Apple did it again: Despite all the worries about China, the consumer tech giant hit back with beats on the top and bottom lines, sending shares up 6% in after-hours trading. This is why we own it. This is why we don’t trade it. Apple’s fiscal first quarter revenue hit $90.75 billion, down 4% from a year ago but ahead of the LSEG estimate of $90.01 billion. Earnings per share rose 1% to $1.53, a March quarter record, and exceeded the LSEG consensus estimate of $1.50. Gross margin was 46.6%, an expansion of 230 basis points from a year ago and in line with expectations. (One hundred basis points (bps) equals one percentage point). Apple Why we own it: Apple’s dominant hardware and growing services businesses provide a deep competitive moat and plenty of bundling opportunities. Management’s so-called net cash neutral strategy provides confidence that free cash flow will continue to fund dividends and buybacks. Plus, the company’s commitment to the customer experience has translated to industry-leading user loyalty scores, giving it pricing power. There’s a reason it’s one of only two “own it, don’t trade it” stocks in the portfolio. Competitors: Most recent buy: April 8, 2014 Initiation: Dec. 2, 2013 Bottom line There was much to like in Thursday’s quarterly results. Top of the list: The consumer tech giant hit another record for its installed base of active devices, across all geographies and product categories — which helped drive another record in the high-margin and recurring revenues from its services business. We were also very pleased to see sales in Greater China come in better than expected, especially given its sluggish economy and Wall Street’s unwillingness to give companies a pass on sales misses in the region. Growth was still negative versus last year, but the iPhone drove an acceleration sequentially in the region and holds the number 1 and 2 spots for top-selling smartphones in urban China. Meanwhile, the company set new sales records in Latin America, the Middle East, Canada, India, Spain, Turkey and Indonesia. On top of this strong performance, Apple announced a $110 billion share repurchase authorization, the largest corporate buyback of all time. Apple is as strong as ever, and we see positive catalysts ahead. CEO Tim Cook is itching to share the company’s artificial intelligence efforts, and we expect to learn more at WWDC in June. “We are making significant investments and we’re looking forward to sharing some very exciting things with our customers soon,” Cook said. “We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era, including Apple’s unique combination of seamless hardware, software, and services integration, groundbreaking Apple silicon with our industry-leading neural engines and our unwavering focus on privacy, which underpins everything we create.” We couldn’t agree more. Consider how much information is in your phone. Apple is…
Read More: We’re raising our price target on Apple after earnings beat and raise
