Apple, Inc. Expects A Very Good 4Q: Analysts

Apple appears to be expecting to blow past analysts’ revenue estimates for the December quarter, believes Morgan Stanley. Such an expectation from the firm is based on Apple’s spending plans.

Apple has big spending plans

In the last quarterly report, Apple Inc. (NASDAQ:AAPL) reported $29.5 billion in off-balance sheet commitments and $7.3 billion in other commitments. These numbers reveal the company’s expected spending on parts and manufacturing equipment. This helps analysts in projecting what the company is expecting in terms of sales.

Based on this, Morgan Stanley expects that Apple is expecting revenue of $84.4 billion for the December quarter, up 9% from consensus estimates. In the last two quarters, Apple has beaten the consensus by 1% and by 3% on average since 2013. In terms of capital expenditures like manufacturing capacity, the iPhone firm is planning to spend $15 billion during the fiscal year, which can be attributed to revenue of $252 billion for the year or 3% more than the consensus.

Morgan Stanley has an Overweight rating on the stock with a price target of $152.

Samsung can match Apple’s scale

Apple’s capital spending has gone up sharply in the past half-decade or so. In its latest 10-K filing with the SEC, Apple said its capital expenditures in 2016 include “product tooling and manufacturing process equipment; data centers; corporate facilities and infrastructure, including information systems hardware, software and enhancements; and retail store facilities.”

For Apple, the biggest jump in the actual capital spending was noted from 2011 to 2012 when the number jumped over $10 billion. This was more than the $8 billion the iPhone firm projected. In 2013,and  the spending was $3 billion less that the forecast, says a report from The Motley Fool. Despite the ups and downs, Apple has shown commitment in making advances in technologies. Such big spending helps Apple take its technology further, something that its rivals can’t afford to do. The only rival that can match Apple’s scale is Samsung.

The Korean firm has a big capital budget, but the majority is allocated towards its semiconductor operations. But after losing the smartphone battle to Apple, the Korean firm is trying hard to win back lost ground by focusing more on higher-quality devices. Thus, for the full year, Samsung expects capital expenditures to be $24 billion.

On Monday, Apple shares closed up 1.41% at $121.18. Year to date, the stock is up by almost 10% while in the last one year, it is up by over 12%.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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