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AAPL reported F4Q EPS yesterday (10/30/19) after close, posting a 6% beat vs. our model; the stock was up 2% in the aftermarket. Hardware was the source of upside: iPhone and iPad delivered meaningful sequential improvements and Wearables kicked in another blowout quarter. Management guided to December quarter revenue $1bn above our expected range at the midpoint. AAPL turns the page to F20 with accelerating 1H revenue growth to the mid-single digits on easier comps (with potential upside drivers from iPhone/Wearables), but we see the dropdown to earnings momentum largely priced in at these levels.
Wolfe Research Senior IT Hardware & Networking Analyst, Andrew Vadheim, hosted a webcast with Michael Levin, Partner/Co-Founder of Consumer Intelligence Research Partners.
Broadly positive data points since the 9/12 hardware event have driven the recent runup in the stock, putting it now at a 10% premium to the market multiple for the first time in 8 years. We take our 4Q ests up $0.03 to $2.86 on higher iPhone units, partially offset by lower ASP, as we rollforward our unit model for F20. We see potential for upside from sequentially improving Services and from Wearables, but F4Q results likely will not drive big moves in the stock. Rather, we look for F1Q topline guidance to frame overall potential for the 11 cycle and to commentary around imminent expenses in F20 from Intel modem deal & spend behind new services.
Yesterday (09/10/19) Apple hosted its annual September product event headlined by CEO Tim Cook. Apple led with TV+ and Arcade, but the focus was, as always, on hardware. Thematically, iPad/Watch saw enhanced use cases for the customer: base model iPad was retooled in preparation for the OS launch, while the watch was in scope partially as tool to drive increased direct participation in healthcare change. For the first time, three phones will hit the market simultaneously; we see the combination of design, processing power, and camera capability (coupled with the upcoming iOS 13 update) as likely increasing Apple’s lead in premium smartphones.
Non-iPhone hardware strength was core to F2Q, coming against inline iPhone revenues and a modest disappointment on Services. Wearables provided the biggest beat vs. our model in F3Q. We take a second look (exhibit 1) at the business and see that it is now at a scale to more than offset iPhone cycle valleys. On iPhone, we’re modelling another down 10% growth figure in F4Q and we see F20 setting up for units down 2%.
John Treadway has worked with large enterprises considering both private and public cloud implementations, first at Cloud Technology Partners, which was acquired by HPE, and now at Symphony Solutions, where he is CEO. Although hyperscaler revenue growth is moderating, he argues it is mostly due to tough comparisons as cloud approaches $70bn of revenue. He says AWS’s Andy Jassy might be right that only 3% of workloads are in the cloud by dollars.
In addition to tracking the five major tech sectors—Hardware, Semis, Software, Internet, and Services—we have added 2-3 subsectors for each for greater granularity. We show their performance in our weekly Wolfebytes.
Yesterday (07/30/19) after the close, Apple printed a solid report—albeit against low expectations—trading up 4% in the aftermarket. Outperformance of non-iPhone hardware drove much of the 4% beat vs. consensus and F4Q guidance delivered upside to numbers. As for the iPhone, an inline performance helped to cement that 2Q was the trough for units growth. We also read positively the sequential improvement in China as well as commentary around iPhone sales starting to grow in June through the online & retail channels.
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