ii view: Apple breaks records

Shares for this tech icon are down year-to-date but are outperforming the tech-heavy Nasdaq index. We assess prospects. 

Fourth-quarter results to 24 September

• Revenue up 8% to $90.1 billion
• Earnings per share up 4% to $1.29
• Dividend of $0.23 per share, unchanged from the previous quarter
• Returned over $29 billion to shareholders

Chief executive Tim Cook commented: 

“This quarter’s record results speak to Apple’s constant efforts to innovate, to advance new possibilities, and to enrich the lives of our customers. As always, we are leading with our values, and expressing them in everything we build, from new features that are designed to protect user privacy and security, to tools that will enhance accessibility, part of our longstanding commitment to create products for everyone.”

ii round-up:

US stock market giant Apple (NASDAQ:AAPL) reported record fourth-quarter sales of $90.1 billion (£77 billion), helping its active installed base of devices also reach a new all-time high. 

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Earnings up 4% year-over-year to $1.29 per share exceeded Wall Street forecasts with Apple once again offering no next-quarter guidance.  

Apple shares were little changed in after-hours US trading having come into this latest announcement down by just under a fifth year-to-date. That’s similar to the S&P 500 index during 2022 and better than the 31% fall for the tech-heavy Nasdaq index. Shares for Google owner Alphabet (NASDAQ:GOOGL) and maker of rival smartphone software Android are down by more than a third year-to-date. 

Sales of Apple’s core iPhone product rose by nearly a 10th during the quarter to $42.6 billion, while Service sales including its Apple Music offering improved by almost 5% to $19.2 billion. 

Geographically, revenues for its core American market rose 8% to $39.8 billion, with only sales for its Japanese business falling. Sales in Greater China rose 6% to $15.4 billion.  

Despite detailing no next-quarter guidance since 2020, management in its post-results conference call did point to some expected slowing in sales growth from this quarter’s total 8%. Sales for its Services business are expected to slow given the tough backdrop for consumers. 

The biggest US company by stock market value returned over $29 billion to shareholders during the quarter. Sales for the full year climbed 8% to $394.3 billion. 

ii view:

Started in 1976 by Steve Jobs, Apple today employs more than 150,000 people. Sales for its iPhone product account for just over half of all sales, followed by Service sales at around a fifth. Wearables, Home and Accessories, and Mac sales come in next at around a 10th each, with the iPad its smallest generator of sales and making up the balance. 

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For investors, a global cost-of-living crisis for consumers and an uncertain economic outlook offer a tough backdrop for customers to spend on Apple's high-ticket value products. Costs for companies generally remain elevated, while the West’s relationship with China, a key Apple market, is increasingly strained. Environmental concerns and the required use of resources in making its products also warrants consideration.   

On the upside, the move to 5G phones and faster data-download speeds does give customers reasons to upgrade. The tying in of customers to Apple services generates high customer loyalty, while diversity in both product and geographical region are not to be forgotten. 

For now, this well-managed company looks to remain deserving of its place in many already diversified long-term focused portfolios.  

Positives:

• Diverse geographical markets
• Strong customer loyalty

Negatives:

• Dependency on iPhone sales
• Strained relations between the West and China

The average rating of stock market analysts:

Buy