Apple is playing a lot as of this Thursday when it presents its results. Its valuation of more than 3 trillion dollars is supported by growth and the company is about to complete three consecutive quarters of declining revenue, dragged down by sales of the iPhone, its flagship product, along with iPads and Macs. But investors and analysts have made a leap of faith with the technology, the former buying shares and the latter improving their recommendations.
In addition to revealing its recent figures and the ins and outs of the evolution of its business, Apple offers clues tonight on how it will close the year as a whole and how things are going towards the end of the year, its most important period. A constant in its latest accounts has been the strength of its Services area -which includes everything that is digital sales of video, music, apps and subscriptions in its iOS ecosystem- compared to the incipient weakness of Products (iPad, Mac and iPhone). .
Slowly but unstoppably, the purely digital business area begins to gain weight in the revenue account compared to physical devices. It has gone from representing 15% of sales at the start of 2022, to already representing 22%, while ‘hardware’ has fallen from 84% to 78% of the total. It is more profitable than the first one as well. According to the consensus of analysts compiled by Bloomberg, Apple will have registered revenues of 81,500 million dollars in the second quarter, 1.7% less than the previous year, although its gross margin will rise 44%, up to 36,170 million. Its ebitda -gross operating result- would have grown by 31%, to 25,770 million, and its net profit by 23%, to 18,820 million.
Bank deposits and soccer subscriptions
Tim Cook also has news to tell in the area of services after the launch of the Apple bank account in alliance with Marcus (Goldman Sachs), which some analysts see as a disruptive agent of the banking sector in the US. During its first days in April, the superaccount at 4% of technological capacity captures more than 1,000 million dollars in liabilities from its clients, at a delicate moment due to the deposit crisis of US banks. Analysts will be awaiting these figures at the conference with the top management this Thursday once they release their quarterly results.
On the other hand, the technology also has the signing of Leo Messi as the great catalyst for subscription sales of its Apple TV + division, which is now at the tail of streaming services in the US. The commitment to paid ‘soccer’ is ambitious through the MLS Pass subscription that it sells exclusively. The company was made in 2022 with the television rights of the MLS until 2032 at a rate of 250 million dollars per year. But Apple has now thrown in all the stops by agreeing to share part of its subscription revenue with Messi in an unprecedented deal with MLS and Inter Miami.
Analysts watching the stock still see some value in Apple. The 12-month consensus price objective stands at $197, 2.4% above its current price, but the truth is that it seems that investment banks are following the evolution of the stock market. Since it presented results in April, the target price has been rising progressively from 171 to the current 197, a movement similar to that registered by technology on the stock market.
Over the past week, several brokerage firms have improved their view before Apple presents its accounts. Samik Chatterjee, an analyst at JP Morgan, has confirmed his ‘overweight’ recommendations but raises his valuation from $190 to $235. Wedbush’s Daniel Ives and Cowen’s Kirsh Sankar hold that same note and their fair price matches at $220. Only Morningstar, Itau, Lightshedd and Aletheia have sell advice for Apple, or four out of a total of 51 brokerages, according to Bloomberg’s monitoring.
It recovers a trillion in the stock market since January
Apple is registering in 2023 one of its best years on the stock market despite the fact that the business seems stagnant a priori. Investors value the company’s revenue digitization process, which is more recurring and makes it less dependent on competitive threats or the success or failure of its latest device launch. For many, including the competition authorities of many European countries that closely monitor its practices, the Cupertino giant holds its audience captive, its clientele of nearly 2,000 million active devices around the world, making it difficult the competition.
Since in January of this year it marked its annual lows on the stock market below 1.9 trillion dollars of market valuation, Apple has shot up more than 50% on the stock market and is once again above 3 trillion dollars, something that no company in history had achieved. Since June, the price of its shares has been at all-time highs, but not its market capitalization. The reason is the continuous process of repurchasing shares and amortization that the company has been carrying out for a decade when it also reinstated the dividend payment.
Since 2012, Apple ownership has gone from being divided into 26,500 million titles, to less than 15,900 million, although for this it has had to allocate hundreds of thousands of millions of dollars. Only with its last annual program, which was announced before the summer, it will allocate 90,000 million dollars to buy its own shareholders. With this, technology has managed to have the tailwind to continue raising earnings per share (EPS) because its results are distributed among a smaller number of actions. The Cook doctrine of capital reduction has even reached investors who are not very friendly with technology but with companies that reward the shareholder like Warren Buffett. The oracle of Omaha, at 80, has made the largest investment in Apple of his entire career as an investor… and the most profitable.
