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Apple posted strong Q2 FY'21 results, with revenue surging almost 54% year-over-year to $89.58 billion and EPS growing to $1.40, from around $0.64 last year. The growth was driven by robust sales of Apple's new flagship iPhone 12 devices (iPhone sales were up 65% year-over-year), higher services revenues, and strong Mac and iPad sales. Apple's gross margins also surged to their highest levels in almost nine years, coming in at 42.5%, up from less than 39% last year. That said, the momentum could slow slightly in the coming quarters, as Apple expects the industrywide semiconductor shortage to impact the production of some of its products.
Apple unveiled its new iPhone 12 models in mid-October 2020 - including the iPhone 12, iPhone 12 Mini, iPhone 12 Pro, and iPhone 12 Pro Max. The new devices represent a nice upgrade from last year’s models, with 5G wireless technology, new processors, improved cameras, a slightly refreshed design, and new screen size options. While Apple has indicated the early demand for the devices has been strong, it's likely that wireless carriers – who’ve spent considerable amounts on 5G network upgrades – will be aggressive with promotions on the new devices as they look to sign up new customers and boost revenues.
Apple has started shifting its Macs from Intel chips to its custom ARM-based processors. In November, the company launched updated versions of its Macbook Air, Macbook Pro 13, and Mac Mini that run on its custom M1 processors. A complete transition is planned by 2022. By designing its own processors, Apple will control the Mac experience from end-to-end, allowing it to optimize performance, design, and battery life. There is likely to be an attractive financial incentive as well, considering that processors are very high-margin components.
Below are key drivers of Apple's value that present opportunities for upside or downside to the current Trefis price estimate for Apple:
For additional details, select a driver above or select a division from the interactive Trefis split for Apple at the top of the page.
Apple makes money primarily by selling mobile phones, computers, and tablets to consumers worldwide. Apple's well-known consumer products include the iPhone, Mac, iPad and Apple Watch. In addition to selling hardware, Apple makes money from services that include the App Store, Apple Music and iCloud. Our valuation model is based on Apple's fiscal year, which ends on September 30.
We believe the iPhone segment is more valuable than the Mac and iPad segments due to:
The smartphone market is significantly larger than the tablet market and margins in the smartphone business are also likely to be higher. Globally, about 1.4 billion smartphones were shipped globally in 2019.
In 2007, when Apple entered the then-nascent smartphone market with the iPhone, Nokia and RIM were the only players in this segment. iPhone's success led to the entry of other players in the market, which has seen a huge spurt in demand in recent years. Today, consumers have a huge array of smartphones to choose from, including premium Android smartphones from Samsung and Google and low-cost manufacturers such as Lenovo and Xiaomi. While the smartphone market could expand slightly, much of the sales are coming from low and mid-priced handsets in emerging markets, while the high-end of the market - which Apple caters to - is becoming increasingly saturated. Apple posted a year-over-year decline in iPhone sales during FY'16, FY'19, and FY'20. However, the company is expected to see double-digit growth in iPhone sales in FY'21, driven by the new iPhone 12.
Apple's Services business has grown at a rate of over 21% between FY'16 and FY'20, eclipsing the iPad and Mac to become the company’s second-largest business segment with revenues of about $54 billion in FY'20. While the App store remains the primary driver of growth, services such as Apple Music are also gaining traction. Apple's base of paid subscriptions on its platform has also been rising steadily, with about 585 million active subscriptions at the end of September 2020.
Global tablet shipments have been sluggish on account of longer upgrade cycles for tablets and cannibalization from large-screen smartphones. Apple has been impacted, with iPad shipments declining by about 4% in FY'17 and remaining almost flat in FY'18. However, things started to turnaround in FY'19, driven by Apple's two-pronged strategy of focusing on both value-priced tablets for casual users while catering to professionals with its higher-powered iPad Pro devices, which are priced as high as $1,800.
While the global PC market has been shrinking, Apple has largely been able to buck the trend given its superior product differentiation, proprietary Mac OS software and applications, sleek design, and premium build quality. Apple also benefits from the fact that it plays in the high end of the PC market – typically focusing on the lucrative $1,000+ price points – rather than the commoditized low and mid-range where a bulk of the volumes come from. Over FY'20, Mac Revenues reached an all-time high of almost $29 billion, as demand for computers soared with people working and learning remotely due to Covid-19.
