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Apple (AAPL) Q2 2018 Results - Earnings Call Transcript

May 01, 2018 8:35 PM ETApple Inc. (AAPL)52 Comments
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Apple, Inc. (NASDAQ:AAPL) Q2 2018 Earnings Call May 1, 2018 5:00 PM ET


Nancy Paxton - Apple, Inc.

Timothy Donald Cook - Apple, Inc.

Luca Maestri - Apple, Inc.


Shannon S. Cross - Cross Research LLC

Kathryn Lynn Huberty - Morgan Stanley & Co. LLC

Michael J. Olson - Piper Jaffray & Co.

Amit Daryanani - RBC Capital Markets LLC

Steven Milunovich - UBS Securities LLC

Brian J. White - Monness, Crespi, Hardt & Co., Inc.

Wamsi Mohan - Bank of America Merrill Lynch

Jim Suva - Citigroup Global Markets, Inc.


Good day everyone, and welcome to the Apple Incorporated Second Quarter Fiscal Year 2018 Earnings Release Conference Call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Nancy Paxton, Senior Director of Investor Relations. Please go ahead, ma'am.

Nancy Paxton - Apple, Inc.

Thank you. Good afternoon, and thanks to everyone for joining us. Speaking first today is Apple's CEO, Tim Cook, and he'll be followed by CFO Luca Maestri. After that we'll open the call to questions from analysts.

Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including without limitation those regarding revenue, gross margin, operating expenses, other income and expense, taxes, capital allocation, share repurchases, dividends and future business outlook. Actual results or trends could differ materially from our forecast.

For more information, please refer to the risk factors discussed in Apple's most recently filed periodic reports on Form 10-K and Form 10-Q and the Form 8-K filed with the SEC today, along with the Associated Press release. Apple assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

I'd now like to turn

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Comments (52)

Probably until the next recession hits but that may not be long off. The point is they would do much better if they had a clue. Good performance could easily be great performance.
With the selloff in Feb. AAPL had to try hard to pay $171.53 a share on their repurchases. These guys are capital allocation idiots.
Agree but it will look like a bargain in a year.
Simple math
AAPL sold the equivalent of 585,000 iphones every day for 90 days in the quarter totalling 52 million iphones.
Of the installed base of 1.3 billion Appleites only 4% either bought or upgraded their iphones.
Since many are holding their older iphones longer most will eventually upgrade.
Cloud, watches and subscriptions, etc. are growing exponentially year over year.
Why can't AAPL get to 225-250 by the end of 2019? It sure can.
Bill West profile picture
Paging Tony Sackanachos, Colon Gillis and Michael Blair to the White Courtesy Telephone for a message....!!!
Their new price target is $161. How do they have any clients?
Barclays lowered their price target 2 days ago and raised it today. Really? How are any of these firms better than your typical investor?
Guess the battery issue didn’t hurt them too bad. Their revenue is going to take off in the second version of the X and X plus. Plus big things coming with Cook saying pipeline as strong as it ever was.
I am also expecting huge increases in sales of the watch after the next iteration.
lost money profile picture
It is seriously criminal and shameful how all the smart people on Wall street injected all the negative bad news into Apple just before the earnings call... just like the last time and many times before... I called them all on it ...bought more apples and.... the crime continues on wall street.....
RegularGuy28 profile picture
$AAPL is the only company I would trust storing my health data outside my doctor.
Tony at Bernstein just did a channel check. X sales WAY down for Q 3. Better sell now! :). It is time for SA to tell everyone an analysts last 3 predictions on a stock when they make a new prediction in said stock. Why are they not held accountable?
Effective tax rate of 14.5%. That is insane. With corporate tax cuts this market will be way higher a year from now including Apple!
mit558 profile picture
This is a one time effect. Next year tax rates will be higher than in 2018. We should not forget this.
Mit558. Not true corporate tax cuts are permanent. They might vary by 50 or 100 basis points for fine tuning but it’s not gonna move much.
Didn’t have an inch of a doubt that AAPL will top the chart. I have literally banned all the analysts from my news feed. Day in and day out watched Buffett on CNBC and kept adding AAPL. Firmly believe in its leadership and balance sheet. The mantra is simple ‘believe in your research and listen to the sage in Omaha’. So humbled by this experience. Thank you!
vicwinkler profile picture

I agree, and I make it a point to get my news direct from Apple each earnings call.

