Apple shares fell on Friday threatening its trillion dollar value. Investors are reacting to a disappointing forecast even though the tech giant topped profit and sales expectations for the quarter.
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The company posted earnings per share of $2.91 on revenue of $62.9 billion, easily surpassing Wall Street’s projections of earnings per share of $2.78 on revenue of $61.57 billion, according to Refinitiv data. Both marks were quarterly records for Apple. The average sale price of iPhones was $793 per device, beating an expected $750.78, suggesting that Apple’s strategy of hiking prices to offset sagging demand hasn’t turned off customers.
Apple’s first-quarter sales guidance hampered the strong fourth-quarter report. The company said it expects revenue of $89 billion to $93 billion, falling slightly short of Wall Street’s expectations.
“We’re thrilled to report another record-breaking quarter that caps a tremendous fiscal 2018, the year in which we shipped our 2 billionth iOS device, celebrated the 10th anniversary of the App Store and achieved the strongest revenue and earnings in Apple’s history,” Apple CEO Tim Cook said. “Over the past two months, we’ve delivered huge advancements for our customers through new versions of iPhone, Apple Watch, iPad and Mac as well as our four operating systems, and we enter the holiday season with our strongest lineup of products and services ever.”
Shares fell around 5 percent in pre-market trading after dropping as much as 7 percent after the earnings announcement. They had gained 29 percent this year.
Unit sales of the iPhone remained flat at roughly 47 million units year-over-year. Apple CFO Luca Maestri said the company will stop reporting unit sales of iPhones, Macs and iPads in the future.
Apple unveiled three new versions of its flagship iPhone last September as it turns to a multi-tiered pricing structure to offset dwindling demand. The models range in price from $749 for the cheaper iPhone XR to $1,099 for the large-screen iPhone XS Max. All three models were on sale as of mid-October.
Fourth-quarter earnings largely excluded the sales impact of the new models, which were released near the end of the period.
Apple Services, which includes the iCloud, the App Store and Apple Music, posted quarterly revenue of $9.98 billion, up 17 percent compared to the same period one year ago.
Quarterly revenue grew 16 percent to $11.4 billion in the key Greater China segment. Cook said Apple is "very happy" with its performance in the region, but noted that a new regulatory structure in China has impacted operations in its App Store. In the Americas, revenue grew 19 percent to $27.5 billion.
Cook said he is "optimistic" that the ongoing U.S.-China trade dispute will have a positive outcome.
The earnings report came days after Apple revealed the latest version of its MacBook Air laptop at an event in New York. Priced at $1,199 for its base model, the laptop has a 13.3-inch Retina display with four times the screen resolution of previous models.
Apple became the first U.S. company to surpass $1 trillion market capitalization last August.