Apple's (NASDAQ:AAPL) highly lucrative services business faces its biggest legal challenge yet, as the Epic Games lawsuit against Apple and its AppStore went to trial on Monday. Epic alleges that Apple's AppStore is an anti-competitive marketplace, that locks in customers and diminishes the earnings of mobile app developers. ...More
Apple (NASDAQ:AAPL) posted a strong set of Q2 FY'21 results, with revenue surging almost 54% year-over-year to about $90 billion and earnings per share rising to $1.40, up from around $0.64 last year, driven by higher sales of the iPhone, digital services, as well as iPads and Macs. Apple's gross margins expanded by a remarkable 420 basis points year over year to 42. ...More
Apple (NASDAQ:AAPL) is expected to publish its Q2 FY'21 results on April 28. We expect Apple's Revenues to come in at about $76.6 billion, marking an increase of about 31% year-over-year. EPS is likely to stand at about $0.97 per share, an increase of about 51% compared to last year. ...More
Apple stock (NASDAQ: AAPL) has declined by around -11% over the last month and currently trades at about $122 per share. There are a couple of factors driving the correction. Firstly, rising bond yields have likely taken some sheen off mega-cap tech stocks that were viewed as a safe haven through Covid-19. ...More
Apple stock (NASDAQ: AAPL) dropped -5.5% over the last five trading days and has underperformed the S&P 500 which fell by a little over -1% during the same period. The stock is also down by almost -10% over the last 21 trading days. ...More
Apple (NASDAQ:AAPL) had a solid Q1 FY'21, posting record Revenues that topped $110 billion led by the new 5G iPhones. Apple's Operating Margins also soared by a remarkable 220 basis points year over year to about 30.1%. Can Apple sustain these margins going forward? Let's take a closer look at what drove Apple's Products and Services Gross Margins and Operating Expenses to find out. ...More
Apple (NASDAQ:AAPL) is slated to publish its Q1 FY'21 earnings on January 27, reporting on a quarter that saw the launch of its much anticipated 5G iPhone 12. We expect Revenues to come in at about $100 billion for the quarter, growing by about 9% versus last year, with EPS likely to grow by about 7% to around $1.35 per share. Our estimates are marginally below the consensus. ...More
Apple's (NASDAQ:AAPL) Services business is likely to emerge as its most profitable (and valuable) business within the next four years, likely eclipsing even the iPhone - which is seen as one of the most lucrative consumer products of all time. Here's how we expect this to play out. ...More
Last week, Apple (NASDAQ:AAPL) indicated that it would be cutting its commissions on app sales and in-app purchases from 30% to 15% for smaller developers, who earn less than $1 million annually from the AppStore. ...More
Apple (NASDAQ:AAPL) launched its first set of Mac computers with proprietary ARM-based processors yesterday. The new chip, dubbed the Apple M1, will first feature in the updated MacBook Air and MacBook Pro 13 laptops and the Mac mini desktop computer. ...More
[Updated 10/26/2020] How The Google Antitrust Case Threatens Apple The U.S. Justice Department's antitrust lawsuit against Internet behemoth Google could have major repercussions for Apple. ...More
[Updated 10/14/2020] Do The New iPhones Meet Expectations? On Tuesday, Apple (NASDAQ:AAPL) launched four new iPhones - the iPhone 12, iPhone 12 Mini, iPhone 12 Pro, and iPhone 12 Pro Max that operate on the next-generation 5G networks. ...More
[9/28/20] Apple One Earlier this month, Apple (NASDAQ:AAPL) announced a digital services bundle called Apple One, that combines multiple services into a single monthly subscription. ...More
Apple's (NASDAQ:AAPL) stock has tanked over 15% in the last 5 trading days, while the S&P 500 has fallen about 12% driven by the broader technology stock selloff. The most identifiable reason behind Apple's fall appears to be concerns around inflated valuation amid slowing iPhone sales growth prospects. ...More
Although Working Capital - which refers to the funds a business uses in its day-to-day operations - is seen as a relatively mundane metric, we think it's quite useful to identify quality businesses. ...More
[9/4/2020] Putting Apple's $180 Billion Decline Into Perspective Apple's (NASDAQ:AAPL) market cap declined by a whopping $180 billion on Thursday, after the stock fell by 8% to about $121 per share due to the broader technology-led sell-off. ...More
[8/25/2020] Does Apple's Soaring P/E Indicate Much Better Days Ahead? Apple stock (NASDAQ:AAPL) has extended its rally, rising by about 30% since late July to levels of around $500 currently. The stock is up about 65% year-to-date and has more than doubled from its March lows. ...More
Apple (NASDAQ: AAPL) stock is up by over 50% this year, despite the fact that the company has seen limited growth. Revenues rose less than 5% for most of the last eight quarters, the exceptions being the 9% growth posted in Q1 FY'20 due to a favorable year-over-year comparison and 11% in Q3 FY'20 when demand saw a Covid-19 related bump. ...More
Last week, Epic Games sued Apple (NASDAQ:AAPL) for antitrust violations, after its popular Fortnite game was removed from the AppStore shortly after Epic let players bypass Apple's in-app purchase system, avoiding the 30% commission on sales. Although Apple has had spats with developers in the past, the Epic lawsuit is noteworthy for a couple of reasons. ...More
Apple (NASDAQ:AAPL) reportedly intends to launch bundled subscriptions this Fall, combining its various services including Apple Music, News, Arcade, and TV+ into a package priced at a lower monthly fee compared to subscribing for individual services. ...More