AAPL EPS to skyrocket!
Analysts have been focusing all their attention on news from China, as well as the lower volumes supposedly flowing through Apple's supply chain. China has reported GDP growth of 6.8%, so it is unlikely that Apple sales in China have fallen off a cliff. And the supply chain weakness is also a dicey measure - it is unlikely that anyone can get accurate figures for those, let alone read much into them. Data coming from App Store sales figures, and other indirect sources point to a very robust picture.
I think it is high time investors stopped expecting continued growth in iPhone sales. Obviously sales figures are at ridiculously high levels, so they cannot be going up forever. Some day they will plateau or even fall a bit. But I expect a small fall followed by sales stabilizing at a lower level. From whatever we can see today, it is clear Apple still has a lot of good things going for it, and iPhone sales will continue to be a huge contributor to profits - even if below current levels.
In addition, the ecosystem plays of Apple are becoming big. Sales figures from App Store are hitting levels where the numbers are beginning to look attractive even for a company as large as Apple. If Apple paid out $10B to developers in 2014, I would say that number would be closer to $20B in 2015. That means Apple has made $10B for itself in 2015. Even if we assume 80% going to costs, thats $2B in profits. Not bad for a company thats making $70B a year. That's 2.5% of overall profits, and growing rapidly. Not a bad place to be, at all. And with Apple Music and Apple TV starting to become significant, content profits could easily hit $10B a year in 3 years time.
Apple Pay is also becoming the biggest player around. No one has realized the potential for Apple Pay, especially considering that Apple has already cornered most of the premium customer segment, the people who have money to spend. Google, Samsung, Amazon and Microsoft are far behind in this space - nowhere in the picture even. Best part is, Apple's partner growth and acceptance is actually faster than adoption rates amongst iPhone users. This is just a question of time. Apple Pay could also eventually play a big role in lowering transaction costs for Apple in the micro-payments made in the App Store.
Apple's share buyback is at levels where it is foreseeable that the company will buy back about 20% of shares currently outstanding over the next 3 years. They have probably already taken advantage of the current fall, and completed the $140B already announced, and will likely announce a massive enhancement of that buyback this week. Just the EPS accretion from the buybacks will make many other shares look great! But when you have a company trading at 10x earnings, 6% annualized EPS growth is awesome.
Those who just want to look at iPhone sales figures are going to miss out on the opportunity.
I think it is high time investors stopped expecting continued growth in iPhone sales. Obviously sales figures are at ridiculously high levels, so they cannot be going up forever. Some day they will plateau or even fall a bit. But I expect a small fall followed by sales stabilizing at a lower level. From whatever we can see today, it is clear Apple still has a lot of good things going for it, and iPhone sales will continue to be a huge contributor to profits - even if below current levels.
In addition, the ecosystem plays of Apple are becoming big. Sales figures from App Store are hitting levels where the numbers are beginning to look attractive even for a company as large as Apple. If Apple paid out $10B to developers in 2014, I would say that number would be closer to $20B in 2015. That means Apple has made $10B for itself in 2015. Even if we assume 80% going to costs, thats $2B in profits. Not bad for a company thats making $70B a year. That's 2.5% of overall profits, and growing rapidly. Not a bad place to be, at all. And with Apple Music and Apple TV starting to become significant, content profits could easily hit $10B a year in 3 years time.
Apple Pay is also becoming the biggest player around. No one has realized the potential for Apple Pay, especially considering that Apple has already cornered most of the premium customer segment, the people who have money to spend. Google, Samsung, Amazon and Microsoft are far behind in this space - nowhere in the picture even. Best part is, Apple's partner growth and acceptance is actually faster than adoption rates amongst iPhone users. This is just a question of time. Apple Pay could also eventually play a big role in lowering transaction costs for Apple in the micro-payments made in the App Store.
Apple's share buyback is at levels where it is foreseeable that the company will buy back about 20% of shares currently outstanding over the next 3 years. They have probably already taken advantage of the current fall, and completed the $140B already announced, and will likely announce a massive enhancement of that buyback this week. Just the EPS accretion from the buybacks will make many other shares look great! But when you have a company trading at 10x earnings, 6% annualized EPS growth is awesome.
Those who just want to look at iPhone sales figures are going to miss out on the opportunity.