• Sean D. Emory

FAANG - THE A IS FOR APPLE

Updated: May 2, 2018

The Apple critics have turned to crickets after this earnings report. It was one of those reports where you can't even pinpoint just one single data point to share. Here's a few instead.


iPhone Continues

The company generated $61B in revenue during the quarter, that makes it $247B over the last 12 months. 10 years after its original launch, the iPhone was once again the highlight. The device saw growth of 14% year over year, and on a trailing 12 month basis realized a slight pickup in growth quarter to quarter.


SERVICES

Services is now a $37B revenue run rate business. It grew 31% year over year and 6.9% when smoothing it out over a 12m basis, as shown below. Whoa!



THE WORLD LOVES APPLE

From a geography standpoint, they saw growth in every region.


• China and Japan both grew 20% or more

• Europe was up 9%

• Americas was up 17%.


Tim Cook also on the call mentioned that the iPhone was the #1 selling smartphone in China during the quarter. That says a lot.


MARGINS SIT TIGHT

The one significant number which many pay close attention to is the gross margin. This number has come down slightly over the years, but remains stable overall and ticked just above the 2-year downtrend. It will be interesting to see how margins look in 12 months from now as the service business continues to grow.



KING APPLEWATCH

On the earnings call, Tim Cook mentioned several things. He stated that the AppleWatch was the "top selling watch in the world." He also said that their wearable business was up 50% year over year. So much for the watch being a flop.


KING Balance sheet

The company announced a $100 billion repurchase authorization and increased their dividend by 16%. This comes as they currently have $267B in cash on their balance sheet. The capital return story remains an important part of the overall story.



There are so many things to share but got to get on the Snap call, so here's an operating metrics chart for Apple. See you next quarter.



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Sean D. Emory


Avory & Co. Founder & Chief Investment Officer


Disclaimer: This is not a recommendation for purchase or sale of any securities. Avory & Company has a position in Apple at the time of this writing and no position in Snap Inc. This can change following this time.


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