Apple Q3 - Still Cash Heavy

Apple released its quarterly profit date update last night, after the market close. This was the one that I had been waiting for, as I explained earlier this month. I was eager to see how Apple's lower number of shares in issue (as a result of aggressive share buybacks) would affect earnings per share and the company rating. I was not disappointed!

For the quarter ended in June, Apple reported a 1% rise in revenue to $53.8 billion and a 7% drop in earnings per share to $2.18, compared with expectations of $53.4 billion and $2.10 per share. That may not sound all that great, but the stock price rallied by 4.5% after hours to over $218 per share.

Here is the important take away. Revenue of $53 billion per quarter is about the same as it was in the same quarter back in 2015. However, Apple's earnings per share is about 20% higher, because they bought back 20% of the shares in issue since 2015, around 1 billion shares.

It is clear that Apple is going through a soft patch in iPhone sales. That is not expected to change until 2020 or even 2021 when new iPhone11s with extra cameras and 5G functionality are launched. In fact, iPhone sales currently contribute less than half of quarterly group revenue. Mind you, iPhone sales were still worth $26 billion for the quarter, which is an enormous number!

Macs and iPads sold well. Wearables and other accessories revenue also rose nearly 50% to $5.53 billion, compared with analyst estimates of $4.81 billion. This segment includes devices like the Apple Watch and AirPods.



Services revenue rose 12.6% to $11.46 billion, setting a new absolute record. Apple has about 1.45 billion active devices in use, of which about 920 million are iPhones. Of that "installed base" they have 420 million paid subscribers to its own services like iCloud and Apple Music. The company has set a goal of 500 million subscribers by 2020.

A quarterly dividend of 77 cents per share was declared, payable on 15 August to shareholders of record on the close of business on 12 August. Despite all those buybacks in recent times, the company still has $200 billion in cash. Incredible!

That healthy dividend will go some way to "refunding" me for my family Apple purchases in the quarter, which were two iPhoneXs, a new Apple Watch series 4 and a pair of AirPods. Oh, and another AirPod charging case for my wife, because her dog chewed up the old one.

This goes without saying, but I'm going to say it anyway: Buy more Apple shares for your portfolio. Today. Then hold them for a long, long time.