Breaking down Apple's tricky, 'gravity defying' $83 billion June quarter

Comments

• Reply 1 of 20

  jas99 Posts: 150member

  July 29, 2022 4:15PM

  Apple continues to deliver for its customers and investors unlike any other company can. 

  
  

  For how many years must Apple demonstrate this before it’s recognized by Wall Street?
  

  
  

  It deserves a much higher price multiple. 

  
• Reply 2 of 20

  foregoneconclusion Posts: 2,689member

  July 29, 2022 4:35PM

  The "supply chain issue" is that today's corporations have created a crappy supply chain. 

  
• Reply 3 of 20

  austinbaze Posts: 14member

  July 29, 2022 6:49PM

  Isn't this the time that some genius at Goldman (looking at you Rod Hall) reiterates his "sell" recommendation with downward advice and a target of $100 or so?  How does he keep a job?  https://i.imgur.com/RSYnQwW.png ;

  
• Reply 4 of 20

  MisterKit Posts: 496member

  July 29, 2022 7:08PM

  It would be interesting to see the numbers if Apple were not operating in a restrained supply chain mode. 

  
• Reply 5 of 20

  waveparticle Posts: 1,497member

  July 29, 2022 7:46PM

  jas99 said:

  Apple continues to deliver for its customers and investors unlike any other company can. 

  
  

  For how many years must Apple demonstrate this before it’s recognized by Wall Street?
  

  
  

  It deserves a much higher price multiple. 

  I believe Wall Street gives highest pe to companies whose products are monopoly. 

  
• Reply 6 of 20

  retrogusto Posts: 1,112member

  July 29, 2022 9:15PM

  MisterKit said:

  It would be interesting to see the numbers if Apple were not operating in a restrained supply chain mode. 

  Yes. I was thinking it would be interesting to see what the numbers would look like if calculated at last year’s exchange rates, too, because it would give a much better picture of the growth year over year. 

  
• Reply 7 of 20

  retrogusto Posts: 1,112member

  July 29, 2022 9:29PM

  designr said:

  foregoneconclusion said:

  The "supply chain issue" is that today's corporations have created a crappy supply chain. 

  I don't know about that. I mean it worked (for a long, long time) until it didn't and the didn't work part was due to unprecedented (there's that word) circumstances foisted on the world by massive overreactions to COVID.
  
  They've now learned (we can assume) and more resiliency will be built in and new balanced will be achieved.
  
  

  And more specifically the wrong reactions. Companies slashed orders, in anticipation of a big slowdown in sales, but lots of people kept their jobs and were no longer spending money on things like travel, clothing and restaurants, so demand for lots of other stuff went up, but it takes a while to ramp up production once you’ve ramped it down, laid off workers, etc. Stimulus checks were lifesavers for many, but also did exacerbate the supply issues. Plus all of the other factors, which are probably the things you were referring to, like factory shutdowns and travel bans. This supply mess, along with the oil crisis caused by the Ukraine war, is also largely responsible for the global inflation we’re seeing now.

  
• Reply 8 of 20

  Marvin Posts: 15,326moderator

  July 29, 2022 10:23PM

  designr said:

  I'm sure we never will, but I would love to see a breakdown of the services revenue.
  
  In the past I believe Apple has made statements implying that large chunks of this revenue is iPhone-independent. I wonder.
  
  I believe stuff like Apple Care is under services. Yes, a "service" of sorts but probably not what most people think of. Rumors that Google's annual payment to be the search engine is quite substantial—possibly north of $10B—is also included in this revenue. And then App Store fees.
  
  I suspect that the revenue from services like:
  

  • Fitness+
  • TV+
  • Music
  • Arcade
  • Card / Pay

  Is likely much smaller portion of the total than is being subtly implied.
  
  The only reason I mention it is because I think Apple made this move to try to say "we're not just a phone company." But, if my suspicion is correct, they still very much are. That's fine. This could all just be PR smoke and mirrors for a bunch Wall Street analysts, etc.
  
