Shares of Apple Inc. (AAPL, Financial), the top holding of Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial), traded lower in aftermarket trading on Thursday on the heels of failing to provide revenue and earnings guidance for the June quarter due to coronavirus impact uncertainty.
For the quarter ending March 31, the Cupertino, California-based tech giant reported adjusted earnings of $2.55 per share, outperforming the Refinitiv consensus estimate of $2.26. Revenue of $58.3 billion outperformed the estimate of $54.54 billion.
Revenue in services offset 7% decline in iPhone sales as coronavirus pressures supply and demand
Apple CEO Tim Cook said revenue increased 1% year over year as a new record revenue of $13.3 billion in services and a quarterly record for wearables offset a 7% decline in iPhone sales as the Covid-19 outbreak pressured supply and demand around the globe. Cook mentioned that while strong sales during the first five weeks of the quarter represented a record-setting start, supply and demand for iPhones trended downward for the rest of the quarter as the coronavirus outbreak spread from China to other countries, shutting down retail stores and hindering the supply chain.
Despite the decline in iPhone sales, revenue in services reached a new all-time high, driven by strong performance in a wide range of categories. Chief Financial Officer Luca Maestri said during the earnings call that growth in existing categories like Apple Pay, the App Store, Apple Music and Apple Care continues to have strong momentum while new services like Apple TV continue showing increased customer growth. Maestri said that Apple is on track to double its service revenue from fiscal 2016 by the end of fiscal 2020.
Shares fall as company skips June-quarter guidance
Shares of Apple tumbled over 1% in aftermarket trading as management announced it will not issue June-quarter guidance due to the uncertainty regarding the coronavirus outbreak. According to John Hopkins University statistics, the number of Covid-19 cases has reached over 3.2 million around the globe, with over 1 million cases in the U.S.
Berkshire has not released its March-quarter portfolio as the deadline is 45 days after the quarter ends. As of the December 2019 filing, Buffett’s conglomerate owns 245,155,566 shares, dedicating 29.74% of the equity portfolio to the stake.
GuruFocus ranks Apple’s profitability 10 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank, a high Piotroski F-score of 7 and operating margins that are outperforming over 96% of global competitors.
Other gurus riding Apple’s high profitability include Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio)’s GMO and Bill Nygren (Trades, Portfolio).
Disclosure: The author is long Apple.
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