Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Apple Stock Jumped Today

By Daniel Sparks - Updated Apr 24, 2019 at 10:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Apple's services business has investors upbeat.

What happened

Shares of tech giant Apple ( AAPL -1.17% ) popped on Wednesday, rising as much as 5.6%. As of 11:03 a.m. EST, the stock was up 5.1%.

The stock's gain follows Apple's fiscal first-quarter earnings release. While the company's earnings per share and revenue for the quarter beat consensus analyst estimates, the main reason for the Street's bullishness toward the stock on Wednesday is likely news from the company's services segment. Apple revealed the segment's gross margin for the first time -- and it's impressive.

Apple CEO Tim Cook greets a customer at an Apple Store on the iPhone X launch day

Image source: Apple.

So what

For its fiscal first quarter of 2019, Apple reported revenue of $84.3 billion, slightly ahead of a consensus analyst estimate for revenue of $84 billion but down from revenue of $88.3 billion in the year-ago quarter. Notably, however, Apple had already told investors in a Jan. 2 letter to shareholders that its revenue for the period would be close to $84 billion. Earnings per share for the period were a record high, at $4.18. This was ahead of a consensus analyst forecast for $4.17.

Apple said its services segment, which boasted 19% year-over-year revenue growth during the quarter, had a gross margin of 63%. This easily trumps Apple's consolidated gross margin of 38%. Such a hefty gross margin for its fast-growing services segment bodes well for the company's ability to make up for headwinds in its iPhone business.

Now what

Apple expects its year-over-year decline in revenue to persist in its fiscal second quarter, as the iPhone segment is expected to continue weighing on the company's overall performance. Management guided for revenue during the period to be between $55 billion and $59 billion. This compares to revenue of $61.1 billion in the company's second quarter of fiscal 2018.

Apple's strong services segment likely gave investors incremental confidence in the company's ability to navigate further challenges in its iPhone segment, which saw revenue decrease 15% year over year in its fiscal first quarter.

Check out the latest Apple earnings call transcript.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$161.84 (-1.17%) $-1.92

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.