Apple, Facebook: Growth Continues

Some of the world's largest technology companies announced their quarterly earnings this week. Their latest figures were important to investors who were concerned whether the strong growth momentum driving the technology giants through the pandemic was still there.

We've summarized Apple's (NASDAQ 🙂 and Facebook's (NASDAQ 🙂 quarterly results and what they mean for their future stock performance.

iPhones Help Apple Achieve Record Sales

After a very robust holiday quarter, investors were concerned that sales of iPhones and other electronic gadgets would slow down somewhat. But when the world's most highly regarded company released its release, it crushed analyst expectations and showed record sales that were strong across all product categories.

The California-based company reported record earnings of $ 23.6 billion in the previous quarter, while sales increased 54% to $ 89.6 billion, aided by the boom in sales of the newer iPhone models. Overall, iPhone revenues for the March quarter were up 65% to $ 47.9 billion, against analysts' forecast of a 42% increase.

During the conference call, Chief Executive Tim Cook told analysts that there was still room for iPhone growth with the newly introduced 5G mobile version of the device. "The 5G cycle is important, and we are in the early days."

Apple's strong performance forced Goldman Sachs to upgrade its stock rating from sales to neutral, admitting it underestimated demand for iPhones.

“Our initial view that the iPhone cycle would disappoint in the midst of COVID was clearly wrong. Not only did Apple perform better over the cycle than we expected on the iPhone, but Mac and iPad also significantly outperformed our forecasts, ”Goldman said in a note to customers.

Apple stock, which has underperformed the general market so far this year, was down slightly on Thursday, closing at $ 133.48.

JPMorgan analyst Samik Chatterjee, who has an overweight rating on the stock, said in a note to customers that the quarter showed how Apple is strengthening its position for long-term leadership.

“Not only does the 5G iPhone cycle take the form of strong consumer upgrades and switchers, but it also positions Apple for a greater share of the total smartphone market due to its leadership in 5G devices and in turn, driving the transformation of services through better utilization of a faster growing installed base. "

JPMorgan raised its target price from $ 150 to $ 165 a share.

Facebook & # 39; s Ad Machine Changes More

The social media giant also produced a stellar boost by increasing its quarterly sales by 48%. ahead of analyst estimates. The report clearly showed that the digital advertising market is recovering rapidly as the US economy reopens after last year's pandemic-induced decline.

Total revenue for FB rose to $ 26.2 billion in the first quarter, well above the analysts average estimate of $ 23.7 billion. Facebook reported 2.85 billion monthly active users as the platform, which also owns Instagram and WhatsApp, benefits from a home environment. Both large and small businesses are spending more on social media sites to attract customers.

Facebook founder and CEO Mark Zuckerberg said in a revenue press release:

“We had a strong quarter as we helped people stay connected and businesses grow. We will continue to invest aggressively to provide new and meaningful experiences for years to come, including in newer areas such as augmented and virtual reality, commerce and the industry. creative economy. "

Several analysts raised their target price for Facebook shares following strong momentum and the potential for further gains once the hardest-hit sectors of the economy from the COVID pandemic, such as tourism and retail, reopen.

"FB was one of the most aggressive investors in new growth opportunities during this COVID period, which should set them up for several years of sustained premium income growth," said Evercore ISI, who "outperformed" – score on FB.

Following the earnings report, the research firm raised its target price for FB shares from $ 370 to $ 400. FB shares closed at $ 329.51 Thursday, about 7% higher than Wednesday.

Facebook Weekly Chart.

Credit Suisse analysts, who also raised their price target from $ 371 to $ 400, said in a note that the street models are too conservative on Facebook for underestimating the long-term monetization potential of other properties with a billion users. such as Messenger and WhatsApp.

Bottom Line

Both Apple and Facebook have shown strong growth in their latest quarterly reports. This impressive performance has prompted many analysts to revise their price targets as they believe 2021 could bring more upside as the global economy reopens and growth accelerates.

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