I listen and then I read the transcript.

This has served me well, and yes I do read the analyst opinions but all they have taught me is to avoid certain firms or analysts when looking at other stocks.

Apple had brilliant and competent management, both in spades.

One point, there are some signs of growing pains in Apple's software, but they are frankly of only light concern ...having been recognized by the firm and having adopted changes to mitigate them going forward. I am speaking about the increase in software bugs that I do not want to see in a premium product. As I said, of small concern to date.

My opinion of the analysts is about as low as my opinion of Congress, if that is possible. Neither actually serve the public, both serve their own interests.
Classic Apple. Every few quarters the analysts come rolling out bashing this stock and it proves them wrong time again and again.
RiceBowl profile picture
What a great day today. Hope my losses @Dialog Semiconducter will be balanced soon on par.
neals58 profile picture
Smart Rabbit. Apple to 205 this year, easy money.
Tim Cook, when asked if smart phone market worldwide was "saturated":

"And so I do think – I don't buy the view that market's saturated. I don't see that from a market point of view or – and certainly not from an iPhone point of view. I think the smartphone market is sort of like the best market for a consumer product company in the history of the world and – but that's how I feel about it. It's a terrific market, and we're very happy to be a part of it."

Think about that: "best market for a consumer product company in the history of the world"

Apple in a historic sweet spot, and managing it well.

Way long Apple (bought on the recent dip below $165)
Stefan Redlich profile picture
That is indeed one hell of a statement. My only regret is not having more AAPL shares as I diversified too broadly into vulnerable dividend stocks like T and MO but yeah time will show how things fare out. With AAPL I should just buy more shares all the way and thank the analysts for talking it down over and over again ahead of earnings. Bought 3 shares yesterday, not much, but I am also not rich so it takes time.
The Smoking Goat profile picture
Simple math 100 billion repurchasing of shares at current price is a ~11% increase of "ownership" for the current share holders. Thanks Apple, I gots me extra 11% for free!
neals58 profile picture
Poor math says 175 x 1.11 = 194 ?
The Smoking Goat profile picture
$194 should be the target price, if 11% of the shares were retired today. So, I think that is a super conservative price target. If you include Apples' cash generating capacity in the pricing, the number should be huge. Mgmt is doing the right thing, buying back shares at clearance prices.

I am long Appl.
“But it's very difficult for me to give you a prediction of where gross margins are going to be six months or 12 months from now.”

It is easy for me to predict that gross margins are not going anywhere since nothing happens in the next 12 months. The 12 months are exctly one already leaked iPhone update and iPad update had to be routine since nothing in iOS and macOS suggests otherwise, more so when both are declared to enter the bug squashing phase.

I will remember I do not know something important.
FAST///M3 profile picture
I believe there will be one more buying opportunity before it shoots up to 200... not only are they making money obviously but their guidance was good for the next quarter and we also got plenty coming down the pipe from Apple. LONG....
FAST///M3 profile picture
one more opportunity 180. .....
SuperPac profile picture
''And customers chose iPhone X more than any other iPhone each week in the March quarter''

''Q2 was our best quarter ever for services''

With headlines like above, Apple should be getting a much, much better valuation. instead its PE is in mid-teens while non-descript companies trade at 20 and 25 PE.

CNBC never has a balanced coverage of Apple. Always negative. The so called ''analysts'' are always casting ''doubt'' over this Apple product or that. There is an industry out there of Apple-haters. Hard to understand what's going on in the heads of these guys.

Apple is a great company. My household has been a user of many Apple products for many years now and we admire Apple's inventive and engineering skills. Apple is so many things - a tech co, a consumer electronics co, a services co....and so on.

I am long Apple and will most likely add more to my long position this week.
I think with the analysts, its "do as i say,not as i do." We hear what they say, but do we really know what they do?
mit558 profile picture
Agree! I think what causes the relativelly low PE of AAPL is the high perceived risk of it being tech, being a "one trick pony" etc. AAPL's PE is lower than PG's even after PG's significant shareprice drop!

Perception is a huge factore, and I've lost most money in relativelly "safe" investments and made the most in "risky" ones. There simply is no way to objectivelly measure riskiness, so it is up to people to determine risk level on the own. Crazy how subjective investing is.
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