Is Apple losing money due to COVID-19?

Is Apple losing money due to COVID-19?

Economy Industrials

Covid-19 has affected many big brands, and Apple is no exemption as its earnings have dipped amid the Pandemic even though investors are set to receive more billions.

Apple Inc recently reported that sales grew amid the Pandemic even though profits slightly slipped. Furthermore, it promised investors more billions in dividends and stock repurchases. Apple topped revenue expectations and earnings for the first quarter but has declined to forecast for the second quarter because uncertainties brought by COVID-19. APPL,-0.24% announced it would be boosting its buyback program by 50 billion U.S. dollars even though this was a smaller amount compared to the $75 billion and $100 billion added in 2019 and 2018 respectively.

In 2019 the iPhone maker posted fiscal second-quarter net income of $11.56 billion, or 2.46 US dollars a share, in 2020 it has dropped slightly in the second quarter by posting a net income of $11.25 billion or $2.55 a share.

Is Apple losing money due to COVID-19?

 

Apple Losing Money

According to Dow Jones Industrial Average DJIA,0.68% Shares of Apple have declined by 9% over the past three months, and Apple as a component has fallen by 16%.

Apple closed all its stores outside China in March and in May it began reopening U.S. locations and then had to scale back those plans due to the COVID-19 Pandemic that kept on worsening in the United States.

Towards the end of April Apple`s lower-cost, iPhone S.E. became readily available. According to Cook, it received a strong customer response from shoppers who needed the latest technology and individuals switching from the Android operating system.

Revenue from accessories and wearables has grown from $5.13 billion to $6.28billion but still came below the $7.05billion that was being modeled by analysts. However, experts predict trends for iPad and Mac might improve as they continue to benefit from remote work and schooling.

Revenue generated from the sale of the Mac category was $5.35 billion, which was down from $5.51 billion in the previous year. Revenue from iPad also fell from $4.87 billion to $4.37billion.

The services generated $13.35 billion in revenue with was a good move from $11.45 billion a year before. Analysts’ expectations in the segment were $12.85 billion. Services like the App Store, cloud services, Video, Apple Music will continue with strong performance throughout the June quarter while advertising and Apple Care might experience weakness this based on the anticipation of the Company.

The overall economic recession caused by coronavirus has impacted the Company`s ad business, Apple News and App Store ads, and is uncertain until the business reopens.

In its annual capital return update, Apple announced it would increase its quarterly dividend by6% to 82 cents a share. The Company`s dividend upped by 5% in 2019 and 16% in 2018.

Apple has been very opportunistic with buybacks historically. According to Evercore ISI analyst Amit Daryanani, he expects Apple to boost its buyback program by 75 billion U.S. dollars to 100 billion U.S. dollars. Apple is indeed losing money while spending on Coronavirus response.

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