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Category: Stock Market and Apple (APPL)
Date: 29 October 2020 Stock Price of Apple: $115.32 We take a look at the 4th quarter earnings report of their 2020 fiscal year of Apple, the maker of the iPad, Macbook and the iPhone. The group reported revenues of $64.7 billion and net income of $12.67 billion for the 4th quarter of 2020. Revenues were up by 1% compared to the same quarter of the previous year while net income declined by 8% when compared to the same quarter of the previous year.
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Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive -Tim Cook, Apple’s CEO."
About Apple
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's 4th quarter 2020 earnings results
Numbers we are interested in: (for the quarter)
Apple sales by product type and category for the 4th quarter of 2020:
So in summary Apple iPhone sales declined strongly while Mac and iPad sales surged significantly, probably due to Covid-19 and people working from home. Wearables, Home and Accessories continues to grow strongly with sales being up over 20.8% compared to a year ago. And services increased by almost 17% and is now comfortably the second biggest revenue generator for Apple after the iPhone.
- Sales of Products $50.149 billion (down from $51.529 billion for the same quarter of the previous year)
- Sales of Products decreased by 2.7% over the last 12 months
- Sales of Services $14.549 billion (up from $12.511 billion for the same quarter of the previous year)
- Sales of Services increased by 16.3% over the last 12 months
- Total cost of sales: $40.009 billion (up from $39.727 billion for the same quarter of the previous year)
- Total cost of sales increased by 0.7% over the last 12 months
- Operating income: $14.775 billion (down from $15.625 billion for the same quarter of the previous year)
- Net income $12.673 billion (down from $13.686 billion for the same quarter of the previous year)
- Diluted earnings per share: $0.73 (down from $0.76 for the same quarter of the previous year)
- PE ratio of Apple: 35
- Dividend declared: $0.205
- Dividend yield: 0.71%
- Number of shares in issue: 17.256 billion (down from 18.081 billion for the same period of the previous year)
- Cash and cash equivalents: $38.016 billion
- Cash and cash equivalents per share: $2.20
- Cash and cash equivalents makes up 1.9% of Apple's market capital
- Cash and cash equivalents makes up 11.7% of Apple's total assets
- Accounts receivable, net: $16.120 billion
- Accounts receivable makes up 4.9% of Apple's total assets
- Inventories: $4.016 billion
- Inventories makes up 1.1% of Apple's total assets
- Total stockholders equity in Apple: $65.339 billion
- Stockholders equity per share in Apple: $3.78
- Apple is trading at 30.4 times its stockholders equity per share which is well outside the expected range of between 2 and 4 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 3.7.
- Cash generated from operations (for fiscal 2020): $80.674 billion
- Cash generated from operations per share (for fiscal 2020): $4.67
Apple sales by product type and category for the 4th quarter of 2020:
- iPhone $26.444 billon (down -20.6% from $33.326 billion for the same quarter of the previous year)
- Mac: $9.032 billion (up 29.2% from $6.991 billion for the same quarter of the previous year)
- iPad: $6.797 billion (up 45.9% from $4.656 billion for the same quarter of the previous year)
- Wearables, Home and Accessories: $7.876 billion (up 20.8% from $6.520 billion for the same quarter of the previous year)
- Services: $14.549 billion (up 16.2% from $12.511 billion for the same quarter of the previous year)
So in summary Apple iPhone sales declined strongly while Mac and iPad sales surged significantly, probably due to Covid-19 and people working from home. Wearables, Home and Accessories continues to grow strongly with sales being up over 20.8% compared to a year ago. And services increased by almost 17% and is now comfortably the second biggest revenue generator for Apple after the iPhone.
Apple (AAPL) management commentary on their 3rd quarter 2020 earnings
Cupertino, California — October 29, 2020 — Apple today announced financial results for its fiscal 2020 fourth quarter ended September 26, 2020. The Company posted record September quarter revenue of $64.7 billion and quarterly earnings per diluted share of $0.73. International sales accounted for 59 percent of the quarter’s revenue.
“Apple capped off a fiscal year defined by innovation in the face of adversity with a September quarter record, led by all-time records for Mac and Services,” said Tim Cook, Apple’s CEO. “Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive. From remote learning to the home office, Apple products have been a window to the world for users as the pandemic continues, and our teams have met the needs of this moment with creativity, passion, and the kinds of big ideas that only Apple can deliver.”
“Apple capped off a fiscal year defined by innovation in the face of adversity with a September quarter record, led by all-time records for Mac and Services,” said Tim Cook, Apple’s CEO. “Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive. From remote learning to the home office, Apple products have been a window to the world for users as the pandemic continues, and our teams have met the needs of this moment with creativity, passion, and the kinds of big ideas that only Apple can deliver.”