  P.S. If "Find My" is considered an Apple service, one also wonders if AirTag revenue is bundled under this category too.
  

  The App Store fees make up a lot of it but they also reported 860 million paid subscribers:
  
  https://www.macrumors.com/2022/07/28/apple-860-million-paid-subscribers/
  
  I expect the minimum monthly subscription would be around $5/month. This is around $12b/quarter. Apple said they paid $60b to App Store developers in 2021. This means they made around $25b in fees for the year or roughly $6b/quarter.
  
  860 million is a high number for the content services as it would eclipse Netflix, Spotify and AAA game subscriptions so that number is more likely due to AppleCare+ and iCloud+ taken out with iPhones, iPads and Macs. Apple News is popular too though:
  
  https://appleinsider.com/articles/20/04/30/apple-news-now-has-125-million-monthly-active-users
  
  Paid subs will be less, maybe 25 million. Apple Music passed 60 million subs in 2019, probably 80 million by now. Apple TV+ is likely around 30-40 million. Apple Arcade is unknown but it could easily be 20 million, same with Fitness+. That's a low estimate and adds up to 175 million subs. This would be $2.6b/quarter at $5/m, likely higher as the average subscription will be higher.
  
  Say 1/5th of iPhone users are on AppleCare+, that covers 300 million and similarly 1/5th on iCloud plans. That's 600 million subs.
  
  I'd say breakdown of $20b/q services would be roughly 30% App Store fees ($6b), 45% device services ($9b), 25% software/content services ($5b).

  
• Reply 9 of 20

  humbug1873 Posts: 125member

  July 30, 2022 10:01AM

  designr said:

  I'm sure we never will, but I would love to see a breakdown of the services revenue.
  
  In the past I believe Apple has made statements implying that large chunks of this revenue is iPhone-independent. I wonder.
  
  I believe stuff like Apple Care is under services. Yes, a "service" of sorts but probably not what most people think of. Rumors that Google's annual payment to be the search engine is quite substantial—possibly north of $10B—is also included in this revenue. And then App Store fees.
  
  I suspect that the revenue from services like:
  

  • Fitness+
  • TV+
  • Music
  • Arcade
  • Card / Pay

  Is likely much smaller portion of the total than is being subtly implied.
  
  The only reason I mention it is because I think Apple made this move to try to say "we're not just a phone company." But, if my suspicion is correct, they still very much are. That's fine. This could all just be PR smoke and mirrors for a bunch Wall Street analysts, etc.
  
  P.S. If "Find My" is considered an Apple service, one also wonders if AirTag revenue is bundled under this category too.
  
  

  Though I think as a standalone Service TV+ is a major loss leader still.

  
• Reply 10 of 20

  flydog Posts: 1,124member

  July 30, 2022 2:48PM

  MisterKit said:

  It would be interesting to see the numbers if Apple were not operating in a restrained supply chain mode. 

  Your question is answered in the article:
  
  ”supply headwinds that Apple warned about earlier in 2022 came in lower than it expected. Apple had warned of a $4 billion to $8 billion revenue hit because of ongoing chip shortages and Covid-related lockdowns in China.”

  
• Reply 11 of 20

  flydog Posts: 1,124member

  July 30, 2022 2:50PM

  waveparticle said:

  jas99 said:

  Apple continues to deliver for its customers and investors unlike any other company can. 

  
  

  For how many years must Apple demonstrate this before it’s recognized by Wall Street?
  

  
  

  It deserves a much higher price multiple. 

  I believe Wall Street gives highest pe to companies whose products are monopoly. 

  PE is the price of a share or stock divided by the earnings per share. It is not “assigned” by anyone. 

