Apple Posts Most Profitable Quarter in History

By Sarah Roden

Wall Street waited patiently for Apple Inc. AAPL to deliver their first quarter results for the fiscal year 2015 on January 27, but the public was still amazed by the ground-breaking results. Earnings from Apple’s report easily dwarfed figures from any other company in history.

Highlights from Apple’s Q1 report include record quarterly revenue of $74.6 billion, a 30% year-over-year increase, and crushing analyst estimates of $67.3 billion. The tech giant posted earnings per share of $3.06, marking an overwhelming 47% year-over-year increase and easily surpassing estimates of $2.58. These figures make Apple’s Q1FY15 the most profitable quarter of any company in history.

The iPhone stole the show as Apple sold 74.47 million iPhone units in the quarter. In addition, Apple saw a huge increase in business from China, citing $16.45 billion in sales from China and Taiwan; a 70% year-over-year increase and contributing to 22% of Apple’s total sales.

Apple reached another impressive milestone this quarter: selling its billionth iPhone. Apple sold its billionth iPhone on November 22, which will be kept in the company’s California headquarters as a trophy.

Looking forward, Apple expects to post revenue between $52 billion and $55 billion for the second quarter of 2015. Investors are also excited to see what the Apple Watch will bring.

On January 28, analyst Michael Walkley of Canaccord Genuity reiterated a Buy rating on AAPL with a $135 price target.

Walkley attributed the “record iPhone 6 upgrade cycle” to two reasons. First, “the iPhone 6 and 6 Plus smartphones are generating very strong replacement sales for existing iPhone consumers who slowed the pace of iPhone upgrade purchases during the relatively disappointing iPhone 5 and 5s product cycles.” Second, Walkley added, “we anticipate F2015 high-end smartphone market share gains for Apple due to surveys indicating a greater mix of Android smartphone consumers switching to the iPhone 6 smartphones than the iPhone 5 series launches primarily due to Apple entering the larger screen smartphone market segment.” The analyst concluded that the iPhone trends “[bode] well for future strong earnings and cash flow generation.”

Michael Walkley has rated Apple 70 times since September 2010, earning a 76% success rate recommending the stock and a +27.9% average return per AAPL recommendation. Overall, Walkley has a 72% success rate recommending stocks and a +24.4% average return per recommendation.

Separately, analyst Bill Shope of Goldman Sachs reiterated a Buy rating on AAPL and raised his price target to $130 from $124. 

Shope notes that Apple’s performance from this quarter puts a “dent in the bear case,” which centers on concerns that “product momentum [will] not easily translate to emerging regions due to its premium price points, aggressive local competitors, and limited iOS ecosystem value in foreign markets.” Additionally, Shope notes that “much of [the] upside [from iPhone] came from growth in the installed base as opposed to just replacements.”

Bill Shope has rated Apple 56 times since April 2009, earning an 88% success rate recommending the stocks and a +33.4% average return per AAPL recommendation. Overall, Shope has a 75% success rate recommending stocks and a +19.3% average return per recommendation.

On the other hand, analyst Andy Hargreaves of Pacific Crest reiterated a Sector Perform rating on AAPL.

Hargreaves does not think that the record-breaking figures in the Q1 report will be sustainable in the future, noting “We estimate [that the pace of iPhone upgrades in Q1] accounted for at least 10 million incremental iPhone units in the quarter, which was augmented by record share gains from Android. We do not believe either of these metrics will repeat themselves in the next iPhone cycle, which creates a difficult comparison and the potential for declining iPhone units in F2016.” The analyst continued, “Absent unexpected success in new products, a decline in iPhones would also likely drive down Apple’s total revenue, profit and trading multiples.”

Andy Hargreaves has rated Apple 39 times since February 2009, earning a 67% success rate recommending the stock and a +28.3% average return per Apple recommendation. Overall, Hargreaves has a 65% success rate recommending stocks and a +34.1% average return per recommendation.

On average, the top analyst consensus for Apple on TipRanks is Moderate Buy.