Investors and analysts alike responded positively to Apple’s fiscal Q3 earnings report, which reported strong year-on-year growth in both revenue and profits despite near-flat iPhone sales.

Their investment notes highlight what they see as the three biggest positive takeaways …

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PED30 and CNBC both have roundups of analyst commentary on the results, from which we see three common threads.

First, that iPhone sales were solid. Although up only 1% year-on-year, that’s in the context of a mature market with limited growth across the sector as a whole.

BTIG:  iPhone revenue grew by over 20% despite smartphone upgrade rates being at historic lows. We believe there are early signs that upgrade rates might be bottoming, which could provide an additional tailwind.

Bank of America Merrill Lynch: Underlying iPhone demand remains strong.

Piper Jaffray: For the June quarter, iPhone was strong, as Apple shipped a total of 41.3 million units.

Second, as we noted earlier, a high average selling price across the iPhone range.

Goldman Sachs: Apple demonstrated better demand resiliency than we had expected in the Summer as evidenced by an iPhone ASP of $724 which was 5% ahead of our forecast. Guidance was just a touch ahead of our numbers but is consistent with our above Street ASP estimates that are based on a detailed SKU level model. We believe Street forecasts are likely to move up but that ASP expectations probably will remain too low for the December quarter as Apple continues to see support from ongoing mix toward higher average prices.

BMO: We are impressed by the iPhone ASP, which bucked normal seasonality. We had expected more of a hit from price elasticity, but consumers are still buying higher-priced devices.

Third, strong growth in Services income, beating out Apple’s own expectations.

Citigroup: Specifically we highlight our view of ‘Applewood’ which is Apple’s growth in service 31 percent year over year or 28 percent excluding one-time items which now represent 18 percent of Apple’s total revenues.

Wells Fargo: Services momentum continues with adjusted growth at +28% yr/yr and new record revenue for App Store, Music, Apple Pay, AppleCare and iCloud; paid subscriptions +30M q/q to 300M (vs. 185M a year ago).

Almost all analysts have raised their target price for AAPL and are optimistic about the future, leaving Oppenheimer’s Andrew Uerkwitz a lone voice in the wilderness:

We are unconvinced that iPhone can remain competitive among the upcoming wave of flagships. Longer term, we expect niche market segments (IoT) and services (voice) to erode Apple’s smartphone-centric platform advantage.

Mac sales were the one disappointment in yesterday’s numbers, down 13% year-on-year, though even there the news may not all be bad.

Photo: Julian Gigola


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