By Emily Bary
Apple Inc. shares gained in after-hours trading Tuesday after the company gave an upbeat forecast for the current quarter, putting the stock on pace to notch a $1 trillion valuation once again.
The tech giant managed to grow revenue slightly in its latest quarter, to $53.8 billion, while topping the consensus view on both sales and earnings. Apple (NAS:AAPL) posted earnings per share of $2.18, down from $2.34 a year prior but ahead of the $2.09 forecast. For the third quarter, it expects revenue of $61 billion to $64 billion, above the $60.9 billion analysts were modeling.
“It was surprisingly good news overall,” said Maribel Lopez, principal analyst at Lopez Research. “Expectations were low but the fact that it wasn’t a seriously down quarter was great news.”
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Apple shares were up 4.2% in after-hours trading. The company is on pace to reclaim its status as a $1 trillion company in Wednesday trading provided its stock price hits $217.34, though that would be based on an older share count. Apple is expected to release an updated filing with the Securities and Exchange Commission late Wednesday that should show a new, lower count based on the company’s recent buyback activity.
Apple may not have a $1 trillion valuation once the updated share count is considered.
Chief Financial Officer Luca Maestri highlighted wearables and other non-iPhone businesses in defending the company’s forecast for the September period, after wearables proved an especially bright spot in June as well. Revenue for the unit rose almost 50% in the latest quarter and helped Apple beat overall top-line expectations.
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The company continued to see declines for its iPhone business in the June quarter, with revenue falling 12% from a year prior, but Chief Executive Tim Cook said that new trade-in and financing programs were having an impact on the segment. Apple saw a year-over-year boost in iPhone sales at its own retail and online stores during the month of June, according to Cook.
Cook also cited positives in the company’s China sales, which fell 4%. He said that trade-ins and other factors, including a government stimulus, helped drive “noticeably better year-over-year comparisons for our iPhone business there than we saw in the last two quarters.” Overall China revenue dropped 22% in the March period and 27% in the holiday quarter.
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“Performance in the quarter exceeded expectations to the extent that trends in China were better than expected,” said D.A. Davidson analyst Tom Forte. “Otherwise, I feel the story is the same, and it’s a good one.” He pointed to 17% sales growth for Apple’s non-iPhone businesses combined as a sign that the company is making good strides in its efforts to diversify the revenue base away from smartphones.
Apple saw services revenue climb to $11.5 billion from $10.2 billion in the latest quarter, which the company called a new all-time record. Lopez is intrigued by the company’s momentum in wearables in conjunction with its services growth, saying that Apple has a “big services opportunity” in health if it can make its devices the product of choice for health-industry players.
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Apple shares have risen 32% so far this year, while the Dow Jones Industrial Average (DOW:DJIA) , of which Apple is a component, has climbed 17%.