Streetwise for Friday, May 3, 2019

Given the many facets of uncertainty facing the financial markets, does Wall Street still make sense? Absolutely! The opportunities to invest in the shares of quality companies are abundant in any economic environment. 

However, it requires a willingness to make decisions with prodigious confidence – and the fortitude to stick to those decisions despite the entreaties of others. Combine determination with a sense of confidence and you will be successful. Or to quote George Zimmer, founder and former CEO of the Men’s Wearhouse, “I guarantee it.”

Take Apple (AAPL) for example. I continue to be besieged with phone calls and email messages asking whether to buy, hold or sell Apple’s shares. Moreover, perusing a variety of news and financial websites brings forth a cornucopia of bullish articles on the company as well as comparable number of bearish ones. The confusion is no surprise. 

According to the latest data from Nasdaq, there are approximately 24 analysts who currently have written opinions regarding Apple. Of those, 10 have a strong buy recommendation, one has a buy and the remaining 13 have a hold recommendation. There are no sell recommendations; a welcome change from past years.

That there was ever a lack of faith in Apple is beyond comprehension. Yes, there have been some difficult periods. January 3 saw Apple’s shares trading at $141.58. Yet, there are plenty of reasons to be excited about Apple as it continues to build out its services business. 

Not to mention that the shares are up over 35 percent this year and will likely move even higher based on its just released second quarter numbers.

Looking forward, the company is forecasting stronger-than-expected third-quarter revenue. Chief Executive Tim Cook said iPhone sales had started to stabilize in China, a sign that Apple’s price cuts there are helping improve sales.

Apple did point out that iPhone sales saw their steepest decline ever, falling 17 percent in the fiscal second quarter from a year earlier, slightly missing consensus expectations. 

However, the company is looking for a pickup in iPhone sales toward the end of the second quarter, along with growth in sales of services and wearable devices.

Apple said it expects revenues of between $52.5 billion and $54.5 billion for its third quarter ending in June, versus the average consensus estimate of $51.93 billion, according to IBES data from Refinitiv.

Net earnings per share came in at $2.46 for the March quarter, compared with Wall Street’s average estimate of $2.36. iPhone revenues were $31.05 billion, slightly below Street estimates of $31.10 billion, according to data from FactSet.

Services revenue, which includes sales from Apple Music, the App Store and other businesses, reached $11.45 billion, compared with analyst estimates of $11.32 billion, according to FactSet.

Apple has wrestled with a slowdown in iPhone sales in key markets such as China. The slowdown stemmed in part from the iPhone’s high cost and competition from rivals such as Huawei Technologies, Xiaomi, Oppo and Vivo – all of which sell cheaper phones with features like the iPhone.

However, price adjustments in China, lower Chinese taxes on the iPhone, and the trade-in and financing deals Apple offers, helped iPhone sales start to recover toward the end of the quarter. 

Key to Apple’s future growth is its services business. Last month, Apple revealed a new credit card offering and subscription services for news, television and gaming.

Apple indicated that it has 390 million total subscribers to both its own and third-party services on its devices. The company has set a goal of 500 million by 2020.

Apple also exceeded Street expectations with its wearable business, bringing in sales of $5.13 billion as compared to estimates of $4.79 billion, according to FactSet data.

And let’s not lose sight of fact that Apple revolutionized personal technology with the introduction of the Macintosh in 1984. Today, Apple leads the world in innovation, empowering people with breakthrough services. So, what’s not too like?

Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com. Phone calls accepted between 9 AM and 3 PM at (941) 706-3449. For back columns please go to www.RuddReport.com.