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Category: Stock Market and Apple
Date: 26 August 2019 Stock Price: $202.64 We take a look at the 3rd quarter financial results 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 latest results
Numbers we are interested in: (for the quarter)
Sales by product type and category
- Sales of Products $ 42.354 billion (down from $ 43.095 billion for the same quarter of the previous year)
- Sales of Services $11,455 (up from $10.170 billion for the same quarter of the previous year)
- Total cost of sales: $33.582 billion (up from $32.844 billion for the same quarter of the previous year)
- Operating income: $11.544 (down from $12.612 billion for the same quarter of the previous year)
- Net income $ 10.044 billion (down from $ 11.519 billion for the same quarter of the previous year)
- Diluted earnings per share: $ 2.18 (down from $ 2.34 for the same quarter of the previous year)
- Number of shares in issue: 4,601,380,000
- Accounts receivable, net: $14.148 billion
- Inventories: $3.355 billion
- Total shareholders’ equity: $96.456 billion
- Net asset value per share: $20.86
- Dividend per share: $0.77
- Dividend yield: 1.5% (assuming this quarter's dividend is paid for full financial year)
- Cash generated from operations: $41.570 billion
- Cash generated from operations per share: $9.03
Sales by product type and category
- iPhone $ 25.986 billon (down from $ 29.470 billion for the same quarter of the previous year)
- Mac: $5.820 billion (down from $5.258 billion for the same quarter of the previous year)
- iPad: $5.023 billion (up from $4.634 billion for the same quarter of the previous year)
- Wearables, Home and Accessories: $5.525 billion (up from $3.733 billion for the same quarter of the previous year)
- Services: $11.455 billion (up from $10.170 billion for the same quarter of the previous year)
Apple (NASDAQ:AAPL) management commentary on the results and earnings guidance
The Company posted quarterly revenue of $53.8 billion, an increase of 1 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.18, down 7 percent. International sales accounted for 59 percent of the quarter’s revenue. “This was our biggest June quarter ever — driven by all-time record revenue from Services, accelerating growth from Wearables, strong performance from iPad and Mac and significant improvement in iPhone trends,” said Tim Cook, Apple’s CEO. “These results are promising across all our geographic segments, and we’re confident about what’s ahead. The balance of calendar 2019 will be an exciting period, with major launches on all of our platforms, new services and several new products.”
“Our year-over-year business performance improved compared to the March quarter and drove strong operating cash flow of $11.6 billion,” said Luca Maestri, Apple’s CFO. “We returned over $21 billion to shareholders during the quarter, including $17 billion through open market repurchases of almost 88 million Apple shares, and $3.6 billion in dividends and equivalents.”
Apple is providing the following guidance for its fiscal 2019 fourth 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 August 15, 2019 to shareholders of record as of the close of business on August 12, 2019.
“Our year-over-year business performance improved compared to the March quarter and drove strong operating cash flow of $11.6 billion,” said Luca Maestri, Apple’s CFO. “We returned over $21 billion to shareholders during the quarter, including $17 billion through open market repurchases of almost 88 million Apple shares, and $3.6 billion in dividends and equivalents.”
Apple is providing the following guidance for its fiscal 2019 fourth quarter:
- revenue between $61 billion and $64 billion
- gross margin between 37.5 percent and 38.5 percent
- operating expenses between $8.7 billion and $8.8 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 August 15, 2019 to shareholders of record as of the close of business on August 12, 2019.
Apple (NYSE:AAPL) stock price history
The image below o shows the stock price history of Apple (NASDAQ: APPL) for the last 5 years. Apple shares dropped by almost 5% (or $9.82) on Friday after more tariffs were announced by President Donald Trump on Chinese goods, to which China responded with retaliatory tariffs sending Apple shares tumbling as the trade war dragging on is affecting the sales and manufacturing of the group's products.
Apple (NASDAQ:AAPLE) stock valuation
So what do we value the group's shares at considering the fact that a new round of tariffs is set to hit the group's sales (in particular sales of the iPhone). Based on their current financial results we value the group's share at $187.2 a share. We therefore feel that looking at Apple's stock price from a fundamental investment point of view the group's shares are overvalued and we would not recommend buying their shares right now and would suggest looking to get into Apple shares at a price below our target (or full value price of $187.20)