Markets

Why Shares of Apple Rose 16.5% in July

What happened

Shares of Apple (NASDAQ: AAPL) rose 16.5% in July, according to data provided by S&P Global Market Intelligence.

This rise brings Apple's year-to-date gain to an impressive 41.5%, taking the smartphone company even closer to being the first company to achieve a $2 trillion market capitalization.

Older couple smiling and looking at tablet computer

Image source: Getty Images.

So what

The company reported an impressive set of earnings for the third quarter of 2020. Net sales rose 12% year over year to $59.7 billion, a new record high, while net income increased 12% year over year to $11.3 billion. Apple's latest results show that the company is still able to continue its growth momentum despite the COVID-19 pandemic.

As more people hunkered down at home due to lockdowns and travel restrictions, they relied on their iPhones, Macs, and iPads to communicate with friends and loved ones. Product sales showed improvements in all categories, with iPads leading the way with a 31% year-over-year increase. Sale of Macs rose 21.6% year over year and iPhone revenue inched up 1.7% year over year.

Apple's services division continues to gain ground, making up 22% of total net sales during the quarter, up from 21.3% in the third quarter of 2019. Due to a favorable mix, the gross profit margin for services rose from 64.1% to 67.2%. The division is one to watch as it generates a stream of recurring income for the company, and is now contributing nearly half the revenue that iPhones generate.

Now what

A cash dividend of $0.82 was declared for the quarter, higher than the $0.77 dividend a year before. Apple's board also approved a 4-for-1 stock split to bring down the absolute stock price and make the stock more affordable to a wider group of investors.

Meanwhile, the company also acquired a start-up in Canada called Mobeewave with technology that could be used to power contactless payments for every iPhone. iPhones are already equipped with near-field communication chips, so this technology could enable buyers to simply tap their credit cards against the back of their phones to make payments, potentially opening up a new revenue source for Apple.

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Royston Yang owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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