Lowered Expectations Paved The Way For Apple's Amazing Beat

Apple Inc. AAPL reported its June quarter revenue and EPS ahead of expectations. The current share price represents “an attractive entry point” to benefit from the company’s ability to sustain revenue and EPS growth through FY16, RBC Capital Markets’ Amit Daryanani said in a report. He maintained an Outperform rating on Apple, with a price target of $115.

Apple reported its quarterly revenues and EPS at $42.4B and $1.42, versus Street expectations of $42.2B and $1.40. The earnings beat was driven by 40.4M iPhone units and gross margin of 38.0 percent. Analyst Amit Daryanani mentioned that iPhone SE likely accounted for ~24 percent of total shipments in the quarter, and that the share could decline to ~15 percent in the September quarter.

Related Link: Apple Surprises street, Posts To And Bottom Line Beat

Apple reported a 7 percent sequential decline in blended ASPs to $595, while noting that business had continued to be healthy despite a tough macro environment and channel inventory reduction by 4M units.

Looking Ahead

Apple’s guidance for the September quarter implies ~10 percent sequential growth in iPhone units to ~44-45M. Moreover, the ASP decline should improve heading in the next quarter, backed by new product launches, Daryanani commented.

The analyst enumerated the upcoming catalysts as:

1. iPhone 6 ramps
2. iPad refresh cycle
3. Potential iTV launch or other major product lines
4. Improvements in capital allocation policy

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