Apple shares soar on signs of demand for priciest iPhone X during holidays

Higher average selling price for gadget offsets worries over revenue outlook

Apple Inc. quelled concern over lacklustre iPhone demand with results showing that when consumers buy the gadget, they’re willing to pay up for the most-expensive model.

Apple shares rose 3.6 per cent in extended trading, after closing at US$167.78 in New York on Thursday.

The average selling price for the iPhone, Apple’s most important gadget, was US$796 in the crucial holiday quarter. That was up from less than US$700 a year earlier and it suggests that people are gravitating toward the iPhone X, which starts at US$999. The metric reassured investors who were initially spooked when Apple forecast lower-than-expected revenue in the current quarter and reported total iPhone holiday sales that missed analysts’ estimates.

“IPhone units were below expectations, though much higher ASP (average selling price) helped offset the unit softness,” Amit Daryanani, an analyst at RBC Capital Markets, wrote in a note to investors.

Apple said revenue in the three months ending in March will be US$60 billion to US$62 billion. Analysts were looking for US$65.9 billion on average, according to data compiled by Bloomberg. For the final quarter of 2017, it sold 77.3 million iPhones, down one per cent from a year earlier and below analysts’ forecasts of 80.2 million units.

Amazon and Google parent Alphabet also reported quarterly results. For Amazon, the holiday season proved to be a good one as the online retailer’s quarterly profit soared past US$1 billion for the first time in its more than 20-year history as it sold more voice-activated gadgets, enlisted new Prime members and benefited from its recent purchase of Whole Foods.

The Seattle-based firm’s profit was also helped by changes to the tax law, giving it a $789 million tax benefit during the fourth quarter.

Amazon on Thursday reported net income of $1.9 billion, or $3.75 per share, in the three months ending Dec. 31. That blew past the $1.88 per share analysts expected, according to FactSet.

Alphabet, however, missed quarterly profit forecasts despite surprisingly strong sales as higher expenses offset growing demand for pricey ads on mobile apps, the U.S. technology firm said on Thursday.

Fourth-quarter sales rose 24 per cent to US$32.3 billion, above the average analysts’ estimate of US$31.9 billion, according to Thomson Reuters. Adjusted quarterly profit of US$6.8 billion, or US$9.70 per share, missed estimates of US$7 billion, or US$10 per share.

Apple’s results capped a flurry of reports indicating that the company was cutting orders to suppliers and that consumers were holding off buying iPhones, especially in China, where rivals are undercutting Apple on price.

Fewer new handsets means Apple has to work harder to sell related services, accessories and other devices. It also leaves less time for the company to create its next big hit, be it in wearable technology, augmented reality or transportation. However, strong sales of the iPhone X help Apple with these future projects because the devices are capable of running the latest software and services, in particular augmented reality features.

During a conference call with analysts following the results, Apple chief financial officer Luca Maestri said iPhone sales in the current quarter will grow at least 10 per cent, year over year.

Apple sold 5.1 million Macs in the quarter on revenue of US$6.9 billion, indicating five per cent year over year declines. The iPad business continued to grow with the firm posting 13.2 million unit sales and revenue of US$5.9 billion. IPad units grew by one per cent, while revenue climbed six per cent, suggesting more customers bought the more-expensive iPad Pro models.

For services, which includes Apple Music, movie rentals, app downloads, cloud storage upgrades, and digital books, Apple reported revenue of US$8.5 billion, topping last year’s US$7.2 billion by 18 per cent.

The results show Apple is successfully continuing its march to services revenue of roughly US$50 billion by 2021. Last year, the segment earned US$30 billion in sales. In early January, Apple said customers of its App Store, part of its services business, spent more than US$890 million in the seven days starting on Christmas Eve.