Brian Colello: Apple reported third-quarter earnings. Revenue and EPS both beat street estimates, and were a little ahead of our expectations as well. The fourth-quarter forecast was also ahead of expectations. EPS, or implied EPS, is about in line with expectations. So, overall, this still isn't the most important quarter to look at for Apple, because the new iPhones are coming in September, so this is sales of the older products. But that said, revenue earnings were not as bad as initially feared.
IPhone sales were about in line with expectations. They saw a mix to the iPhone SE at lower prices, which was a little bit of a negative in terms of pricing, and weighted on revenue, slightly. But on the other hand, they were getting more switchers over from Android than ever before. So, in terms of the SE, trying to get that midrange customer that could never afford an iPhone in the past, and bring them into the iOS ecosystem, I think Apple started off quite well with the iPhone SE.
Another area where Apple did well is the iPad. The iPad Pro, particularly, looked like it sold better than expected this quarter, as well, because we did see an increase in iPad pricing, as well. So, it looks like the iPad Pro is off to a good start after all. Also, Apple's other products line, which include Apple Watches, revenue was quite good there, as well. I think they saw a nice incremental increase in Apple Watch sales in the quarter.
Most important, we think, the Apple ecosystem is still strong. We heard some good commentary from Apple iPhone sales from China Mobile, in terms of the Apple customer in China, on China Mobile's network, has the most data usage, the highest customer loyalty, the highest revenue per customer. These are all signs that we've seen in the U.S., as well, and that lead us to believe that Apple still maintains the premium pricing, still captures the premium customer, and that will lead to more resilient customers over time. It attracts developers in order to build for the platform, and it's very important for the ecosystem that those customer loyalty, the data usage, remains in order to attract more and more people to the ecosystem and make it stronger.
Overall, we still think Apple is undervalued today. Quite frankly, it prices below $100. We think the market implies that the iPhone is in secular decline, that it will never see growth again. We think that's a bit too bearish of a view at this point. Certainly, sales the past couple of quarters have been down on a year over year basis. But we think Apple is poised for a bounce back. We still think that most customers today will continue to buy more iPhones in the future. We don't see tremendous growth going forward, but we think Apple iPhone sales will be more resilient than what that market is giving it credit for. And what we've heard over the past quarter, and on this earnings call, is still in line with our thesis. So, we feel comfortable with our evaluation of Apple.