Wall Street Reports Week: Apple (AAPL) Gains 6% Following Earnings Report – Better Than Feared Returns in Services Unit

TL: DR

• Apple beats analysts prediction by 3% on Service business gross margin
• Service business growth occurs as device sales continue to stagnate
• Focus on software business brings in new profits, but also attracts new competition

Reports week tends to bring a lot of excitement and volatility to the stock market. Much like the Crypto markets, company reports can create the bullish or bearish sentiment. We’ve previously highlighted how there are specific connections between the stock market and crypto. Times like Reports week are generally we these correlations can manifest themselves.

Apple’s quarterly earnings report revealed some positive news for its services business, which includes products like iTunes, Icloud, AppleCare, Apple Music, and Apple Pay. In their first quarter of 2019, Apple services unit produced a gross margin (percentage of revenue left after subtracting the costs of goods sold) of 62.8 percent, beating analysts predictions by ~3% (analysts predicted 59% gross margin for services). The company’s overall gross margin was margin was 38 percent.

The report shows a ~4% increase in gross margin for their services business when compared to last quarters number, which was 58.3%. The company also reported a 19.1% increase in services revenue ($10.9 billion). With this positive news, Apple has stated plans to double their 2016 services revenue ($24.3 billion) by 2020.

Apple’s services business seems to be making up for their stagnating iPhone sales as the smartphone market continues to get more saturated.  The company announced plans in November to no longer disclose sales of iPhones, iPads, and Macs, a clear sign that they have long passed the glory days where devices were a primary revenue driver and continually well-performing a component of the business.

However, with an increased focus on Software, the company’s’ main competitors will now shift from Samsung, Android and Huawei to Google (also owners of Android), Microsoft, Dropbox, and Spotify.

Other key figures for this quarters earning reports included a 40% increase in Apples Cloud service revenue year over year, a more than 100% increase in Apple Pay transactions (now 1.8 billion) and Apple News acquiring more than 85 million monthly active users.

Upcoming major reports after market close (Wednesday Jan.30)

• Facebook Inc
• AT&T Inc
• Microsoft
• Boeing Co
• Mcdonalds Corp

AAPL Stock Data

AAPL stock reacted positively to the earnings report. After yesterday’s trading, closing at $154.68, the stock is currently trading at $165.30, a daily increase of nearly 7%. Here is a technical analysis of AAPL: