Apple Inc. (AAPL): The iPhone 6 and 6 Plus Are Big Hits

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October 21, 2014 1:29pm NASDAQ:QQQ NYSE:IYY

in focus spotlightApple Inc. (NASDAQ:AAPL) fell 0.05 percent from Monday, Oct. 13, to Monday, Oct. 20, but it is up 2.33 percent as of 11:20 this morning due to positive reaction to yesterday evening’s earnings report.

Earnings Beat Expectations

Apple reported earnings yesterday. Its fourth-quarter profit rose 13 percent compared to a year ago, thanks to strong sales of the new iPhones. Earnings were $1.42 per share, up from a split-adjusted $1.18 last year. Revenue rose 12 percent — $42.12 billion, up from $37.47.

These numbers easily beat analyst estimates of earnings of $1.31 per share and revenue of $39.88 billion.

iPhone 6 and 6 Plus Are Big Hits

Apple also reported that it sold 39.27 million iPhones, up from 33.79 million a year ago, beating analyst predictions that it would sell 37.8 million phones. The iPhones, which had explosive sales right out of the gate, selling 10 million in the first weekend, are still in strong demand, with customers currently having to wait at least a week.

Cantor Fitzgerald raised its price target this morning from $123.00 to $143.00 and maintained its “Buy” rating. Morgan Stanley raised its price target from $110.00 to $115.00.

iPad Sales Down

Apple reported selling 12.3 million iPads for the quarter, down from 13.1 million a year ago. Several theories might explain the drop in iPad sales. (1) Consumer demand for tablets may be dropping as smartphones get more powerful and laptops get lighter; or (2) lower-priced tablets from other companies may be cutting into Apple’s market share; or (3) consumers planning to buy iPads may be waiting for the recently unveiled new version.

Guidance for Next Quarter

Apple announced guidance for first quarter 2015: revenue of $63.5 to $66.5 billion, gross margin of 37.5 to 38.5 percent, and operating expenses of $5.4 billion to $5.5 billion.

Share Buybacks

Apple announced it bought back $17 billion worth of shares during the fourth quarter, reducing the number of shares by 6 percent, compared to a year ago.

Apple Pay

Apple Pay became available yesterday at some stores for users of the iPhone 6 and 6 Plus. Early reviews were positive, with both consumers and store clerks saying that Apple Pay worked better than Google (NASDAQ: GOOG) Wallet.

Updated iPads, iMac

Last Thursday, Apple unveiled a new, more powerful iPad Air 2 — the sixth-generation iPad — that is 18 percent thinner than its predecessor and is the thinnest full-sized tablet in the world. Like the new iPhones, the iPad Air 2 has a sensor to read fingerprints instead of requiring a password. The screen has less glare, and the tablet can use Apple Pay for online purchases.

Apple also unveiled an iPad Mini 3, which is much the same as the previous model except for the new fingerprint reader, and a new 27-inch iMac with a very sharp 5K retina display.

iShares Dow Jones U.S. ETF – IYY

To invest in AAPL while reducing the risk of single-stock investing, consider an ETF such as IYY, which has AAPL as its largest holding.

By Diana Primavera, ETF Daily News

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