ii view: Apple reports record revenue

Apple shares are up over 50% year to date. Could healthy holiday sales see them go higher? 

Fourth-quarter results ending 28 September 2019

• Revenue up 2% to $64 billion from Q4 2018
• Net income down 3% to $13.7 billion
• Earnings per share up 4% to $3.03
• Returned over $21 billion to shareholders
• Dividend up 5.5% to $0.77 per share from Q4 2018

Chief Executive Tim Cook commented: 

“We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fuelled by accelerating growth from Services, Wearables and iPad. 

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 line-up of products and services ever, we’re very optimistic about what the holiday quarter has in store.”

ii round-up:

iPhone maker Apple Inc (NASDAQ:AAPL) reported record fourth-quarter revenue and predicted forecast-beating holiday sales in these end of year results. 

Revenue of $64 billion topped analyst estimates driven by its move to increase its diversity of sales away from its famed iPhone. Services sales grew by 18%, Wearables and Accessories such as its watches increased by 54% and iPad sales were up 17%. iPhone sales declined by 5%. 

The group, whose new streaming service Apple TV+ is about to go live, predicted first-quarter Christmas holiday sales of between $85.5 billion and $89.5 billion, potentially ahead of analyst estimates of around $87 billion. Reductions in the price of its latest iPhone 11 range may well contribute. 

While sales in China fell by just over 2%, Chief Executive Tim Cook remained optimistic that a satisfactory trade agreement between the US and China would be reached. Many of its products are manufactured in China. 

Sales in the Americas, its biggest region and including its home US market, rose by 6.5% to $29.3 billion, although sales in its number two region Europe fell by just under 3% to $14.9 billion. 

The share price rose by 2% in after-hours US stock market trading. 

ii view:

The success of the company’s iPhone is arguably the product success of the millennium. In 2018, Apple sold over 215 million iPhones worldwide, up from under 2 million in 2007 when it was launched.  

A base of over 1.4 billion active devices has allowed its Services business, which includes Apple music, to blossom. Services accounted for just under one-fifth of fourth-quarter sales. The launch of its AirPods Pro and a push to diversify its product sales also appears to be showing promise.  

For investors, concerns over what might take-up the slack from the current tailing-off of iPhone device sales persist, but do appear to be easing. A trade war between the US and China, a key market place, is also unhelpful. More favourably, the group’s cash balance and recent change towards funnelling cash back to shareholders offers a positive. 

Positives:

• Apple is predicting buoyant first-quarter holiday sales
• Shareholder returns are now a focus
• Launching new products such Apple TV+ and a credit card

Negatives:

• Sales of its iPhone, its key product, again fell
• Concerns regarding an antitrust US Justice Department probe persist
• A trade war between the US and China is hindering Chinese sales

The average rating of stock market analysts:

Buy