In this May 31, 2018, photo, a customer enters the Apple store in New York. Apple made more money from higher priced iPhones in the latest quarter, even as unit sales were relatively unchanged. Shares of Apple rose nearly 3 percent Tuesday, July 31, after it reported fiscal third-quarter results that beat Wall Street expectations. (AP Photo/Mark Lennihan)

Apple shares rise on jump in average price of iPhones

July 31, 2018 - 7:03 pm
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Apple made more money from higher priced iPhones in the latest quarter, even as the number of phones it sold did not change much.

The sluggish unit growth means Apple is no longer the second-biggest smartphone maker behind Samsung. Huawei took that spot, research firm IDC said Tuesday, with 54.2 million phones versus Apple's 41.3 million.

Still, higher selling prices for devices like the iPhone X and iPhone 8 pleased Wall Street analysts, who are looking forward to even bigger, fancier iPhones heading into the holidays.

Shares of Apple rose 4 percent after-hours Tuesday after it reported fiscal third-quarter results that beat expectations.

CEO Tim Cook, addressing investors, wasn't fazed at the maturity of the smartphone market, which IDC said shrank 2 percent 342 million units in the quarter.

"Whether it grows 1 percent or 2 percent ... or shrinks 1 or 2 percent, it's a great market because it's just huge," Cook said.

Apple unit sales rose just 1 percent from a year ago, which was expected, but the average selling price grew 20 percent to $724 per iPhone, up from $606 a year ago.

Cook said its premium iPhone X, which starts at $999, was the most popular iPhone in the quarter, despite being a few hundred dollars more than previous iPhones.

It features a brighter screen that spans the device from edge to edge and boasts facial recognition technology. Apple's newer base models — the iPhone 8 and 8 Plus — also had $50 and $30 price increases compared with their predecessors.

Revenue from the app store, music subscriptions and other services grew 31 percent to $9.5 billion, a record for Apple. Apple Music subscribers exceeded 50 million.

The services figure included a one-time gain of $236 million in connection with resolving various lawsuits, which the company didn't specify. During the quarter, Apple settled a long-running patent battle with Samsung.

Apple also reported a 37 percent increase, to $3.7 billion, in the division for miscellaneous hardware, including Apple Watch and the HomePod smart speaker. But Apple saw revenue declines in both the iPad and Mac computers.

"Apple is no longer a one-trick pony," said Daniel Morgan, a portfolio manager with Synovus Trust Company, citing higher iPhone prices, a growing cash hoard, and increased services revenue.

Its net cash stood at $129 billion, according to Moody's analyst Stephen Sohn.

Cupertino, California-based Apple said net income rose 32 percent to $11.52 billion, or $2.34 per share.

That beat the $2.17 per share expected by 10 analysts surveyed by Zacks Investment Research.

Revenue rose 17 percent to $53.27 billion, also exceeding Street forecasts for revenue of $52.37 billion.

For the current quarter ending in September, Apple said it expects revenue of $60 billion to $62 billion. Analysts surveyed by Zacks had expected revenue of $58.59 billion.

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Parts of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on AAPL at https://www.zacks.com/ap/AAPL

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