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Category: Stock Market and Apple (APPL)
Date: 28 January 2021 Stock Price of Apple (APPL): $142.06 We take a look at the 1st quarter earnings report of their 2021 fiscal year of Apple, the maker of the iPad, Macbook and the iPhone. The group reported revenues of $111.44 billion and net income of $28.76 billion. 58.9% of Apple sales is made up by the iPhone.
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This quarter for Apple wouldn’t have been possible without the tireless and innovative work of every Apple team member worldwide - Tim Cook, Apple’s CEO."
About Apple (APPL)
Apple is one of the worlds biggest smart phone and related accessories makers with the group manufacturing the iPhone, iPad, Macbook (laptops for those that don't know), Apple Watch and other related products and services. The group is starting to focus more and more on their services offering such as cloud services for their device users and services such as iTunes.
Overview of Apple (APPL) 1st quarter 2021 earnings results
Numbers we are interested in: (for the quarter)
Apple sales by product type and category for the 1st quarter of 2021:
So in summary Apple iPhone sales increased strongly while Mac and iPad sales surged significantly more than iPhone sales, probably due to Covid-19 and people working from home. Wearables, Home and Accessories continues to grow strongly with sales being up over 29% compared to a year ago. And services increased by almost 23.6% and is now comfortably the second biggest revenue generator for Apple after the iPhone.
- Sales of Products $95.67 billion (up from $79.1 billion for the same quarter of the previous year)
- Sales of Products decreased by 20.9% over the last 12 months
- Sales of Services $15.76 billion (up from $12.75 billion for the same quarter of the previous year)
- Sales of Services increased by 23.6% over the last 12 months
- Total cost of sales: $67.11 billion (up from $52.07 billion for the same quarter of the previous year)
- Total cost of sales increased by 28.8% over the last 12 months
- Operating income: $33.5 billion (up from $25.6billion for the same quarter of the previous year)
- Net income $28.75 billion (up from $22.2 billion for the same quarter of the previous year)
- Diluted earnings per share: $1.68 (down from $1.25 for the same quarter of the previous year)
- PE ratio of Apple: 21.2
- Dividend declared: $0.205
- Dividend yield: 0.58%
- Number of shares in issue: 17.11 billion (down from 17.82 billion for the same period of the previous year)
- Cash and cash equivalents: $36 billion
- Cash and cash equivalents per share: $2.10
- Cash and cash equivalents makes up 1.5% of Apple's market capital
- Cash and cash equivalents makes up 10.3% of Apple's total assets
- Accounts receivable, net: $27.1 billion
- Accounts receivable makes up 7.6% of Apple's total assets
- Inventories: $4.97 billion
- Inventories makes up 1.4% of Apple's total assets
- Total stockholders equity in Apple: $66.2 billion
- Stockholders equity per share in Apple: $3.86
- Apple is trading at 36.7 times its stockholders equity per share which is well outside the expected range of between 2 and 5 times that most firms tend to trade at. This ratio should raise alarm bells for investors and does point to how inflated APPL's stock price is.
- For some perspective the average price to book value of firms in the S&P 500 is 4.2
- Cash generated from operations: $38.7 billion
- Cash generated from operations per share: $2.26
Apple sales by product type and category for the 1st quarter of 2021:
- iPhone $65.6 billon (up 17.2% from $55.97 billion for the same quarter of the previous year)
- Mac: $8.67 billion (up 21% from $7.16 billion for the same quarter of the previous year)
- iPad: $8.435 billion (up 41% from $5.977 billion for the same quarter of the previous year)
- Wearables, Home and Accessories: $12.9 billion (up 29% from $10 billion for the same quarter of the previous year)
- Services: $15.7 billion (up 23.6% from $12.7 billion for the same quarter of the previous year)
So in summary Apple iPhone sales increased strongly while Mac and iPad sales surged significantly more than iPhone sales, probably due to Covid-19 and people working from home. Wearables, Home and Accessories continues to grow strongly with sales being up over 29% compared to a year ago. And services increased by almost 23.6% and is now comfortably the second biggest revenue generator for Apple after the iPhone.
