Apple slumps on Light Guidance and Disclosure Plans: 10 Key Takeaways
Apple's sales forecasts and a planned accounting change exceed the company's latest sales and earnings team.
After Thursday, Apple reported quarterly revenue for the fourth quarter last year of $ 62.9 billion (up 20% annually) and GAAP EPS at $ 2.91, topping consensus analyst estimates of $ 61.46 billion and $ 2.78. However, for the seasonally large quarter in December, the company ruled revenue of $ 89 billion to $ 93 billion, largely below a consensus of $ 92.94 billion.
Stocks fell in post-trade because of the guidance and added losses after financial director Luca Maestri stated on the earnings call that Apple plans to end its historical practices to break out iPhone devices, iPad and Mac devices. They closed down 6.5% to $ 207.81[ads1]; During the year, Apple is still up in the year after increasing in August and September following a strong quarterly report. Some chip vendors, such as Skyworks (SWKS), Qorvo (QRVO), Broadcom (AVGO) and STMicroelectronics (STM), also fell under Apple's report.
Here are some remarkable meat stores from Apple's earnings report and conversation.
1. The company is partly due to currency fluctuations
As is the case with many other American multinational companies, a stronger dollar pushes Apple's top line. Maestri listed forex is expected to have an impact on revenue of $ 2 billion on revenue in December and an impact of 2 percentage points on revenue growth.
He also indicated the prospects of macro uncertainty related to emerging markets, and also related to Supply / Demand Balance for new products (presumably, iPhone XR is one of them). In addition, Maestri noted the fact that Apple launched its flagship iPhone in the September quarter, and a cheaper iPhone in the December quarter, having done the reverse last year, will have an income effect.
2. Apple insists on unit sales figures does not mean as much as now
"[T]" the number of devices sold in a 90-day period is not necessarily representative of the underlying strength of our business. "Maestri largely supports Apple's September quarter. While the iPhone, iPad and Macs were flat, down 6% and down 2%, total revenue increased 20% thanks to strong growth in the iPhone average selling price (ASP), as well as major increases in the company's services and "Other products" revenue.
Nevertheless, markets like transparency and dislike uncertainty. As an analyst's question on the call drove home, Apple's plans to quit sharing the unit numbers have fought – rightly or not – that the company makes the change because it expects to see the iPhone slow down in future quarters.
3. iPhone ASPs Soared
Thanks to the iPhone X demand, in addition to some introductory iPhone XS and X S Max sales, Apple's iPhone ASP came in to a lot of $ 793. It's well over a year ago the level of $ 618, and also over a $ 751 consensus. As a result, iPhone revenues (59% of total revenue) increased 29% to $ 37.19 billion, although devices that came in at 46.9 million were approximately flat.
Maestri announced that the above shift in this year's iPhone launch plan compared to 2017 will result in tougher ASP comparisons for the December quarter. Going into revenue was the iPhone ASP consensus for the December quarter, a seasonally strong for ASP, at $ 809.
4. China is healthy, but other emerging markets are under pressure
After rising 19% in June quarter, Apple's "Great China" revenue (covering mainland China Taiwan and Hong Kong) increased 16% to 11.4 billion dollars. While a recent government's moratorium on game approvals affects the Chinese App Store, Tim Cook discovered that both iPhone and "Other Products" sales grew to a strong two-digit cut in the region.
On the other hand, Cook took Apple to "see pressure" in other emerging markets, such as India (flatly), Brazil (said to be "slightly down"), Turkey and Russia, partly due to currency fluctuations. "[E] One of the emerging markets has a bit of another story, and I do not see it as a kind of problem that is common among them for the most part," he added.
5. Services Missed Estimates, But Still Strong
Service revenue came to $ 9.98 billion, under a consensus of $ 10.2 billion. The Chinese approval deviation may have played a role, and it may also be the reason for a one-year anniversary of a favorable revised revenue sharing of search ads with Alphabet / Google (GOOGL). However, after supporting an accounting adjustment of $ 640 million a year, revenues remained 27%, as Apple benefits from continued double-digit growth in its installed base, as well as better revenue generation of existing users.
Cook mentioned Apple saw "new all-time revenue records for the App Store, cloud services, AppleCare, Apple Music and Apple Pay," and noted Apple Pay's transaction volume tripled annually. The total number of subscriptions supported by Apple's ecosystem (and as Apple gets some kind of cuts) is said to be up 50% to over 330 million.
Formerly Apple plans to include some revenue related to its estimated value
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6. & # 39; Wearables & # 39; Sales continue to grow fast
After growing 60% in June quarter, Apple's wearables revenue, which covers Apple Watch, AirPods and Beats headsets, increased over 50% in the September quarter. It helped Apple's other products, which also covers Apple TV, accessories, HomePod and iPods, grows 31% to $ 4.23 billion, just over a $ 4.18 billion consensus.
Maestri included Apple TV sales were also strong in the quarter. The September launch of the well-received Apple Watch Series 4 will boost sales of other products in the December quarter, which is a seasonally high for Apple's smartwatch.
7. Macs and iPads Had a Ho-Hum Quarter
Macs dropped 2% to 5.3 million, while Mac revenue rose 3% to $ 7.41 billion. iPad devices, damaged by weakness in the broad tablet market, fell 6% to 9.7 million, with sales of 15% to 4.09 billion dollars.
The iPad update, MacBook Air and Mac Mini update unveiled earlier this week, would give some boost to December quarter iPad and Mac sales. Maestri noted that over half of all Mac buyers in the quarter, and almost half of all iPad buyers, were first-time buyers.
8. Gross margin still not much
The GAAP gross margin (GM) for the September quarter was 38.3%, in line with guidance from 38% to 38.5% and a year-on-year increase of 37.9%. Apple's December-quarter GM guidance is also 38% to 38.5%, compared to a year ago at 38.4%.
While margins benefit from iPhone ASP growth and lower flash memory prices, forex turns, which (absent price tours) reduce the amount of revenue Apple collects in dollars outside of the US is a headwind. Maestri noted Apple expects to see a 0.9 percentage point sequential impact this quarter from forex while also indicating higher initial costs for new products will weigh on margins.
In the future, Apple plans to break out its cost of product and services revenue, which will allow investors to calculate the gross margin the company sees for each type of revenue stream.
9. R & D spending picks up
Apple R & D spending rose 26% in June quarter to $ 3.7 billion and 25% in Q3 to $ 3.75 billion. Expenditure increases come from reports that the company is working on an AR / VR headset that can start in 2020, and also from recruitment activity that has created new speculation about a project to build a full-service car.
10. Buyback continues at a good pace
EPS growth slightly: Apple spent $ 19.4 billion on stock purchases last year, after spending $ 20 billion on them in June quarter. As a result, the company's diluted shareholding was NOK 4.85 billion, down from 5.18 billion the previous year.
Maestri repeated Apple's goal of having a neutral net cash balance (cash minus debt). With the company still having 122.66 billion dollars in net cash at the end of last quarter, it suggests (if Apple does not splurge on a major acquisition), much more shares will be repurchased in the next few years.
TheStreet Eric Jhonsa previously covered Apple's revenue report and called through a live blog .