Good News Already Priced Into Apple

Abhinav Davuluri: Apple reported third-quarter results yesterday that surpassed expectations thanks to strength in the iPhone, services, and wearables segments. In fact, the seasonably weaker third quarter actually turned in record performance, growing 17% year over year. We are maintaining our fair value estimate of $175 per share and narrow moat rating for Apple, and we think that the current iPhone X cycle is more than priced in.

Revenue for the quarter in the iPhone space grew 20%, primarily due ASP increases which we think illustrates the customer's willingness to spend a premium amount for Apple's flagship devices. Going forward, we expect Apple to grow via extraction of value from their current installed base over ongoing unit growth. In fact, the services and wearables segments grew 30% and 60% respectively, which highlights this strategy.

As we look to the September quarter, Apple expects to grow revenue to about $61 billion which would imply 16% year-over-year growth. Going forward we expect the firm to benefit from its place at the top of the food chain in the smartphone market.