  
• Reply 12 of 20

  sunman42 Posts: 264member

  July 30, 2022 4:32PM

  austinbaze said:

  Isn't this the time that some genius at Goldman (looking at you Rod Hall) reiterates his "sell" recommendation with downward advice and a target of $100 or so?  How does he keep a job?  https://i.imgur.com/RSYnQwW.png ;

  How does he keep his job? On the "personal" side of Goldman's business, they provide financial advice and investment management — don't know about their various products, but that's usually at a fixed fee, ostensibly so no one can claim they lost money while the advisors made it. Another way of putting it is that Mr. Hall has no stake in Goldman's investor's investments' performance.

  
• Reply 13 of 20

  sunman42 Posts: 264member

  July 30, 2022 4:33PM

  flydog said:

  waveparticle said:

  jas99 said:

  Apple continues to deliver for its customers and investors unlike any other company can. 

  
  

  For how many years must Apple demonstrate this before it’s recognized by Wall Street?
  

  
  

  It deserves a much higher price multiple. 

  I believe Wall Street gives highest pe to companies whose products are monopoly. 

  PE is the price of a share or stock divided by the earnings per share. It is not “assigned” by anyone. 

  The markets ("Wall Street") assign value to shares every day.

  
• Reply 14 of 20

  mike_galloway Posts: 106member

  July 30, 2022 5:40PM

  sunman42 said:

  flydog said:

  waveparticle said:

  jas99 said:

  Apple continues to deliver for its customers and investors unlike any other company can. 

  
  

  For how many years must Apple demonstrate this before it’s recognized by Wall Street?
  

  
  

  It deserves a much higher price multiple. 

  I believe Wall Street gives highest pe to companies whose products are monopoly. 

  PE is the price of a share or stock divided by the earnings per share. It is not “assigned” by anyone. 

  The markets ("Wall Street") assign value to shares every day.

  A purely mathematical figure   - it is true that the market makers quote both a buy and a sell price in a tradable asset hoping to make a profit on the difference. Not really an "assign" as they must adjust the price according to the buyers and sellers that want the stock. They are effectively guessing the ratio of buyers to sellers.
  

  
• Reply 15 of 20

  welshdog Posts: 1,897member

  July 30, 2022 6:43PM

  austinbaze said:

  Isn't this the time that some genius at Goldman (looking at you Rod Hall) reiterates his "sell" recommendation with downward advice and a target of $100 or so?  How does he keep a job?  https://i.imgur.com/RSYnQwW.png ;

  
  I believe that Goldman seeds disinformation to throw retail and other investors off. Most of the time when you see a story that quotes Goldman, the investing action they recommend taking is no longer valid or out of date. Their paying customers were given that information long before it was released publicly. Goldman saying Apple is headed to $100 has to be seen as misdirection.
  

  
• Reply 16 of 20

  anonconformist Posts: 199member

  July 31, 2022 4:07AM

  I've not paid close attention to their changes (or not) in hardware prices, but there has been a significant amount of inflation since last year, much more than their raise in revenue, I know certainly in the US, and I know the US isn't alone in an unusual increase in inflation.

  
  

  If people's wages don't keep up with inflation or above it, at least that segment will be (unless they already make more than enough to have a large enough margin) impacting future earnings due to not having as much discretionary spending capacity.

  
• Reply 17 of 20

  22july2013 Posts: 3,573member

  July 31, 2022 2:48PM

  sunman42 said:

  flydog said:

  waveparticle said:

  jas99 said:

  Apple continues to deliver for its customers and investors unlike any other company can. 

  
  

  For how many years must Apple demonstrate this before it’s recognized by Wall Street?
  

  
  

  It deserves a much higher price multiple. 

  I believe Wall Street gives highest pe to companies whose products are monopoly. 

  PE is the price of a share or stock divided by the earnings per share. It is not “assigned” by anyone. 

  The markets ("Wall Street") assign value to shares every day.

  Wall Street isn't an "entity". It's not a person. It's not a company. It's a metaphor you are using to ascribe to some mythical power.
  
