Analyst Tom Forte shares his take on Apple Q2 earnings

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on May 4, 2023
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  • Apple Inc reports strong results for its second financial quarter.
  • D.A. Davidson analyst Tom Forte continues to rate "AAPL" at buy.
  • Apple stock is already up about 35% versus the start of 2023.

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Shares of Apple Inc (NASDAQ: AAPL) are up 2.0% in extended hours after the tech behemoth reported market-beating results for its second financial quarter.

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Apple stock up on iPhone sales

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iPhone brought in $51.3 billion worth of sales in Q2 – up 1.5% versus last year and beating Street estimates by a whopping $2.6 billion, as per the earnings press release.

CEO Tim Cook attributed that strength partially to the reopening of China. Reacting to Apple Q2 earnings, D.A. Davidson analyst Tom Forte said:

Good news is that sales shifted into March quarter instead of being lost entirely. So, there’s opportunity for more sales to be shifted into June quarter. There could be additional momentum on the Chinese reopening trade.

Year-to-date, Apple stock is now up about 35%.

Update on buybacks and dividend

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On the downside, Mac revenue tanked 31% on a year-over-year basis to $7.2 billion versus $7.8 billion expected.

But that was offset by the company’s services business that grew 5.5% to $20.9 billion – roughly in line with consensus. On Yahoo Finance Live, Forte added:

Reopening in China had Apple well positioned from supply and demand standpoint. I also think they got an added boost from foreign exchange rates. So, good results from Apple.

Also on Thursday, Apple Inc authorised another $90 billion in stock buybacks and dividend payments. It also raised dividend to 24 cents a share – a 4.0% increase.

Apple Q2 earnings snapshot

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  • Earned $24.2 billion versus the year-ago $25 billion
  • Per-share earnings (EPS) remained unchanged at $1.52
  • Revenue declined a bit under 3.0% to $94.8 billion
  • Consensus was $1.43 a share on $92.9 billion revenue
  • iPad slipped roughly in line with estimates to $6.67 billion
  • Other products revenue was essentially flat at $8.76 billion
  • Gross margin improved 20 basis points in Q2 to 44.3%

Should you buy Apple shares here?

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Last month, Apple launched a high-yield savings account to expand its footprint in financial technology (find out more) but Forte is not very bullish on that.

The multinational is committed to shifting production from China to India. According to the D.A. Davidson analyst, though, the switch will likely take a long time.

On a relative basis, there are more consumers in China with high discretionary income today than India. So, they need emerging market of India to grow so more consumers there can afford Apple products.

Nonetheless, he stuck to his buy rating on the stock after Apple Q2 earnings and attributed the muted after-hours response to the fact that shares have already performed incredibly well since the start of the year which means much of the good news is already factored in.

Eventually, he agreed, the Nasdaq-listed firm will need products like the AR/VR headset or an autonomous car to retain the strength of Apple stock.

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