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Apple Earnings: Bank Of America Reacts

In a report published Tuesday, Bank of America analyst Wamsi Mohan commented on Apple Inc. (NASDAQ: AAPL)'s second quarter results, noting that iPhone strength was "impressive" as new users drove share gains.

Mohan noted that Apple's Chief Executive Officer Tim Cook commented that iPhone strength was driven by a higher rate of first-time iPhone buyers and Android users converting to the Apple ecosystem. In addition, 20 percent of the installed base upgraded to a new iPhone in the quarter (versus a low-teen figure last quarter), creating a longer-term opportunity and implying very strong new user additions.

Meanwhile, international iPhone sales were "incredibly strong," especially in emerging countries were unit sales were up 63 percent, with more than double in Korea, Singapore, Taiwan and Vietnam. Sales were up 80 percent plus in China, Mexico, Germany and Turkey, among others.

iPad shipments in the quarter were in-line with the analyst's recently lowered estimates of 12 million while Mac units were slightly higher at 4.5 million units versus the 4.2 million estimated.

Mohan said that Apple's gross margin of 40.8 percent was better than the 39.8 percent he had previously estimated. The analyst noted that gross margins benefited from strong iPhone sales versus what was expected. Looking forward, the analyst noted that Apple's 39 percent (mid-point) gross margin guidance implies a 180 basis quarter over quarter decline due to sequential decline in revenue from iPhone sales, a 40 basis point headwind from foreign exchange and a 40 basis point headwind from Apple Watch.

Finally, Apple's revenue guidance of $46 billion to $48 billion falls short of Mohan's prior estimate of $49.07 billion, but the analyst does state that Apple's guidance is "again conservative."

Shares remain Buy rated with a price target raised to $145 from a previous $140.

Latest Ratings for AAPL

Apr 2015

Canaccord Genuity

Maintains

Buy

Apr 2015

Susquehanna

Maintains

Positive

Apr 2015

Jefferies

Maintains

Hold

View More Analyst Ratings for AAPL
View the Latest Analyst Ratings

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© 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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