Apple (AAPL) management commentary on their 1st quarter 2021 earnings
Cupertino, California — January 27, 2021 — Apple today announced financial results for its fiscal 2021 first quarter ended December 26, 2020. The Company posted all-time record revenue of $111.4 billion, up 21 percent year over year, and quarterly earnings per diluted share of $1.68, up 35 percent. International sales accounted for 64 percent of the quarter’s revenue.
“This quarter for Apple wouldn’t have been possible without the tireless and innovative work of every Apple team member worldwide,” said Tim Cook, Apple’s CEO. “We’re gratified by the enthusiastic customer response to the unmatched line of cutting-edge products that we delivered across a historic holiday season. We are also focused on how we can help the communities we’re a part of build back strongly and equitably, through efforts like our Racial Equity and Justice Initiative as well as our multi-year commitment to invest $350 billion throughout the United States.”
“This quarter for Apple wouldn’t have been possible without the tireless and innovative work of every Apple team member worldwide,” said Tim Cook, Apple’s CEO. “We’re gratified by the enthusiastic customer response to the unmatched line of cutting-edge products that we delivered across a historic holiday season. We are also focused on how we can help the communities we’re a part of build back strongly and equitably, through efforts like our Racial Equity and Justice Initiative as well as our multi-year commitment to invest $350 billion throughout the United States.”
“Our December quarter business performance was fueled by double-digit growth in each product category, which drove all-time revenue records in each of our geographic segments and an all-time high for our installed base of active devices,” said Luca Maestri, Apple’s CFO. “These results helped us generate record operating cash flow of $38.8 billion. We also returned over $30 billion to shareholders during the quarter as we maintain our target of reaching a net cash neutral position over time.”
Apple’s Board of Directors has declared a cash dividend of $0.205 per share of the Company’s common stock. The dividend is payable on February 11, 2021 to shareholders of record as of the close of business on February 8, 2021.
Apple’s Board of Directors has declared a cash dividend of $0.205 per share of the Company’s common stock. The dividend is payable on February 11, 2021 to shareholders of record as of the close of business on February 8, 2021.
Apple (AAPL) stock price chart over the last 5 years
The image below shows the stock price history of Apple ( APPL) for the last 5 years. And its been a very good time for Apple shareholders. Over the last 5 years the stock of Apple (APPL) has returned 500% to investors. No investor would say no to those kinds of returns.
The stock of Apple is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Apple stock is very positive at this point in time,
The stock of Apple is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Apple stock is very positive at this point in time,
Apple (APPL) stock vs Microsoft (MSFT) stock performance over the last 5 years
So you might be wondering why we are comparing the stock performance of Apple (APPL) to that of Microsoft (MSFT). Well both are seen as tech giants, both are listed on the Nasdaq and they have very similar market capitals with Apple's market cap sitting at $2trillion compared to Microsoft's $1.55 trillion. Below the stock price returns provided by each over the last 5 years:
So Apple (APPL) stock price has easily outperformed that of market favourite Microsoft over the last 5 years.
- Apple (APPL): 500%
- Microsoft (MSFT): 355%
So Apple (APPL) stock price has easily outperformed that of market favourite Microsoft over the last 5 years.
Apple (AAPL) latest stock valuation
So what do we value Apple's stock at after the release of their 1st quarter 2020 earnings report? Following Apple's 1st quarter 2020 earnings report our valuation model provides a target price (full value price) for Apple at $111.70 a stock. We therefore believe that the stock of Apple is overvalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $111.70. Therefore we believe a good entry point into Apple stock is at $100.50 or below. We expect the stock of Apple to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is significantly overvalued at this point in time.
Since the stock of Apple is trading at well above our target (full value) price and our suggested entry price we will go against almost all market commentators and punters and rate Apple as a sell
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $111.70. Therefore we believe a good entry point into Apple stock is at $100.50 or below. We expect the stock of Apple to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is significantly overvalued at this point in time.
Since the stock of Apple is trading at well above our target (full value) price and our suggested entry price we will go against almost all market commentators and punters and rate Apple as a sell
Next earnings release of Apple
It is expected that Apple will publish their Q2 2021 earnings report in late April 2021