Apple’s brilliant December Quarter Results weren’t enough

Apple reported its December quarter results after the market closed on Wednesday and even though they were outstanding, shares fell the next two days. Expectations were running high for the company as the stock had risen 16% in the six trading days prior to the announcement, so the fall appears to be taking a normal profit.

It was almost impossible for Apple to show large enough numbers and not to see the stock at least stall, if not fall, because shares were in too much condition. However, the positive results and report should set Apple’s next few quarters to be strong as the iPhone 12 with 5G technology is just starting to roll out. The key question for the stock is whether it will exceed historical valuations at near or near levels.

Blowout income and earnings

Apple easily generated more than $ 100 billion in quarterly revenue for the first time; in fact it was over $ 111 billion vs. expected $ 103.3 billion. This was a 21% increase from a year ago and the strongest year-on-year gain from the 22 September 2015 quarter. The quarterly to quarter increase was 72% the strongest from 77% in December 2014. iPhone 6 and 6 Plus’ first full quarter.

EPS came in at $ 1.68 vs. the average street forecast between $ 1.41 and their range between $ 1.23 and $ 1.56. The $ 1.68 was a 35% year-over-year increase and contrasted with a difficult comparison of the previous year’s 19% increase.

Total incoming margins at 39.8% were also very strong. This was a combination of a full hardware margin at 35.1% and Services at 68.4%. Full services margin is the highest ever reported and up more than 10 percentage points from three years ago (58.3% quarter December 2017) when the company first started reporting on them.

Apple’s net cash position increased slightly to $ 83.5 billion from the September quarter but was down $ 15.2 billion from a year ago. The company had the largest net cash quarter in December 2017 at $ 163 billion. At the current rate Apple should achieve its goal of $ 0 net cash in about three years.

Operating cash flow of $ 38.8 billion and free cash flow of $ 35.3 billion were extremely strong. One thing that should be kept in mind is that several factors can avoid any quarter money transfer. It is best to look at cash flows over a multi-year period.

IPhones could be even stronger

IPhone revenue of $ 65.6 billion easily surpassed the street expectation of $ 61 billion. The number beat up 17% year over year and 148% from the September quarter. The strong yields from a combination of larger unit vessels and average retail prices or ASPs are also likely to increase. This result is even more impressive with the fact that the first iPhone 12 models were not available until October 23, almost a full month into their quarter.

Counterpoint Research Analyst Aman Chaudhary predicts that Apple will be the leader in the global smartphone market segment in the fourth quarter of December with explosive growth of 96% quarter to quarter. He wrote, “Pent-up demand for the new iPhone 5G, a strong behavior boost, especially in the US, and the longevity of the iPhone 11 are some of the reasons for this growth.”

For the full year Chaudhary’s study shows that Apple moved from the third market segment position to second place and significantly closed the gap with the Samsung leader.

China’s revenue explosion

Apple’s revenue in China increased 168% quarter-on-quarter to $ 21.3 billion. This was the strongest quarter-to-quarter increase in a decade, when incomes were nearly five times lower.

It was also 57% year-on-year growth, which helped drive the company’s total revenue of a 21% increase. Without strong growth in China the company’s total revenue growth would have been at 15%.

Commenting on the market dynamics, Counterpoint Research Analyst Mengmeng Zhang said, “Sales of 5G smartphones in China with Chinese OEMs rose strongly to more value-for-money offerings. The level of 5G guidance became even more pronounced in the fourth of December with the launch of Apple 12. 5G smartphones accounted for more than 60% of the smartphones sold in China, up from just 5 % a year ago. ”

Commenting on the competitive landscape, Counterpoint Research Analyst Flora Tang said, “Among major OEMs, Apple was the only one to enjoy positive year-over-year growth in 2020. Growth was strong. Apple led the debut of the iPhone 12 series, which. comes with 5G connectivity and modules over a wider price range. Moreover, thanks to high price cuts and upgrades, the iPhone 11 series continued to perform well even after the iPhone 12’s release. The iPhone 11 was the best-selling model on JD.com during the e-commerce festival sale. The phenomenal growth of both the iPhone 12 and iPhone 11 series helped push Apple’s market share in China to 16% in the December quarter. ”