Analysts say low Q2 guidance already baked into stock price, happy with Apple’s cash plans

AAPL’s share price has held steady in after-hours trading despite low guidance on Q2 revenue. Analysts say that the stock had already dropped in response to reports of reduced iPhone X production targets, and the Q2 guidance was thus in line with expectations …

AAPL at one point climbed 3% in after-hours trading, before falling back. At the time of writing, it was wavering around +0.7%.

Update: Stock was down 2.5% after market opening.

Reuters reports that the high average selling price of iPhones coupled to the company’s plans for its overseas cash stockpile eased concerns among investors.

Thrivent Financial analyst Peter Karazeris said the low revenue forecast had been expected by many analysts and investors following a string of “credible reports” that Apple had cut parts orders.

“I’m happy we’ve gotten the bad news that I was expecting guided into the stock. It was probably a little overbaked,” he said. “Now we’re focusing on metrics that really matter like free-cash generation and shareholder returns.” Thrivent holds Apple shares.

Investors were also happy with Apple’s plans to reduce its net cash balance to zero.

“Over time, we are trying to target a capital structure that is approximately net neutral. We will have approximately the same level of cash and debt on the balance sheet,” Apple’s chief financial officer, Luca Maestri, told Reuters in an interview.

“We’re going to take that balance down from $163 billion to zero,” Maestri said, referring to Apple’s current level of cash net of debt […]

The cash plans are a “pleasant surprise,” Brian Colello, an analyst at Morningstar Inc, said. “This goes a bit against Apple’s historically conservative capital structure.”

Trip Miller, managing partner at Gullane Capital Partners and an Apple investor, said the move to a level balance sheet was good news. “Let’s face it, this cash has been doing nothing for us over the last six years,” he said.

Apple did not reveal precise plans for the cash, but it is widely expected to boost its stock buyback program, which effectively makes existing shares worth more.

Photo: Reuters

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