Apple Inc.
Apple is the developer of the iPhone and Mac line of computers but it’s more than just a hardware company, it’s a software developer that focuses on developing easy-to-use products that its customers love. The ecosystem that Apple developed enhances the user experience. Interestingly after a slower growth patch over a year ago, growth has reaccelerated but its P/E ratio has not expanded – the company continues to trade at a discount to the market. The iphone business is sound with continued product and software improvements, room for increased penetration, and no sign of deteriorating appetite as average selling prices (ASPs) remain strong. Apple continues to grow its non-iphone business at higher rates than the corporate average and aims to double its services revenue in 4 years (in its 1Q17 report, Services were 9% of revenues).
Ests: 4Q18 1Q19 FY18 FY19
Revs 61.6b 92.9b 264.0 281.7
EPS 2.78 4.94 11.79 13.77
P=222.22, Div 2.92, yield =1.7%, 48.91/sh gross cash, 23/sh net of debt, def revs, and WC deficit, TTM EPS 11.91, P/E=19X, 17X ex cash, FY19 P/E ex cash 14X
Mid Quarter Update Jan 2, 2018
Apple warned for 1Q19
Revs -4.9% to 84bn, GM 38%, OpEx 8.7bn, other income 550m, TR 16.5%, s/o 4.77bn, implies OpInc -12%, EPS +6.9% to $4.16 (est $4.65) due to lower tax rate which laps in 1Q.
Installed base grew by more than 100m units over past 12 months, was 1.3bn in 1Q18 so +7.7% y/y?
Revs ex iphone +19% y/y, puts iphone -15% y/y to 52bn (also lower than 1Q17)
Results lower than their expectations due to weaker than expected Emerging markets (particularly China which in their guidance they excluded China from EM commentary) and fewer iphone upgrades than they expected.
Looks like upgrade cycle is indeed lengthening especially in the face of high new phone prices and fx headwinds especially in face of lowered cost of battery replacement.
Confirms reports over the past few months of broader smartphone weakness.
FY19 EPS estimates are for 12% growth but could actually decline, why not towards $10/share?
Exited position Nov 2, 2018. I still like the company but the nervousness around the lower disclosure could weigh on the stock (it’s still well above its lows for the year). If anything, the company should have changed its disclosure policy when there wouldn’t be questions of weakness. I think their guidance is fine and makes sense but in line with my trim in August, it’s no longer screaming cheap and this nervousness could undo the rerating the stock has enjoyed. Locking in my gains and watching from the sidelines.
4Q18 2.91 vs 2.07, +41%, est 2.78 up from 2.65, FY 11.91 vs 9.21
Nov 1, 2018, P=222.22, TTM EPS=11.91, P/E=19X, 17X ex cash, FY19 P/E ex cash 14X
Revs +20% to 62.9bn, GM 38.3% vs 37.9%, OM 25.6% vs 25%, OpInc +22.9%
Ex 640m benefit last year, Services +27% to 10bn
Americas +19%, EU +18%, Greater China +16%, Japan +34%, Rest of Asia +22%
iPhone Revs +29%, units flat, ASP +28%, ipad -15%, Mac +3%, Services +17% but +27% ex 640m benefit last year, Other +31%, revs ex iphone and ipad +14%
1Q Guidance: Revs 89-93bn (+0.8%-5.3%, est 92.9), GM 38-38.5%, OpEx 8.7-8.8bn, Other income 0.3bn, tax rate 16.5%, implies EPS 4.38-4.70, +12.6-21%, est 4.94)
Q/q Rev guidance contemplates an earlier launch this year vs lasty year, $2bn in fx headwinds, uncertainty of being able to satisfy demand in early product ramps, and macroeconomic uncertainty particularly in emerging markets (Turkey, India, Brazil, Russia) and specifically excluded China from that group.
They continue to see a lot of opportunity in health-related products and services.
Nothing seems to be wrong with EPS guidance, if anything the estimates are just out of whack but the stock is weak after hours.
Going forward, they will no longer provide unit sales by product, while some might be concerned with less disclosure, stepping back a bit, FY18 iphone units were +0.4% while iphone Revs +18%, and EPS +29%
3Q18 2.34 vs 1.67, +40%, est 2.18
July 31, 2018 P=190.29, TTM EPS=11.03, ex cash TTM P/E=15X, FY19 P/E=13X
Revs +17% to 53.3bn, GM 38.3% vs 38.5%, OM 23.7% vs 23.7%, OpInc +17%
Americas +20%, EU +14%, Greater China +19%, Japan +7%, Rest of Asia +16%
iPhone Revs +20%, units +1%, ASP +20%, iPad -5%, Mac -5%, Services +31%, Other +37%
iPhone 56% of revs, revs ex iphone and ipad +19%
4Q Guidance: Revs 60-62bn (+14-18%, est 59.6bn), GM 38-38.5%, OpEx 7.95-8.05bn, Other Income 0.3bn, tax rate 15%, implies EPS 2.61-2.78, vs 2.07, est 2.65
Solid results, EPS growth faster than OpInc due to lower tax rate but still 17% is solid.
iPhoneX most popular phone again, apple Watch +40%
Solid results, valuation continues to be very attractive.
