Elevated expectations weigh on Apple:

  • AAPL-US a post-earnings laggard with elevated expectations seemingly biggest overhang. Fiscal Q4 revenue and EPS largely in line. iPhone unit sales of 45.5M ahead of 44.8M consensus. Gross margin of 38% at high end of guidance. ASP lower than some expected. Lot of discussion about how iPhone supply constraints limited upside. In addition, expected to persist in fiscal Q1. However, December Q revenue and implied iPhone shipment guidance still a bit better than consensus, while ASP outlook also ahead with help from improved supply and stronger mix shift to the iPhone 7 Plus. Gross margin outlook better on a sequential basis, but below Street. Company noted leverage and mix offset by cost structure on new products and more difficult comps. Services a widely discussed bright spot in Q4 with revenue accelerating to 24% y/y growth from ~20% in prior two quarters. Fits with monetization theme. Also some focus on M&A with company highlighting interest in content creation and ownership. In addition, said that it was willing to look at deals of any size that have strategic value.