Can Apple keep the tech ball rolling?
Apple will be looking to keep the ball rolling Monday when it unveils earnings in the wake of strong reports last week from Microsoft and Amazon that lifted the Nasdaq tech index and bolstered confidence in turnaround strategies.
After spectacular iPhone shipments in the previous quarter Apple is forecasting a sales pull back, but most analysts still see strength from the category that generates more than 65 per cent of the Cupertino, Ca. giant’s total revenue.
Part of the sentiment stems from growth in greater China, which Cowen & Co.’s Timothy Arcuri said is on pace to become Apple’s largest iPhone market.
He also has a bullish take on prospects on the Apple Watch that just launched in regions including Canada, the U.S. and the U.K.
Arcuri said demand from the “Tesla crowd” should be large enough to allow Apple to offer an upbeat sales outlook for the wearable computer. Apple is counting on new offerings including the watch and its mobile payment system to offset an easing of iPhone sales between upgrades.
According to Apple, its revenues could decline by 26 per cent to 30 per cent in the fiscal 2015 second quarter after the iPhone 6 and iPhone 6 Plus launch in September drove record sales.
Arcuri said he expects $58.4 (U.S.) billion in revenue and a $2.29 per share profit, along with some stock upside “despite high expectations and (foreign exchange) uncertainty.”
If that happens it will build on a Nasdaq rally that saw the tech weighted index trade Friday at its highest intraday level since the dot com bubble burst 15 years ago.
Microsoft and Amazon were key contributors after the companies, which are both looking for new avenues of growth to offset core business declines, topped analyst’ earnings expectations.
Both were buoyed by unexpectedly strong showings in cloud computing while changes to Microsoft’s business eased investor concerns about a further drop in income. Google shares rose on optimism about search ads on mobile devices despite an earnings miss it blamed on the high U.S. dollar.
“I think we are starting to see actual evidence that their strategies are working, especially at Microsoft and Amazon,” said Dan Morgan, a portfolio manager at Synovus Trust Company.
Amazon revealed big profits from public cloud hosting and related services and said growth is accelerating. Investors were focused on the news despite another big loss from the e-commerce retailer, pushing its shares ahead by 14 per cent.
“I think most of us believed that the business [was breakeven at best, and it is surprising that it generates such a significant portion of profit,” said Wedbush Securities Michael Pachter.
Along with losses from the high value of the U.S., dollar spending to improve advertising on mobile devices and investment in video emerged as themes during the tech earnings parade.
Facebook, in its report said it sees video as key while analysts said it is taking some market share from Google’s YouTube. Facebook reported profit that topped estimates but missed on revenue.
Chip maker Qualcomm beat forecasts, but guidance came in light of analyst estimates. Google said its spending slowed slightly while Yahoo reported worse-than-expected profits despite growth from mobile offerings.
“Yahoo is amidst a multi-year transformation to return an iconic company to greatness,” chief executive Marissa Mayer in a statement.
Source: The Star