  If there was an entity or a person who could "assign" values to shares, that entity or person would be filthy rich in a matter of days.
• Reply 18 of 20

  22july2013 Posts: 3,573member

  July 31, 2022 3:01PM

  anonconformist said:

  but there has been a significant amount of inflation since last year
  

  That is correct, but you must also look at the relative value of international currencies. The iPhone is made in China. The US dollar has gone up 6% against the Renminbi this year, which has the reverse effect (that inflation has) on US consumers' buying power for products made in China.

  
• Reply 19 of 20

  anonconformist Posts: 199member

  July 31, 2022 9:51PM

  22july2013 said:

  anonconformist said:

  but there has been a significant amount of inflation since last year
  

  That is correct, but you must also look at the relative value of international currencies. The iPhone is made in China. The US dollar has gone up 6% against the Renminbi this year, which has the reverse effect (that inflation has) on US consumers' buying power for products made in China.

  Interesting.  However, overall, I’d wager that doesn’t help US consumers have more effective disposable income to buy non-vital stuff as a result, with it more negatively being felt by those with a lower income, or whose budgets (for whatever reason: it’s not hard to find people that go broke on an income multiple times higher than average because they have huge car and house payments and other debts they’ve run up) were already very tight before the inflation.  Something has to give: it’s wiser to spend money on proper food, medical care, sufficient housing before worrying about updating hardware and software that keeps on working and fulfilling needs, as well as monthly services that aren’t vital.
  
  As an example: I live in a place where both fuel and housing costs (rental as well as mortgage-holders) are some of the highest in the country due to various reasons, including taxes.  Housing costs here have increased notably faster than inflation since I moved to the area in 2005.  Being single and working in tech enable more budget for housing and fuel than most without such an income.  I’m not remotely close to earning top tech wages with my current role.  That being said, there are a lot of people (likely more than half the area population) that don’t have as high of an income, and likely are forced to make a devil’s bargain choice of living out where housing costs a bit less but wasting their time in commutes daily that would make a used Toyota Prius the best car for cost-efficiency because you’re often at crawling or dead-stop speeds, or you avoid the commutes for the most part by trying to live closer.  I’ve optimized for the latter, also trying to always have as much as I can be walkable for my daily/weekly routines/needs.  The gas taxes and prices here as a result don’t make a huge dent in my regular travel budget, but that does compound in especially food price inflation, but as I’m a single person to feed, that still doesn’t hugely stress my budgets, especially since I know how to and do regularly cook my own food.  But then you go to a family with (perhaps) more than one car, and all their longer-distance commuting (hard to arrange both working the same shift at the same place) and the food cost multiplied, and their income is already notably lower than mine as a family than mine as an individual, and their available discretionary/disposable spending is greatly reduced and possibly wiped out completely by the inflation, as their jobs likely don’t increase their pay fast enough to keep up.  This is a longer-term headwind for a company like Apple that sells a lot of higher-end things that can be made to last longer as needed due to budget concerns, because they’ve not broken down, and are still sufficiently current.  Software doesn’t degrade just because it’s old code, unless software is changed either for its code or its operating environment, it is a static and still works.  Hardware always degrades, it’s only a matter of timescale and amount of usage, but it’s generally not nearly as fast as the common iPhone refresh cycle (2-3 years for many, others, more frequent, some, longer) and with that, it’s reasonable to expect hardware refresh frequency cycles  to be stretched out by the portion of customers most squeezed by inflationary pressures.  The fun part of that is even if Apple knew their incomes, I don’t see a way Apple could know enough about their overall finances to accurately forecast that, and that’d be an interesting exercise in statistics to guess at.
  
  I do know this much from the tight margin aspect: the exact numbers have changed, but it’s been around 75-80% of those in the US couldn’t financially handle a $1000 emergency.  TBD how long this inflation persists, and if it becomes full-blown stagflation as I remember growing up with, where costs rose faster than income, and lots of financial belt-tightening had to be done.