Saturday, September 27, 2014

Apple Looks East, Looks West For Growth

Over the past few years much of Apple’s revenue growth has been fueled by the expansion of the number of iPhone carriers outside the Untied States. In the first nine months of the current fiscal year, Apple’s revenue moved higher by 5.42% to $140.672 billion. During this time, revenue in Apple’s Americas region rose by only 0.38% to $48.985 billion while revenue rose in the Greater China region by 22.27% to $24.068 billion and in Japan by 13.38% to $11.475 billion. 

The chart below details Apple’s regional revenue mix for the first nine months of the fiscal year that ends on Saturday, September 27th.
During this nine-month period, Greater China and Japan combined to deliver just over 25% of reported revenue while the Americas region represented just over one-third of Apple’s revenue total. 
The graph below illustrates Apple’s revenue growth rates by region over this nine-month period. While Europe’s 5.07% revenue growth was close to the aggregate revenue growth rate of 5.42%, the Rest of Asia Pacific region had a negative revenue growth in the period. Apple’s Retail revenue segment, separate from the revenue activity in the regions in which the stores are located, delivered a 3.64% rate of growth. 
No matter the four-quarter slide in net income that ended in the December quarter (FQ1 2014), Apple has continued to deliver year-over-year revenue growth. The chart below illustrates Apple’s revenue on a quarterly basis, segmented by region, since FQ1 2011.

Saturday, August 30, 2014

Apple’s Success Is In The Sensational And The Subtle

On Friday, August 29th, Apple’s share price ended the month’s trading at an all-time closing high of $102.50 after setting an all-time trading high of $102.90 earlier in the day’s session. For the month of August, the share price rose about 8% from the opening price of $94.90 on August 1, 2014. Since Apple announced the return to profit growth following the close of trading on April 23, 2014, the share price has risen about 37%. 

At Friday’s closing price, the company’s market capitalization stands at about $614 billion dollars. Because of the ongoing $90 billion share repurchase program and despite the recent all-time highs, the company’s market cap remains below the record levels set in late September 2012 and institutional ownership remains at a curiously low 62% of outstanding shares. 

No matter the dramatic rise in the share price over the past four months, opportunities remain for long-term shareholders to be richly rewarded over the next several quarters. 

Apple’s September 9th Event
There’s no shortage of rumors and speculation concerning what products and services Apple will choose to announce at the upcoming September 9th event. There’s very little doubt Apple will announce the next iteration of the company’s popular line of smartphones and expectations are high Apple will also announce its foray into mobile payments as well as new services to complement the much-anticipated iWatch line of accessories. 

Various reports from component suppliers suggest Apple will produce record numbers of iPhones, with larger screen sizes, to accommodate what is predicted to be unprecedented demand for the new handsets and demand on a scale that may prove to be high even by lofty iPhone standards. But the fact of the matter is it would actually be worrisome if demand for the new iPhone handsets didn’t break all previous records by a proverbial country mile. 

Apple’s Dependence On iOS Devices
The graph below illustrates Apple’s reliance on the iPhone and iPad product lines for revenue and revenue growth. Since the June quarter (FQ3) of FY2011, the iPhone and iPad lines have contributed at least 60% of Apple’s reported revenue. In seven of the most recent fifteen quarters, the iPhone and iPad lines have contributed at least 70% of Apple’s reported revenue total.
The graph below delineates the revenue performance of the iPhone and iPad lines over the most recent fifteen quarters. Against a backdrop of 5.42% aggregate revenue growth in the first three quarters of the current fiscal year, iPhone revenue rose 9.12% to $78.313 billion while iPad revenue fell 3.21% to $24.967 billion. Combined, the two product lines delivered $103.280 billion or 73.42% of the $140.672 billion in reported revenue in the nine-month period. As Apple determines the best path forward for growth in iPad unit sales, the iPhone line is and will remain Apple’s primary revenue growth driver.