Apple – The Gift That Keeps On Giving

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Apple – The Gift That Keeps On Giving
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Apple Inc (NASDAQ:AAPL)’s total net sales rose 28.8% to $83.4bn– a fourth quarter record. This represented a 29.8% rise in product sales, to $65.1bn, while services made up $18.3bn and rose 25.6%. Operating expenses increased 14.9%, and operating profit rose to $23.8bn, compared to $14.8bn this time last year.

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Rise In iPhone Sales

Every geography grew in the quarter, and this was most pronounced in Greater China were sales rose over 83% to $14.6bn.

Within products, iPhones still make up the bulk of sales, accounting for $38.9bn and rising from $26.4bn. Mac sales rose 1.6% to $9.2bn, while iPad’s were up 21.4% at $8.3bn. Wearables, Home and Accessories went from $7.9bn to $8.8bn.

Apple generated free cash flow of $93.0bn in the year as a whole, up from $73.4bn last year. Apple had net debt of $56.1bn at the end of September.

$24bn was returned to shareholders in the quarter, and the board announced a dividend of $0.22 per share.

Apple shares fell 3.5% in after-market trading.

Apple's record Growth In The FOurth Quarter

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown

“Apple is the gift that keeps on giving. Despite enormous macroeconomic pressure, it’s delivered a fourth quarter of record growth. Every single geography and product category has set a record. That is hard to do when the world is normal, let alone today. The incredible performance comes down to Apple’s nail-on-the-head new product launches. You can’t fault Apple’s dogged efforts to protect its brand and capture customers in its web – if your phone is from Apple, they’ve made sure your life is a whole lot easier if your laptop and smart watch are too.

The most astonishing figure when it comes to Apple is the amount of free cash flow pumping through the company’s veins. The group had over $90bn of free cash flow in the last year, which is what can ultimately be used to pay down debt or pay shareholder returns. Unusually for a tech giant, Apple does offer a dividend. You’d be forgiven for wondering if it shouldn’t be a little more generous given the abundance of resources available.

Looking back, it’s hard to fault the year Apple’s had. But that doesn’t cancel out some questions. The group’s costs as a proportion of sales for its phones are increasing, suggesting it’s getting harder to stay ahead of the competition. This is by no means a close race at the moment, but as a wider trend it’s something to think about. Compared to less hardware focused FAANG peers, Apple is also a lot more exposed to supply chain disruption. It’s managed to navigate the problems fairly well, but hasn’t escaped unscathed, and an extended duration of these problems will spell trouble, especially because the market is unforgiving when it comes to Apple’s performance. Add in questions from some shareholders about forced labour and carbon footprint concerns and it becomes clear that while the Apple is still plenty good enough to eat, there’s some potential for bruising.”


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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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