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Apple's sales prospects (AAPL) and a forecasted accounting change overshadow the company's latest sales and profits.
On Thursday afternoon, Apple announced revenue of $ 62.9 billion (up 20 percent year-on-year) and earnings EPS per share of $ 2.91, exceeding consensus analyst estimates of 61 , 46 billion and 2.78 USD. However, for the seasonal December, the company posted revenues of $ 89 billion to $ 93 billion, well below the consensus of $ 92.94 billion.
Shares fell after normal market hours due to forecasts and increased their losses after CFO Luca Maestri said at the call of the results that Apple was planning to end its historic practice of divide the volumes of units for iPhone, iPad and Mac. They closed down 6.5% to $ 207.81; Apple is still up over the year, following a sharp rise in August and September after a solid quarterly report in June. Some chip vendors, such as Skyworks (SWKS), Qorvo (QRVO), Broadcom (AVGO), and STMicroelectronics (STM), also fell as a result of the Apple report.
Here are some points to remember from the results report and calls from Apple.
1. The company partially blames its indications on exchange rate fluctuations
As with many other US multinationals, a strong dollar puts pressure on Apple's revenue. Maestri noted that the forex is expected to have a $ 2 billion impact on revenue in the December quarter and a 2 percentage point impact on revenue growth.
He also said that the macroeconomic uncertainty outlook related to emerging markets and related to the supply / demand balance of new products (presumably the iPhone XR is one of them). In addition, Maestri noted the fact that Apple launched its flagship iPhone in September this year and that a cheaper iPhone in December, after reversing the course of the year last, will have an impact on revenues.
2. Apple insists that unit sales figures do not matter as much
"[T]The number of units sold in a 90-day period is not necessarily representative of the underlying strength of our business, "said Maestri, to a large extent, Apple's performance in September. The iPhone, iPad and Mac units were stabilized respectively, down 6% and down 2%, total business rose 20%, thanks to the strong growth in sales prices. average (iPhone) of the iPhone as well as the sharp increase in the Services group business and "Other Products".
Nevertheless, markets like transparency and do not like uncertainty. While an analyst question on the call led to the home, Apple's plans to stop sharing unit numbers fueled fears – rightly or otherwise – that the company is making the change because it expects to see iPhone units drop over the next few quarters.
3. The ASP of the iPhone have soared
Through the application of the iPhone X and the initial sales of iPhone XS and XS Max, the ASP for Apple's iPhone is high at $ 793. This is well above the level of a year ago of $ 618 and a consensus of $ 751. As a result, iPhone revenues (59% of total revenue) grew 29% to $ 37.19 billion, even as units, which stood at $ 46.9 million , were about stable.
Maestri warned against the call because the aforementioned change in this year's iPhone launch schedule compared to 2017 will result in more severe comparisons of ASPs for the December quarter. Between the results, the consensus on the iPhone's ASPs for the December quarter, a seasonal record for ASPs, was $ 809.
4. China is healthy, but other emerging markets are under pressure
After a 19% rise in June, Apple's "Greater China" revenues (covering mainland China, Taiwan and Hong Kong) rose 16% to $ 11.4 billion. Although a recent government moratorium on gaming approvals has an impact on the Chinese App Store, Tim Cook noted that iPhone sales and "other products" had both grown significantly double digit in the region.
For its part, Cook admitted that Apple "saw pressure" on other emerging markets, such as India (down annually), Brazil (said "slightly down"), Turkey and Russia, partly due to exchange rate fluctuations. "[E]Each of the emerging markets has a slightly different story, and I do not see that as a problem common to most countries, "he added.
5. Missed services are estimated, but continue to grow strongly
Service revenues reached $ 9.98 billion, a consensus of less than $ 10.2 billion. The cessation of approvals of the Chinese game could have played a role, as did the anniversary of a revenue-sharing anniversary of advertising for the revised research favorably . Alphabet / Google (GOOGL). However, after canceling an accounting adjustment of $ 640 million a year ago, business revenue grew another 27%, with Apple enjoying continued double-digit growth in its installed base as well than better monetization of existing users.
Cook mentioned that Apple had "recorded new revenue records for the App Store, cloud services, AppleCare, Apple Music and Apple Pay," and noted that Apple Pay transaction volume had tripled each year. The total number of paid subscriptions supported by Apple's ecosystem (and for which Apple gets some sort of cut) is said to rise by 50% to more than 330 million.
In the future, Apple plans to include some of the products related to the estimated value of services provided for free with its hardware in its reporting line Services, rather than in its hardware lines.
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6. Sales of "portable" products continue to grow rapidly
After a 60% growth in June, Apple's "Apparel" sales, which includes Apple Watch, AirPods and Beats, increased by more than 50% in September. This contributed to the growth of 31% of Apple's other business revenue, which also covers Apple TV products, accessories, the HomePod and iPod, to reach 4.23 billion USD, a rate slightly higher than that of 4.18 billion USD.
Maestri included Apple TV sales were also strong during the quarter. The highly anticipated launch of the Apple Watch Series 4 in September will give a boost to sales of other products in December, a staggering figure for Apple's smart watch.
7. Mac and iPad had a Ho-Hum neighborhood
Mac units declined 2% to $ 5.3 million, while Mac's revenues increased 3% to $ 7.41 billion. The iPad units, penalized by the weakness of the broader tablet market, fell by 6% to 9.7 million, with a turnover down 15% to $ 4.09 billion.
The iPad Pro, MacBook Air and Mac Mini update announced earlier this week is expected to boost iPad and Mac sales in the past quarter. Maestri noted that more than half of all Mac buyers during the quarter and nearly half of all iPad buyers were new buyers.
8. The gross margin still does not move much
The September quarter gross margin (GA) GAAP was 38.3%, in line with expectations of 38% to 38.5% and slightly up from 37.9% a year ago. Apple's GM forecast for the December quarter is also between 38% and 38.5%, up from 38.4% a year ago.
While margins are benefiting from the iPhone's ASP growth and falling flash memory prices, forex fluctuations, which (in the absence of price hikes) lower the amount of revenue that Apple collects in dollars outside the United States, is a headwind. Maestri said that Apple expects a sequential exchange rate impact of 0.9 percentage points over the quarter, while indicating that higher upfront costs for new products will weigh on margins.
In the future, Apple plans to allocate its product and service-related costs individually, which will allow investors to calculate the gross margin earned by the company for each type of revenue stream.
9. R & D expenditure resumes
Apple's research spending rose 26% in June to $ 3.7 billion and 25% in September to reach $ 3.75 billion. The increases in expenses are due to reports that the company is working on an AR / VR helmet that could be launched in 2020, as well as among recruitment activities that have generated new speculation about a construction project. car in its own right.
10. Buybacks continue at a steady pace
Boosting some EPS: Apple spent $ 19.4 billion on share buybacks in the last quarter, after spending $ 20 billion in June. As a result, the number of diluted shares of the company was established at 4.85 billion, against 5.18 billion a year ago.
Maestri reiterated Apple's goal of having a net cash balance (cash less debt) neutral. As the company still had $ 122.6 billion of net cash at the end of the last quarter, this suggests (provided that Apple does not embark on a major acquisition) many more shares will be redeemed in coming years.
Eric Jhonsa of TheStreet previously covered Apple's revenue report and calls across a live blog .
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