الجمعة Nov 1 2019 08:40
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Apple posted record Q4 revenues despite slower iPhone sales and guided for a very strong holiday quarter. Shares popped 2% to reach $248 again and you can definitely sense there’s appetite to push thus stock to new all-time highs above $250. Earnings per share beat handsomely at $3.03 vs $2.84 expected and up 4% year on year. Revenues jumped 2% to $64bn.
What we learned
iPhone sales matter a lot less…
This improvement on both top and bottom line came despite a 9% drop in iPhone sales. Whilst that’s not as bad as the 15% type level seen recently, it shows how much of the lifting is now being done by other parts of the business. It suggests Apple is reaching an inflection point where it’s no longer dependent on the iPhone for EPS growth. This is across the board a positive.
…because Services and Wearables are roaring ahead
Wearables, Home and Accessories knocked it out the park, with sales up 54% to $6.52bn. This was by far the fastest growing segment and will account for an increasing percentage of sales, currently c10%.
Services growth remains good at 18%. Stripping out certain one-off items that knocked the Q3 number, this represents consistent sequential growth from the last quarter. Whilst still very positive, it’s a comedown from the +20% levels seen in preceding quarters. But with a clutch of new services rolling out, not least Apple TV+, a renewal of past growth rates is on the cards. Higher margin, recurring Services revenues are a key reason why multiples may rise – they’ve already climbed to about x20 TTM vs x15 average over the last five years.
American consumers are in good shape
The US consumer remains strong. Almost all the growth came from the Americas, which is dominated by US sales. American consumers still look in good shape. Sales in Europe, Japan and Greater China fell.
Holiday quarter could be record breaking
Guidance for the fiscal first quarter is bullish, and Apple could mark a record for quarterly revenues. Apple is guiding revenue of between $85.5 billion and $89.5 billion.
Early indicators suggest the iPhone11 is performing well with consumers. Favourable comparisons in China from last year are assured, given the previous year’s downswing in iPhone sales in the region. Moreover we can expect further improvement in iPhone sales through the 2020 year on the anticipated 5G rollout.
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