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Category: Stock Market and Apple
Date: 31 October 2019 Stock Price: $243.26 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Apple, the maker of the iPad, Macbook and the iPhone. Has the trade war between China and the United States hurt the group's earnings or are their services offering picking up the slack from slowing device sales?
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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.
Financial overview of Apple's 4th quarter 2019 earnings results
Numbers we are interested in: (for the quarter)
Apple sales by product type and category for the 4th quarter of 2019:
- Sales of Products $ 51.529 billion (down from $ 52.301 billion for the same quarter of the previous year)
- Sales of Services $12.511 billion (up from $10.599 billion for the same quarter of the previous year)
- Total cost of sales: $39.727 billion (up from $38.816 billion for the same quarter of the previous year)
- Operating income: $15.625 (down from $16.881 billion for the same quarter of the previous year)
- Net income $ 13.686 billion (down from $ 14.125 billion for the same quarter of the previous year)
- Diluted earnings per share: $3.03 (up from $ 2.91 for the same quarter of the previous year)
- PE ratio of Apple: 19.8
- Dividend declared: $0.77
- Dividend yield: 1.31%
- Number of shares in issue: 4.52 billion (down from 4.847 billion for the same period of the previous year)
- Cash and cash equivalents: $48.840 billion
- Cash and cash equivalents per share: $10.07
- Cash and cash equivalents makes up 4.3% of Apple's market capital
- Cash and cash equivalents makes up 14.4% of Apple's total assets
- Accounts receivable, net: $22.926 billion
- Accounts receivable makes up 6.77% of Apple's total assets
- Inventories: $4.106 billion
- Inventories makes up 1.22% of Apple's total assets
- Total stockholders equity in Apple: $90.488billion
- Stockholders equity per share in Apple: $20.01
- Apple is trading at 11.7 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
- Cash generated from operations (for the full fiscal year): $69.391 billion
- Cash generated from operations per share: $15.35
Apple sales by product type and category for the 4th quarter of 2019:
- iPhone $33.362 billon (down from $ 36.755 billion for the same quarter of the previous year)
- Mac: $6.991 billion (down from $7.340 billion for the same quarter of the previous year)
- iPad: $4.656 billion (up from $3.983 billion for the same quarter of the previous year)
- Wearables, Home and Accessories: $6.520 billion (up from $4.223 billion for the same quarter of the previous year)
- Services: $12.511 billion (up from $10.599 billion for the same quarter of the previous year)
Apple (NASDAQ:AAPL) management commentary on 4th quarter 2019 earnings and guidance
Cupertino, California — October 30, 2019 — Apple today announced financial results for its fiscal 2019 fourth quarter ended September 28, 2019. The Company posted quarterly revenue of $64 billion, an increase of 2 percent from the year-ago quarter, and quarterly earnings per diluted share of $3.03, up 4 percent. International sales accounted for 60 percent of the quarter’s revenue.
“We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad,” said Tim Cook, Apple’s CEO. “With customers and reviewers raving about the new generation of iPhones, today’s debut of new, noise-cancelling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best lineup of products and services ever, we’re very optimistic about what the holiday quarter has in store.”
“Our strong business performance drove record Q4 EPS of $3.03 and record Q4 operating cash flow of $19.9 billion,” said Luca Maestri, Apple’s CFO. “We also returned over $21 billion to shareholders, including almost $18 billion in share repurchases and $3.5 billion in dividends and equivalents, as we continue on our path to reaching a net cash neutral position over time.”
Apple is providing the following guidance for its fiscal 2020 first quarter:
Apple’s board of directors has declared a cash dividend of $0.77 per share of the Company’s common stock. The dividend is payable on November 14, 2019 to shareholders of record as of the close of business on November 11, 2019.
“We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad,” said Tim Cook, Apple’s CEO. “With customers and reviewers raving about the new generation of iPhones, today’s debut of new, noise-cancelling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best lineup of products and services ever, we’re very optimistic about what the holiday quarter has in store.”
“Our strong business performance drove record Q4 EPS of $3.03 and record Q4 operating cash flow of $19.9 billion,” said Luca Maestri, Apple’s CFO. “We also returned over $21 billion to shareholders, including almost $18 billion in share repurchases and $3.5 billion in dividends and equivalents, as we continue on our path to reaching a net cash neutral position over time.”
Apple is providing the following guidance for its fiscal 2020 first quarter:
- revenue between $85.5 billion and $89.5 billion
- gross margin between 37.5 percent and 38.5 percent
- operating expenses between $9.6 billion and $9.8 billion
- other income/(expense) of $200 million
- tax rate of approximately 16.5 percent
Apple’s board of directors has declared a cash dividend of $0.77 per share of the Company’s common stock. The dividend is payable on November 14, 2019 to shareholders of record as of the close of business on November 11, 2019.
Apple (NYSE:AAPL) stock price history
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 $108 a stock and its currently trading at $243.26 a stock. That's a very healthy 125.2% 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 $249.75 than it is to its 52 week low of $142 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 $249.75 than it is to its 52 week low of $142 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,
Recent coverage of Apple
The extract below discusses Apple's latest results as obtained from TheStreet.com
Shares of Apple (AAPL - Get Report) rose after the tech giant reported earnings that beat expectations and strong guidance for the current quarter. The stock was rising 1.46% to $246.81 a share in post-market trading, after having finished flat in regular hours. Earnings per share came in at an adjusted $3.03 for its fiscal year fourth quarter, beating estimates of $2.84 and rising 4% year-over-year. Revenue was $64.04 billion, beating estimates of $63.015 billion and rising 2%. iPhone sales came in at $33.362 billion, beating estimates of $32.773 billion. Analysts were already expecting a strong quarter for iPhone sales, as the company's new iPhone 11s are sold at a lower price point than previous new models were.
Mac sales were $6.991 billion, slightly below expectations. iPad revenue was $4.656 billion. Wearables, Home and Accessories, which includes the Apple Watch, was $6.52 billion, a jump of 54%. Services revenue was $12.511 billion, also ahead of expectations.
Read the full article here
Shares of Apple (AAPL - Get Report) rose after the tech giant reported earnings that beat expectations and strong guidance for the current quarter. The stock was rising 1.46% to $246.81 a share in post-market trading, after having finished flat in regular hours. Earnings per share came in at an adjusted $3.03 for its fiscal year fourth quarter, beating estimates of $2.84 and rising 4% year-over-year. Revenue was $64.04 billion, beating estimates of $63.015 billion and rising 2%. iPhone sales came in at $33.362 billion, beating estimates of $32.773 billion. Analysts were already expecting a strong quarter for iPhone sales, as the company's new iPhone 11s are sold at a lower price point than previous new models were.
Mac sales were $6.991 billion, slightly below expectations. iPad revenue was $4.656 billion. Wearables, Home and Accessories, which includes the Apple Watch, was $6.52 billion, a jump of 54%. Services revenue was $12.511 billion, also ahead of expectations.
Read the full article here
Apple (NASDAQ:AAPLE) stock valuation
So what do we value Apple's stock at after the release of their 4th quarter 2019 earnings and their guidance provided for 2020. Based on their latest earnings report our valuation model provides a target (full value) price of Apple at $191.40 a stock (up slightly from our 3rd quarter 2019 earnings report valuation of Apple). 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 $191.40. Therefore we believe a good entry point into Apple stock is at $172.30 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 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 most market commentators 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 $191.40. Therefore we believe a good entry point into Apple stock is at $172.30 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 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 most market commentators and rate Apple as a sell
Next earnings release of Apple
It is expected that Apple will publish their Q1, 2020 earnings report in early February 2020