Apple Q4 - Strong Growth Across All Categories

Last week Apple was among a long list of companies that reported third-quarter results. The current global semiconductor chip shortage meant that their sales were a bit lower than market expectations. Despite the miss, Apple still managed to increase revenue by 29%, thanks to growth across all product categories.

Tim Cook estimated that global supply constraints cost Apple around $6 billion in lost sales this quarter and will cost them more come in the coming quarter. Ouch! Notwithstanding the ongoing component shortages, Apple expects to report record sales in the current quarter. They are prioritising chips for iPhones, instead of using them in iPads.

The Apple brand is truly amazing. Over the last year, they managed to improve their gross margins from 42% to 42.2%. In other words, for every $100 in sales, $42.20 is gross profit. Not many businesses have that level of pricing power.

In the last 12 months Apple had revenue of $366 billion, so they made $95 billion of pure profit! That number could have been even higher were it not for the $22 billion that they spent on research and development. To put that annual R&D number into perspective, that's roughly R330 billion, which is the same as the market value of the whole FirstRand Group.

Apple expects to continue powering ahead. Demand for the new iPhone 13 model has been strong, the refreshed Mac laptops with M1 chips are receiving rave reviews, and the services side of the business is enjoying double-digit growth. At $150 per share, it's a strong buy.