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By Benjamin Rains
Apple AAPL is again a $ 1 trillion company joining Microsoft MSFT, with shares up 8% last month. Shares of the tech giant also jumped more than 5% this week while Wall Street seems to be satisfied with the latest iPhone and TV streaming packages from Apple.
IPhone updates
Apple unveiled Tuesday its new iPhones at its usual event before the end of the year, under the leadership of CEO Tim Cook and other leaders. The company introduced three new iPhones, under the new brand 11.
Smartphones offer somewhat standard updates from Apple, which include better battery life and faster processors. What sets the two most expensive new smartphones (iPhone 11 Pro and 11 Pro Max: from $ 999) from their cheaper counterpart (iPhone 11: from $ 699) is a triple camera system. Apple also dropped 20% ($ 599) last year's iPhone XR price, with the iPhone 8 starting at $ 449.
Consumers might be more inclined to buy the high-end iPhone 11 because the proposed prices roughly correspond to the new high-end models of last year, after years of rising prices. Perhaps more importantly, the new base model of the iPhone 11 costs $ 50 less than the comparable offer of last year. Clearly, Apple wants to give consumers every reason to switch to new phones after a year of bad iPhone sales, especially since the new phones are nothing shocking.
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Apple TV + and services
Wall Street, investors and Apple fans have been waiting for months more details about their foray into the world of streaming television. They now have everything they can hope for until they use the streaming service for the first time on November 1st – the Disney + debut on November 12th. Anyone who buys a new iPhone, iPad, Mac or other eligible device will enjoy a year's worth of Apple TV + for free. Otherwise, the service will cost $ 4.99 per month after a free seven-day trial, and will be available on the Apple TV app.
The price of Apple's streaming TV offer is reasonable, well below $ 14.99 per month for HBO Go, NFLX premium at $ 15.99 from Netflix, $ 12.99 for Amazon AMZN Prime – which comes with shipping benefits – and $ 6.99 for Disney +. In addition to trying not to force users to make a decision between Apple + or Netflix, the price represents the little content available at launch.
Apple TV + will offer about 10 shows at launch, including a fictional show from the era of the space race called For all humanity, a show starring Jennifer Aniston, Reese Witherspoon and Steve Carell titled The morning showand post-apocalyptic drama See.
Apple will then slowly build its program library, which should include more Hollywood stars on the list, in front of and behind the camera. The iPhone maker is likely considering Apple TV + as some sort of loss leader at the moment, since it would have spent about $ 15 million per episode to make it See.
Apple is committed to converting over one billion hardware users into service customers over the long term. This company, which includes its app store, Apple Music, Spotify SPOT's challenger, a monthly news service heavily based on magazines and an Apple credit card, will also soon be offering Apple Arcade. The company's enthusiasm in the video game world will provide access to about 100 titles for $ 4.99 per month and its launch on September 19. Apple hopes to capture a share of the global market for mobile games, which amounts to $ 68.5 billion.
What else?
The ongoing trade war between the United States and China has early frightened some Apple investors, but Cook has been in constant contact with President Trump and his main products have remained intact. In addition, in recent days, China and the United States have slightly changed speeches as both parties prepare to meet again in a few weeks.
Apple's iPhone sales have fallen in each of the past three quarters, as has the company's revenue in Greater China. The company has struggled to sell its more expensive smartphones in a market where many cheaper options are available.
Meanwhile, iPhone sales have dropped due to difficult times to compare, which means that a turnaround in 2020 could be envisaged. In fact, Apple's sales increased 1% in the last quarter (third quarter of fiscal 2019), after a decline of 5.1% in the second quarter and 4.5% in the first quarter.
Outlook Q4 and Beyond
Apple's fourth-quarter revenue for 2019 is expected to be $ 62.55 billion, down 0.56% from the same period last year, according to our consensus Zacks. However, this stands in the way of the 20% increase in revenue in the fourth quarter of 2018. Overall, the revenue of the AAPL for the 2019 financial year is expected to fall by 2.7% to 258 , 28 billion dollars.
Apple's first-quarter revenue, which includes the largest holiday shopping period, is expected to jump 1.5 percent to $ 85.54 billion. In the future, the revenues of the AAPL for the fiscal year 2020 are expected to be 3.8% compared to our estimate for 2019 to reach $ 268.01 billion and to exceed the 2018 figure.
At the bottom of the income statement, Apple should see its fourth-quarter profits plummet to 2.75%, with EPS falling 1.85% for the year 2019. Then, Apple's profits for the first quarter 2020 are expected to increase by 6.2% compared to the same quarter of the previous year, and the whole of the year 2020 should exceed our estimates of 2019 by 11.5%.
Bottom line
In line with Apple's strong growth outlook for 2020, the company has seen a resurgence in earnings estimates recently, particularly for the fourth quarter and fiscal year 2019. AAPL is currently ranked number one. 3 of Zacks (hold) and displays the "A" note for Momentum in our Style Scores system.
We can see that Apple has traded at a higher forward price / sales ratio than last year (4.2 vs 3.8 currently). More importantly, Apple is the only one of the so-called FAANG shares to pay a dividend. The Company's current annualized dividend is $ 3.08 per share for a return of 1.38%. This compares relatively favorably with the 1.7% of 10-year US Treasuries.
Apple also has more than $ 200 billion in cash, which means it will likely continue its massive buyout program. As a result, investors should view AAPL's stock as a safe haven investment in the current market uncertainty with the potential for significant gains.
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The views and opinions expressed in this document are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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