“Our outstanding September quarter performance concludes a remarkable fiscal year, where we established new all-time records for revenue, earnings per share, and free cash flow, in spite of an extremely volatile and challenging macro environment,” said Luca Maestri, Apple’s CFO. “Our sales results and the unmatched loyalty of our customers drove our active installed base of devices to an all-time high in all of our major product categories. We also returned nearly $22 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 November 12, 2020 to shareholders of record as of the close of business on November 9, 2020.
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 November 12, 2020 to shareholders of record as of the close of business on November 9, 2020.
Apple (NYSE:AAPL) stock price history over the last 5 years
The image below obtained from Google, shows the stock price history of Apple (NASDAQ: APPL) for the last 5 years. And its been a very good time for Apple shareholders. 5 years ago the stock of Apple was trading at around $29 a stock and its currently trading at $115.32 a stock. That's a very healthy 297.6% return provided to Apple stockholders over the last 5 years.
The stock of Apple is trading at a lot closer to its 52 week high of $137.98 than it is to its 52 week low of $53.15 a stock, 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 of $137.98 than it is to its 52 week low of $53.15 a stock, 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 Microsoft's stock price has easily outperformed that of market favourite, Apple over the last 5 years.
- Apple (APPL): 217%
- Microsoft (MSFT): 377.41%
So Microsoft's stock price has easily outperformed that of market favourite, Apple over the last 5 years.
Recent news coverage of Apple
The extract below discusses the latest regarding Apple (APPL) as obtained from Fool.com
What happened
Shares of Apple (NASDAQ:AAPL) declined by more than 5% after the market close on Thursday, following the tech titan's fourth-quarter earnings release.
So what
Apple's revenue rose 1% year over year to $64.7 billion. With more people working and learning from home during the coronavirus crisis, Apple's Mac and iPad sales rose 29% and 46%, respectively. "From remote learning to the home office, Apple products have been a window to the world for users as the pandemic continues, and our teams have met the needs of this moment with creativity, passion, and the kinds of big ideas that only Apple can deliver," CEO Tim Cook said in a press release.
Yet sales of iPhones fell more than 20%, to $26.44 billion. That was below Wall Street's estimates of $27.93 billion. Additionally, Apple declined to offer guidance for the first quarter of fiscal 2021, which disappointed investors hoping to gain some insight into management's expectations for sales of the company's new 5G-enabled iPhones.
Now what
During an interview with CNBC, Cook said that rising COVID-19 case counts, as well as the general economic uncertainty related to the pandemic, made giving accurate guidance difficult. Yet Cook did say that "initial data points are really quite good" for the iPhone 12's launch.
"Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive," Cook said.
Read the full article here
What happened
Shares of Apple (NASDAQ:AAPL) declined by more than 5% after the market close on Thursday, following the tech titan's fourth-quarter earnings release.
So what
Apple's revenue rose 1% year over year to $64.7 billion. With more people working and learning from home during the coronavirus crisis, Apple's Mac and iPad sales rose 29% and 46%, respectively. "From remote learning to the home office, Apple products have been a window to the world for users as the pandemic continues, and our teams have met the needs of this moment with creativity, passion, and the kinds of big ideas that only Apple can deliver," CEO Tim Cook said in a press release.
Yet sales of iPhones fell more than 20%, to $26.44 billion. That was below Wall Street's estimates of $27.93 billion. Additionally, Apple declined to offer guidance for the first quarter of fiscal 2021, which disappointed investors hoping to gain some insight into management's expectations for sales of the company's new 5G-enabled iPhones.
Now what
During an interview with CNBC, Cook said that rising COVID-19 case counts, as well as the general economic uncertainty related to the pandemic, made giving accurate guidance difficult. Yet Cook did say that "initial data points are really quite good" for the iPhone 12's launch.
"Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive," Cook said.
Read the full article here
Apple (NASDAQ:AAPL) stock valuation
So what do we value Apple's stock at after the release of their 4th quarter 2020 earnings report? Following Apple's 4th quarter 2020 earnings report our valuation model provides a target price (full value price) for Apple at $68.90 a stock (up slightly from our 2nd quarter 2019 earnings report valuation of Apple. Note this valuation was done prior to the Apple stock split). 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 $68.90. Therefore we believe a good entry point into Apple stock is at $62 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 $68.90. Therefore we believe a good entry point into Apple stock is at $62 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 Q1 2021 earnings report in late January 2021