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3 Reasons to Be Stupid on Apple Stock



Shares of Apple (NASDAQ: AAPL) rose to a new high over the days following the company's fiscal fourth quarter earnings report earlier this week. Investors were impressed with the company's accelerated top-line momentum and a return to earnings growth. The quarter was driven by improved iPhone sales trends and strong service and wearables momentum.

But what should investors think about the stock at these levels? Although stocks are certainly not the coup they were earlier this year, there is still reason for investors to be bullish on the stock.

Here are three quotes from Apple management during the company's fourth quarter tax revenue that helps make a good bull case for the stock.

  A packed Apple store after the iPhone XS launch in China.

An Apple Store. Image source: Apple.

1
. IPhone Sales Trends Improve

During the 4th quarter, iPhone revenue fell 9% year-over-year. While a contraction in Apple's largest segment continues to weigh on the tech giant's overall performance, Apple CFO Luca Maestri highlighted why investors should be encouraged.

"This [9% year-over-year decline in iPhone revenue] was a meaningful improvement to the 12% decline in the third quarter and a 16% decline in the first half of the fiscal year," Maestri explained. "And we saw great customer response at the launch of the iPhone 11, 11 Pro and 11 Pro Max at the end of the quarter."

Later in the conversation, CEO Tim Cook said early sales trends for the company's latest iPhones led management to believe that year-on-year sales trends will continue to improve throughout the fiscal year 2020.

2. Apple sees strong growth over iPhone

While Apple's iPhone business continued to decline year-on-year in fiscal Q4, investors can't deny how healthy the rest of the company's business is. Cook gave an interesting perspective on Apple's performance in fiscal year 2019 as we looked at business beyond the iPhone.

We introduced new services from Apple Card to Apple TV +, generating over $ 46 billion in total service revenue, setting new annual service records in all five of our geographic segments and leading the service business to the size of a Fortune 70 company. … Our Wearables business showed explosive growth, generating more annual revenue than two-thirds of Fortune 500 companies. And we set an annual Mac revenue record. All in all, except for the iPhone, our revenues increased by $ 17 billion to almost $ 118 billion.

3. Fiscal 2020 looks promising

While Apple ended the second half of fiscal 2019 with weak top line growth, revenue growth was still down throughout the year. Total sales fell from $ 266 billion in fiscal 2018 to $ 260 billion in fiscal 2019. In addition, earnings per share became a saving, to around $ 11.90.

But investors hope fiscal 2020 will mark a period of renewed financial performance. After all, Apple saw accelerated service and wear and tear in fiscal policy in the fourth quarter, and the company's earnings per share returned to growth.

Fortunately, Apple management appears to be on board with a forecast for improving the economy in fiscal year 2020. Said CFO Maestri:

The Guide We Provide [for our first quarter of fiscal 2020] – if you look at it … the centerpiece implies a accelerated growth in performance that we have seen during the fiscal year 2019. … We feel very good … about the iPhone … and we expect an improvement in the rate of growth for the year over the year on the iPhone. Wearables have very, very strong speed. The service portfolio also has incredible speed.

Apple advised that fiscal first quarter 2020 revenue should be between $ 85.5 and $ 89.5 billion. This compares to revenue of $ 84.3 billion in the first quarter of fiscal 2019.

In addition to iPhone trend trends improving in fiscal 2020, this year's results will likely benefit from stronger growth in Apple's two main catalysts: services and wearables. Services are seeing broad-based double-digit growth, and sales of Apple wearables products are seeing explosive growth.


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