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Did Apple Shares Really Deserve A 6% Rally From That Report?

Apple Inc. (NASDAQ:AAPL) posted its latest quarterly results late Tuesday this week, and the reaction from the market was truly historic.

Apple shares surged 6.1% in the session following the release. It can’t be overstated how huge of a move that was for a stock of Apple’s size. You simply don’t see a $700 billion company’s shares explode in either direction like that very often (granted, Apple is the only $700 billion company in existence, but you get the point).

That’s not the only remarkable part about Apple’s massive rally, either. With over 111 million shares changing hands on Wednesday, at an average price around $125 per share, we saw nearly $14 billion in dollar volume traded in a single day. That’s roughly equivalent to the GDP of Jamaica. In a single 7.5 hour trading session.

So, why’d the stock move so much? And was the reaction even warranted? Here are the key tidbits we pulled from the release. You be the judge.

1. iPhone Sales Bounced Back

With 78.3 million iPhones shipped in the all-important holiday quarter, Apple erased a troubling trend of year-over-year sales declines. The iPhone 7 remains popular, but tens of millions of users are still waiting in the wings for the iPhone 8, which is rumored to be coming this year.

To sustain the iPhone sales momentum, Apple needs a truly special upgrade next time around.

2. iPad Looks Very Weak

Apple has a lot of competition in the tablet space, and it shows. Annualized average iPad sales (over a rolling 12-month period) have plunged 43% from their peak back in 2014 to where they stood at the end of 2016. Same deal with revenue, which has fallen a similar amount on the same basis.

The tablet market is saturated, and with everyone carrying around giant-screened phones, they might becoming superfluous for a large amount of people. Plus there’s less reason to upgrade frequently.

3. Macs Are Doing Well

Mac sales rose to 5.4 million units last quarter, beating out analysts’ view for 5.2 million. While the new MacBook Pro has received mixed reviews, there’s no question Apple’s laptops still enjoy a sterling reputation — not to mention a premium price. And In Apple’s world, pricing power is everything.

4. The Apple Watch Is The Best House In A Bad Neighborhood

Smartwatches are still a new and unproven product category, but Apple sells way more of their Apple Watches than any other smartwatch maker. In fact, it’s the second highest selling watch of any kind, period. There’s just that little question of whether or not smartwatches will even exist in five or ten years.

Will more people catch on and want a tiny computer strapped to their wrist? It seems unlikely at this point, but if they do, Apple will be there waiting.

5. Services Are Very Underappreciated

Apple’s Services segment runs the gamut from its 30% cut of App Store sales, to Apple Music, to iCloud fees. Services brought in a record $7.2 billion in revenue in the latest quarter, proving that Apple isn’t just a hardware company. With hundreds of millions of users around the globe, Services may just represent the company’s largest growth opportunity.

6. Guidance Really Wasn’t Good

Apple forecast Q2 revenues ranging from $51.5 to $53.5 billion, which would badly miss Wall Street’s $54.05 billion estimate. The company used to purposely aim low in its outlooks, but it generally did away with that practice a few years ago.

For whatever reason, Wall Street completely disregarded this important bit of info. Does Apple know something we don’t, or was it’s 6% surge yesterday truly warranted?

Only time will tell.

Apple Inc. (NASDAQ:AAPL) was trading at $128.18 per share on Thursday afternoon, down $0.57 (-0.44%). Year-to-date, AAPL has gained 10.67%, versus a 1.88% rise in the benchmark S&P 500 index during the same period.

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