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Apple Exceeds Expectations With FQ2 Earnings Beat

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Apple (AAPL) has reported solid earnings results for its fiscal second quarter with Q2 GAAP EPS of $2.55 beating consensus expectations by $0.29. Revenue of $58.31B came in marginally higher year-over-year, smashing the Street’s forecast by $3.67B. International sales accounted for 62% of the quarter’s revenue.

Crucially, AAPL also reported that its install base of active users reached an all-time high in all geographic segments as well as all major product categories.

“Despite COVID-19’s unprecedented global impact, we’re proud to report that Apple grew for the quarter, driven by an all-time record in Services and a quarterly record for Wearables,” commented Tim Cook, Apple’s CEO.

Apple also revealed that it generated operating cash flow of $13.3 billion during the quarter, up $2.2 billion over a year ago. In a further encouraging sign, the board of directors boosted the dividend 6% to $0.82 per share and authorized an increase of $50 billion to the existing share repurchase program.

However, iPhone revenue of $29 billion declined 7% year-over-year as both iPhone supply and demand were affected by the impact of COVID-19, CFO Luca Maestri told analysts on the earnings call.

Nonetheless, RBC Capital’s Robert Muller reiterated his AAPL buy rating and $345 price target, arguing that “AAPL continues to grow its install base, which we expect will drive recurring purchases over the coming years as customers become ingrained in the iPhone and greater Apple ecosystem.”

He also believes this massive installed user base sets the stage for robust growth once 5G-enabled iPhones are launched later this year.

Due to Covid-19, Apple declined to provide financial guidance- although it did provide some useful commentary. Looking forward to F3Q20, AAPL expects year-over-year revenue performance to worsen vs. F2Q20 for both iPhone and Wearables, however it expects improvements for iPad and Mac.

Overall, AAPL scores a firmly bullish Strong Buy consensus from the Street. That’s with 27 recent buy ratings, 4 hold ratings and just 1 sell rating. Meanwhile the average analyst price target of $320 indicates 11% upside from the current share price, with shares up just over 2% on a five-day basis. (See Apple stock analysis on TipRanks).

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