Apple – when a picture is worth a thousand words!
Okay, so we’ve got Apple’s Q2 results out tomorrow and expectations aren’t very ambitious (see Outlook in below Investment Summary).
It’s the big issue that is going to get the share price right however, and by this, whether we are looking at a re-run of Sony over two decades ago after Akio Morita stepped down. Apple under Tim Cook may be having to resort to IoS upgrades and “Error 35’s” to encourage the iPhone replacement cycle, but it’s still looking like a one-trick pony, waiting for the next big thing – not the Apple Watch or Beat, that we can be fairly sure of.
Markets may be maddening, but they are not stupid. If its not growing, why give it a growth rating? The below chart of Apple’s ‘GrowthRating’ along with its organic revenue growth versus its relative share price performance is all you really need to know. So amongst the endless research reports and meaningless PE multiples, remember the below chart, particularly if you concur that we may be looking at the start of an extended period of decline for the group.
Last comment update on: 2016-01-26
Last Trading – Q1 FY16: Revenues +1.7%/+$1.3bn to $75.87bn (vs guidance of $75.5-77.5bn), GM +20bps to 40.1% (vs guidance of 39-40%), Operating income -0.3% to $24.17bn (vs approx. $23.9bn implied from guidance), tax at 25.3% (-90bps YoY and vs guidance of 26.2%), net income +2% to $18.36bn (vs approx. $17.9bn implied from guidance) and EPS +7.1% to $3.28 (vs guidance implied of approx. $3.15) on a -4.9% reduction in average shares. DPS meanwhile was increased by +10.6% to $0.52 with period end net cash (incl securities) of $153bn (vs end Q4 of $150bn and after $9.8bn of shareholder cash returns in the quarter). YoY Revenues (at =fx) include Americas -1%, Europe +18%, China +17%, Japan -4%, and other Asia +19%. By product, this included iPhone at +1% to $51.6bn (+0% units), iPad at -21% to $7.1bn (-25% units), Mac at -3% to $6.7bn (-4% units), Services at +26% to $6.1bn and ‘Other Products’ at +61% to $4.4bn. QoQ revenues include Americas +35%, Europe +70%, China +47%, Japan +22%, and other Asia +101%. By product, this included iPhone at +60% (+56% units), iPad at +66% (+63% units), Mac at -2% (-7% units), Services at +19% and ‘Other Products’ at +43%.
Co Guidance for Q2 FY16: Revenues of $50-53bn (-11% YoY vs $58.0bn), gross margin of 39-39.5% (vs 40.8%), Op Exp of $6.0-6.1bn (+12.5% vs $5.4bn), therefore implying EBIT of approx. $14.2bn = -22.5% vs $18.3bn), other income of $325m (vs $286m) and tax at 25.5% (vs 26.9%). This suggests an anticipated net income of approx. $10.8bn (-21% vs $13.6bn) and EPS of around $1.95 (-16.4%) on the reduced average
shares in issue (of approx. -4.9%).