Apple and Facebook earnings help reassure nervous tech investors

It was a big day for technology earnings in the United States after the market close last night with Facebook and Apple both reporting earnings. Apple’s shares rose nearly 8% to $564 on its fiscal second quarter earnings and Facebook rose 4.5% to $64 on first quarter earnings as both reported strong figures which helped reassure technology investors after the recent Nasdaq sell off.

The big news from an Apple perspective was that the company seemed to be listening to investors with plans to give more of its enormous cash pile back to shareholders with an increase in the size of the capital return programme from $100 billion to $130 billion by the end of 2015. Activist investor, Carl Icahn must be feeling pleased with himself with the company deploying more of its $156 billion cash pile (as of the end of this quarter).

Apple  announced an increase in its share repurchase authorisation from $60 billion to $90 billion, with an 8% increase in the quarterly dividend  and a 7 for 1 stock split planned for June which the company hopes will make its stock more accessible to retail investors.

The company’s earnings per share rose to $11.62 from $10.09 in the same period in 2013 and beating expectations of around $10.18, with net income coming in at $10.22 billion in its fiscal second quarter ended March 29 versus $9.55 billion a year ago. Revenues increased by 4.6% to $45.6 billion from $43.60 billion, again beating estimates of $43-44 billion. Gross margin, a key metric was also better than expected at 39.3 per cent.

iPhone sales were resilient with 43.7 million phones being sold in the quarter, up 17% versus a year ago with the iPad shipping 16.4 million units from 19.5 million in the same period last year, a drop of 16%. The company blamed a reduction in iPad channel inventory compared to the same quarter last year and pointed out that it had sold over 210 million of the devices since their launch, which is almost double the iPhone at the same point in its life

Tim Cook made it clear that further product development were forthcoming and blamed the company’s obsessive attention to detail meant new products can “take a little longer”, and asked for patience. Many have been waiting for a new television product for some time and rumours are rife of new iPhone’s coming later this year with larger screens similar to Samsung’s Galaxy phones.

Now on to Facebook.

Facebook revenues were up 72% to $2.5 billion, ahead of estimates of analysts $2.36 billion with earnings per share easily beating expectations coming in at $0.34 against forecasts of $0.24. Ad revenues increased 82% to $2.27 billion versus the same perod in 2013, with mobile ad revenues making up 59% of the total compared with 30% in the same period a year ago.

The company reported monthly active users of 1.28 billion, slightly above Wall Street expectations for 1.27 billion users. With 1.01 billion monthly mobile users, up 34% year over year.

Though results were strong, some investors were worried by the announcement that CFO David Ebersman would be stepping down later this year and will be succeeded by David Wehner formerly of Zynga.

Mark Zuckerberg seems to have resolved any fears about Facebook’s relevance in the mobile world which blighted the company’s share price soon after the company floated in 2012.

Wall street futures are looking healthy this morning on this news from the tech sector.

Contrarian Investor UK

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