Apple Shares Outperform S&P 500 in Past Month, Up 12%

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Apple Inc.’s (NASDAQ: AAPL) shares handily outperformed the S&P 500 over the past month. They have risen almost 12% to $108 as the index is up barely 1%. The stock also has outperformed tech giants Facebook Inc. (NASDAQ: FB) and Alphabet Inc. (NASDAQ: GOOGL). Just a few weeks earlier, Apple was in the dumps. What a difference a short period makes.

Apple’s earnings were considered lackluster. Sales of its flagship iPhone family were weak. Its sales in Greater China, the area where Apple management says they have to win, fell sharply.

On July 26:

Apple financial results for its fiscal 2016 third quarter ended June 25, 2016. The Company posted quarterly revenue of $42.4 billion and quarterly net income of $7.8 billion, or $1.42 per diluted share. These results compare to revenue of $49.6 billion and net income of $10.7 billion, or $1.85 per diluted share, in the year-ago quarter. Gross margin was 38 percent compared to 39.7 percent in the year-ago quarter. International sales accounted for 63 percent of the quarter’s revenue.

The guidance:

Apple is providing the following guidance for its fiscal 2016 fourth quarter:

revenue between $45.5 billion and $47.5 billion
gross margin between 37.5 percent and 38 percent
operating expenses between $6.05 billion and $6.15 billion
other income/(expense) of $350 million
tax rate of 25.5 percent

And Greater China sales dropped 33%, compared to the same quarter a year ago, to reach $8.8 billion. A great deal of research shows Apple is losing market share there.

The run up in the share price likely owes itself to one factor. The iPhone 7, which launches in September, is considered an “all or nothing” gamble by the world’s most valuable company. There already have been a number of leaks about the size, weight and features of the smartphone. Bulls believe the iPhone 7 will be a huge leap ahead of competition, as the earliest iPhones were. Bears claim the phone will not have any features not part of Samsung’s (Apple’s greatest rival) current smartphones, or ones it will release in its next generation.

The month has brought a wave of optimism to Apple’s shares, which may last until the next set of earnings and the iPhone 7 release.