2Q18 2.73 vs 2.10, est 2.68 down from 2.84
Raised dividend 16%, approved new $100bn share repurchase authorization and will complete previous $210bn share repurchase in 3Q
Revs +15.6% to 61.1bn, GM 38.3% vs 38.9%, OM 26% vs 26.6%, OpInc +12.7%
iPhoneX, despite wide commentary of its failure, was the most popular iPhone each week in the quarter and since its launch, “this is the first cycle in which the top of the line iPhone model has also been the most popular”
Americas +17%, EU +9%, Greater China +21%, Japan +22%, Rest of Asia +4%
iPhone Revs +14% (shipments +2.9% but +4% ex reduced channel inventories, ASP +11%), iPad +6%, Mac flat, Services +31% (+8% q/q), Other +38%
3Q Guidance: Revs 51.5-53.5bn (+13-18%, est 51.6bn), GM 38-38.5%, OpEx 7.7-7.8bn, Other Income 0.4bn, tax rate 14.5%, implies EPS 2.07-2.23 (+24-33%, est 2.13)
Solid results and guidance, could calm some of the jitters, lots of analyst commentary looks to be just dead wrong.
1Q18 3.89 vs 3.36, est 3.86 up from 3.77
Revs +13% to 88.3bn (Services +18%), GM 38.4% vs 38.5%, OM 29.8% vs 29.8%, OpInc +12.5%
13 week quarter vs 14 weeks last year, avg rev/week was +21%, iphone channel inventory increased <1m vs +1.2m last year, 1.3bn active devices, +30% vs 2 years ago
Americas +10%, Europe +14%, Greater China +11%, Japan +26%, Rest of Asia Pac +17%
iPhone revs +13% despite shipments -1.2% but avg/week +6%, (ASP +15% to $796), iPad +6%, Mac -5%, Services +18%, Other +36%, iPhone X was top selling smartphone in December in the world, top selling iPhone every week since launch followed by 8 and 8 Plus. Apple Watch >+50%
Guidance: Revs 60-62bn (+13-17%, est 65.7), GM 38-38.5%, Other income 0.7bn, tax rate 15%, implies EPS 2.55-2.71 (+21-29%, est 2.84), While guidance is lower than estimates, still for solid growth and the valuation is still attractive. EPS growth boosted by lower tax rate, guidance is for OpInc +7.8-14.7%, see becoming net cash neutral over time
Very solid results, stock was weak before the report and is reacting negatively after (a broadly weak day). Interestingly the company reported new iphone supply/demand in December, early production rates will be high and reports of cutting order rates from suppliers is not necessarily negative nor informative.
4Q17 2.07 vs 1.67, est 1.87 up from 1.81, FY17 EPS 9.21 vs 8.31
Revs +12% to 52.6bn (Services +24%), GM 37.9% vs 38%, OM 25% vs 25.1%, OpInc +11.6%, NI+19% on 18% tax rate vs 23%
Americas +14%, EU +20%, Greater China +12%, Japan -11%, Rest of Asian Pac +5%
Iphone revs +2%, ipad +14%, Mac +25%, Services +34%, Other +36%, Growth ex iphone and ipad 31%, Set record revenues this FY in most parts of the world. Since iPhone 8 launch, they have become the most popular models (8Plus best start of any Plus model)
Guidance: Revs 84-87bn (est 85.3), GM 38-38.5%, OpEx 7.65-7.75bn, Other income .6bn, tax rate 25.5%, implies EPS 3.57-3.79 (vs 3.36, est 3.77)
3Q17 1.67 vs 1.42, est 1.57 down from 1.62
Revs +7% to 45.4bn, GM 38.5% vs 38%, OM 23.7% vs 23.9%
Americas +13%, Eu +11%, China -10%, iphone revs +3%, units +2% to 41bn (reduced channel inventory by 3.3m units, all high end, channel inventory lowest in 2.5 years), ipad revs +2%, units +15% (1st quarter of y/y growth since 1Q14), mac revs +7%, units +1%, services +22% to 7.3bn
Strong iphone demand at high end, 7Plus dramatically higher than 6Plus last year, 7 and 7Plus up strong double digits, upgrade rate for iphone similar to past models except for 6 which was abnormally high, Apple Watch +>50% y/y
4Q Guidance: Revs 49-52bn, est 49.2bn, GM 37.5%-38%, OpEx 6.7-6.8b, other income 500m, tax rate 25.5%, implies EPS 1.73-1.92, (+3.6%-15%, est 1.81)
Solid results and guidance, still legs to the growth and valuation is attractive
2Q17 2.10 vs 1.90 (est 2.02)
Revs +4.5% to 52.9bn, GM 38.9%, OM 26.7%
Revs +11% in Americas and +10% in EU but -14% in China (looks like sales in China might be stabilizing and set to improve), iphone revs +1.1%, shipments -0.8% to 50.8m but reduced channel inventory 1.2m vs 0.45m last year (sell-through improved y/y), higher ASP, Revs ex iphone and ipad +30%
Increased share repurchase program and div +10.5% to 2.52
3Q Guidance: Revs 43.5-45.5bn (est 45.6bn), GM 37.5%-38.5%, OpEx 6.6-6.7bn, other income 450m, TR 25.5%, implies EPS 1.44-1.59 (est 1.62, vs 1.42)
Solid quarter in line with estimates, outlook might be a bit soft but still solid, stock has had a strong run and if pulls back meaningfully I’d be inclined to add (not yet at a full position)
1Q 173.36 vs 3.28
Revs +3.3% to 78.4bn, revs ex iphone and ipad +7.5%, an acceleration from prior 2 Qtrs,
GM 38.5% vs 40.0%, OM 29.8% vs 31.9%
iphone shipments 78.3m vs 74.8m, ASP slightly up, ipad shipments 13.1m vs 16.1m
2Q Guidance includes 1.2bn fx headwind y/y: Revs 51.5-53.5bn vs 50.6bn