Today Apple hosted a Special Event where some new product updates were presented. Well that’s an important event, but before that let’s look at the last financial results.
You know what I really do not like in Apple (and some other companies)? They do not publish investor’s presentation (or I just couldn’t find…). Well obviously they present detailed data and I really like files like Apple Return of Capital and Cash Position, but adding some extra slides to show story/trends/catalysts would be quite useful. It gives a deeper insight, at least for me.
Coming back to financial results they were OK. Sure, they could be better buy generally in my opinion is ok.
EPS is lower than in 2015, but have in mind that company has just launched an iPhone 7 and its’ potential was not fully shown in Q3.
Above we can see sales in units of particular products. Well, trend on iPads could be better and I see a huge potential there. What is very satisfying are services – significant growth and this segment is recurring one.
All in all these results didn’t surprise positive and were ok.
What I really like is following graphics:
Currently market cap is around $605b. Net cash is around $150b (!)
Return yield is around 1% per quarter, so annualizing gives us 4% per annum. Not bad taking into account that 10% of market cap should be returned within less than 1.5 year.
Valuation is still not demanding. Market cap minus excess cash (let’s take $135b as excess) gives us $470b market cap cash adjusted. With EPS for this year $9 gives us P/E < 10. Why I subtract cash? If company returns it then it is obvious. If Apple buy something then financial results should increase (even in case of high multiples there is some EPS appreciation expected). Also consider that valuation is not demanding while results are still depressed by iPhone cycle (low sales in Q1 and Q2).
Coming back to special event conducted today. The real question is whether Apple is able to innovate. Is it able to create product which sales will be comparable to top 3 (iPhone/iPad/Mac). Special event is emphasizing both Apple TV and innovations in Macs (e. g. Touch Bar). Well, maybe I am not representative (young, hard-working, busy all the time…), but I do not really feel the need of having TV. When you got Netflix + big screen plugged into your computer then why do you need TV?
I would rather take a bet that “wearables” are the way where Apple should go. Improve your Apple Watch, create some bands, develop some extra features (e.g. measure level of sugar from sweat). That’s how you can create some new products. Apple TV is for me mixing “old TV” and non-linear content. It will not be a game changer. At least in my opinion. On the other hand do your product well (as always) and I am sure you can earn money on that too!
Summing up, financial results should improve, company is returning a decent amount of cash to shareholders, valuation is not demanding. I am still positive on AAPL shares, although I would probably not buy now (when buying I am always looking for special occasions, which definitely is Apple below $100).
Disclaimer: AAPL – long