its contract recruiters in recent weeks, VentureBeat reported Monday . It also is laying off some full-time recruiters as well, the news website said. In all, more than 100 people were impacted by the moves. Gross Profit Margins Declining Apple’s gross profit margin dipped to 39.4% in Q2 vs. 40.8% a year earlier. Apple expects its gross margin to decline again in the current quarter, to 37.5%-38%. CEO Tim Cook described Q2 as a “challenging quarter.” “Despite the pause in our growth, our results reflect excellent execution by our team in the face of ongoing macroeconomic headwinds in much of the world and difficult year-over-year comparisons,” Cook said on a conference call with analysts. Apple faced currency weakness in most of its international markets. In constant currency, Apple’s revenue declined by 9% year over year, Cook said. Despite the decline in iPhone sales, Apple’s smartphone business remains “healthy and strong,” Cook said. Apple continues to see a high level of people switching from Android smartphones and other platforms, he said. Apple’s iPhone business accounted for 65% of the company’s total revenue in Q2. Apple also saw declines in its iPad and Mac computer businesses. Sales of iPads declined 19% in units and revenue in Q2. Mac sales fell 12% in units and 9% in revenue in the March quarter. Cook hinted at exciting products ahead. Analysts believe Apple is working on an electric car and an Internet TV service, among other things. “The future of Apple is very bright,” Cook said. “Our product pipeline has amazing innovations in store. … We are forging ahead with important investments in research and development, in our infrastructure and our supply chain. We’ve made 15 acquisitions in the last four quarters to accelerate our product and services road map and we’re always on the lookout for companies with great technology, talent and strategic fit.”

Apple Suppliers Broadcom, Qualcomm Could Battle For Xilinx: Analyst

Apple ( AAPL ) suppliers Broadcom ( AVGO ) and Qualcomm ( QCOM ) were pitted Tuesday in a theoretical battle to acquire Xilinx ( XLNX ) which, late Wednesday, is expected to report flat fiscal fourth-quarter sales along with down earnings. Xilinx stock was up 1.3% to 46.38 on the stock market today . It split the difference between gains by fellow takeover candidates Cavium ( CAVM ) and Marvell Technology Group ( MRVL ), up 3.4% and 0.75%, respectively. MKM analyst Ian Ing lists the trio among small- and medium-size fabless firms subject to acquisition as semiconductor companies scramble to serve the top 20 customers: Apple, Samsung, Cisco Systems ( CSCO ), Nokia ( NOK ), Ericsson ( ERIC ) and China’s Huawei, among others. “Customers prefer the fewest suppliers while preserving multi-sourcing choice,” Ing wrote in a research report. “Fabless companies can improve their operating models with more scale in manufacturing and operations.” Field-programmable gate array (FPGA) makers are proving attractive targets. In December, Intel ( INTC ) completed its acquisition of Altera, an FPGA-maker. For Broadcom, the technology would round out its networking and communications equipment needs. Qualcomm needs to diversify from its core mobile business which is threatened by chipsets and disagreements with licensees in China, Ing wrote. Ing expects Xilinx to tack on $3 earnings per share to 2017 run rates, “should a large acquirer apply scale benefits.” He rates Xilinx stock a neutral and has a 46 price target, noting it’s coming off a 2015 data center and communications trough. For Q4, which ended in December, Xilinx is expected to report flat sales of $566.2 million and adjusted earnings per share of 52 cents, down 10% year over year. For fiscal 2016, the consensus of 21 analysts models $2.2 billion and $2.03, down a respective 7% and 16.5%.