Apple – record fourth quarter
Total net sales rose 28.8% to $ 83.4 billion – a fourth quarter record. This represents increases for both products and services. Operating profit reached $ 23.8 billion, up from $ 14.8 billion at the same time last year.
The board of directors announced a dividend of $ 0.22 per share.
Shares fell 3.4% in pre-market trading.
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Our point of view
Despite enormous macroeconomic pressure, Apple achieved a record fourth quarter of growth. Every geographic area and every product category has set a record. It’s hard to do when the world is normal, let alone today. The incredible performance boils down to new product launches from Apple.
Equipment sales are critical, although the group is doing its best to position itself as a service company. IPhones alone account for nearly 47% of net sales. Apple needs to continue the upgrade cycle if it is to strengthen the most profitable services division in the long run (we’ll get to that later).
The increase in sales is a testament to Apple’s greatest asset – its brand. The sheer scale of Apple’s sales is a testament to the hold the embossed shiny fruit has on global consumers. Unwavering loyal customers means there is an element of revenue visibility that other businesses just don’t have.
The powerful brand should also help Apple stay strong in the face of rising inflation. Most big-ticket items are quickly wiped from shopping lists as money loses its value, but there is an army of Apple fans out there who are likely to keep the next iPhone clearly in sight.
Apple seeks to capitalize on its legions of fans with its Services business. The division appears to be turning a corner and accounts for a growing share of the total compared to just before the pandemic hit. He earns money by charging subscriptions for his music service and getting fees from app developers to use the App Store. Service margins are higher and revenues are expected to be reliable – which overall will take the pressure off the group to deliver ever-increasing hardware sales in the future.
All of these forces and another strong quarter might make you wonder why the stock price reaction has been muted. There are several reasons for this. The group’s costs as a proportion of its phone sales are rising, suggesting that it is becoming increasingly difficult to stay ahead of the competition. It’s by no means a close race at the moment, but as a larger trend it needs to be thought about.
Compared to its less hardware-focused FAANG counterparts, Apple is also much more exposed to supply chain disruptions. He handled the issues fairly well, but did not come out unscathed. If these issues persist, it will lead to problems, especially as the market is cutthroat when it comes to Apple’s performance. Add in questions from some shareholders about forced labor and carbon footprint issues and it becomes clear that while the apple is still good enough to eat, there is potential for bruising.
Overall, we believe Apple’s core remains strong, but the future spoils still lie in growing higher-margin business areas while creating another generation of coveted products. Looking at the latest numbers, it would seem so far, so good, from that angle. But remember that there is no guarantee.
Apple key figures
- Price / earnings ratio: 26.7
- Ten-year average price / earnings ratio: 15.6
- Potential dividend yield (next 12 months): 0.6%
All ratios are from Refinitiv. Remember that returns are variable and are not a reliable indicator of future income. Keep in mind that the key figures shouldn’t be considered in isolation – it’s important to understand the big picture.
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Fourth Quarter Results
Product sales increased 29.8% to $ 65.1 billion. Within products, iPhones still account for the bulk of sales, accounting for $ 38.9 billion and increasing from $ 26.4 billion. Mac sales rose 1.6% to $ 9.2 billion, while iPad sales rose 21.4% to $ 8.3 billion. Clothing, home and accessories grew from $ 7.9 billion to $ 8.8 billion.
Services accounted for $ 18.3 billion in sales and increased 25.6%.
Each geographic area grew in the quarter, and this was most pronounced in Greater China where sales rose more than 83% to $ 14.6 billion.
The Group’s operating expenses increased by 14.9%, including a 16% increase in Research & Development expenses.
Apple generated free cash flow of $ 93.0 billion for the full year, compared to $ 73.4 billion last year. Apple had net debt of $ 56.1 billion at the end of September.
$ 24 billion was returned to shareholders during the quarter.
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This article is original content from Hargreaves Lansdown, published by Hargreaves Lansdown. Unless otherwise stated, estimates, including potential returns, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Returns are variable and not guaranteed. The value of investments goes up and down, so investors could suffer a loss.
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