Skip to Content
Stock Analyst Update

No iPhone 'Super Cycle' but Solid Results for Apple

We plan to modestly raise our fair value estimate for the narrow-moat firm.


 Apple (AAPL) reported solid fiscal second-quarter results and provided investors with a decent third-quarter forecast that was not as bad as we feared. Although the iPhone X “super cycle” did not transpire over the past six months, iPhone unit sales held up well while higher average selling prices, or ASPs, per device continued to contribute to robust revenue growth. We were also impressed with growth seen in Other Products and Services, especially as we continue to believe that sales of add-on hardware and services should continue to drive switching costs that will help Apple make repeat, high-margin iPhone sales to its customers over time. Meanwhile, the company authorized another $100 billion of share repurchases while boosting its quarterly dividend by 16% to $0.73 per share, taking advantage of changes in U.S. corporate tax policies. We plan to modestly raise our fair value estimate for narrow-moat Apple to $175 per share from $170 but continue to view shares as fairly valued.

Apple sold 52.2 million iPhones in the September quarter, up 3% year over year. However, iPhone revenue rose 14% year over year, thanks to an 11% increase in ASPs driven by sales of the higher-priced iPhone X. Apple noted that the X was its highest selling model in each of its 13 weeks in the March quarter (as opposed to the iPhone 8 or 8 Plus), which we again view as an encouraging sign regarding Apple’s ability to maintain premium pricing. Other Products revenue rose 38% year over year thanks to Apple Watch and Airpods, which we think is an underrated, innovative hit for Apple. Services revenue rose 31% year over year, accelerating from 18% year-over-year growth in the December quarter, with particular strength in iCloud storage and Apple Music.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Brian Colello does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.