Apple Q4 - Services Continues to Grow

One could argue that Apple is the most important holding in Vestact New York portfolios. Although we have slightly more customers who hold Visa, we have held Apple for longer, and it is an easier company to understand. We started accumulating them November 2008 when Steve Jobs was still the CEO and they had just released the iPhone. Our first client purchase was at $13.70 per share. Believe it or not, we switched all of our clients then out of Nokia and into Apple.

After releasing a good set of third quarter results last night, Apple traded at close to $250 a share, an all-time high. At this level the company has a market capitalisation of more than $1.1 trillion.

Quarterly revenue was an eye-popping $64 billion, 60% of which was sales outside the US. iPhone sales were down 9% but still make up over half of the group total revenue at $33.4 billion. Services revenue reached an all-time high of $12.5 billion. Mac sales fell 5% to $7 billion. The wearables division (includes watches, headphones and other accessories) chipped in $6.5 billion of sales, which is just astonishing!

As for profits, earnings per share was a record $3.03, and so was operating cash flow of $19.9 billion. Apple returned over $21 billion to shareholders, including almost $18 billion in share repurchases and $3.5 billion in dividends. Luca Maestri, Apple's CFO, said that the company plans to get to a net cash neutral position over time. So expect more dividends and buybacks in the future.

Apple CEO Tim Cook sounded very upbeat on the earnings call.

"With customers and reviewers raving about the new generation of iPhones, today's debut of new, noise-cancelling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best line-up of products and services ever, we're very optimistic about what the holiday quarter has in store."

Note that this quarter was not really helpful in discerning future iPhone sales trends. The refreshed line-up of iPhone 11s with the "Pro" triple-lens cameras only came out and sold for nine days in this quarter reported on here. The sales guidance for the holiday quarter underway now is between $85.5 billion and $89.5 billion, implying solid optimism for iPhone 11 sales. I would be surprised if they did not smash the prior best best-ever quarter sales record of $88.3 billion. I'd put money on it that they will top $90 billion!

I'm proud to be a shareholder of this company that makes such great products. I have them all, and plan to keep updating them with newer models for years to come. That's what Apple fanboys do. I'm off to London in two-weeks' time and might well buy myself one of those iPhone 11 Pros when I'm there.

Can one still buy Apple above $250 a share? Well, the management team believes that the company is undervalued at the present share price. That's why they spent $18 billion of the company's cash pile repurchasing shares on the open market. CFO Maestri said "our multiples compared to some other technology companies - even compared to the market - we believe there is a lot of value there." He's right. Don't even think about selling your Apple shares to them now! Rather buy some more.