AAPL - Apple Inc.

[giofranchi]

How Apple Could Make $1 Billion for Carl Icahn If His New Super PAC Succeeds

 

http://www.thestreet.com/story/13333271/1/how-apple-could-make-1-billion-for-carl-icahn-if-his-new-super-pac-succeeds.html?utm_content=buffer23889&utm_medium=social&utm_source=twitter.com&utm_campaign=eb

 

Cheers,

 

Gio

[abitofvalue]

Looks like JPM is building a product to compete with Apple Pay.

 

 

[Liberty]

http://finance.yahoo.com/news/apple-reports-record-fourth-quarter-203000140.html

 

The Company posted quarterly revenue of $51.5 billion and quarterly net profit of $11.1 billion, or $1.96 per diluted share. These results compare to revenue of $42.1 billion and net profit of $8.5 billion, or $1.42 per diluted share, in the year-ago quarter. Gross margin was 39.9 percent compared to 38 percent in the year-ago quarter. International sales accounted for 62 percent of the quarter’s revenue.

 

Per share earnings only up 38%. Must be because last year was an easy comp. No-growth stock.

[TheAiGuy]

http://finance.yahoo.com/news/apple-reports-record-fourth-quarter-203000140.html

 

The Company posted quarterly revenue of $51.5 billion and quarterly net profit of $11.1 billion, or $1.96 per diluted share. These results compare to revenue of $42.1 billion and net profit of $8.5 billion, or $1.42 per diluted share, in the year-ago quarter. Gross margin was 39.9 percent compared to 38 percent in the year-ago quarter. International sales accounted for 62 percent of the quarter’s revenue.

 

Per share earnings only up 38%. Must be because last year was an easy comp. No-growth stock.

 

yes, yes, yes -- that's past growth. Doesn't count  ;)

[Liberty]

http://finance.yahoo.com/news/apple-reports-record-fourth-quarter-203000140.html

 

The Company posted quarterly revenue of $51.5 billion and quarterly net profit of $11.1 billion, or $1.96 per diluted share. These results compare to revenue of $42.1 billion and net profit of $8.5 billion, or $1.42 per diluted share, in the year-ago quarter. Gross margin was 39.9 percent compared to 38 percent in the year-ago quarter. International sales accounted for 62 percent of the quarter’s revenue.

 

Per share earnings only up 38%. Must be because last year was an easy comp. No-growth stock.

 

yes, yes, yes -- that's past growth. Doesn't count  ;)

 

I know, but people have been saying that for how many years now? Share count going down, Android users switching in good numbers, China still early in 4G roll out, relatively small number of existing user base has upgraded to the bigger screen phones, early days of enterprise push, competitors at high end have lost brand power, FX won't work against them forever... And next year we have the 7 with an external refresh, which always gets people more excited. I think returns should be quite satisfactory at a below 10x multiple ex-cash (which at some point their might be able to repatriate if the tax code changes).

[TheAiGuy]

http://finance.yahoo.com/news/apple-reports-record-fourth-quarter-203000140.html

 

The Company posted quarterly revenue of $51.5 billion and quarterly net profit of $11.1 billion, or $1.96 per diluted share. These results compare to revenue of $42.1 billion and net profit of $8.5 billion, or $1.42 per diluted share, in the year-ago quarter. Gross margin was 39.9 percent compared to 38 percent in the year-ago quarter. International sales accounted for 62 percent of the quarter’s revenue.

 

Per share earnings only up 38%. Must be because last year was an easy comp. No-growth stock.

 

yes, yes, yes -- that's past growth. Doesn't count  ;)

 

I know, but people have been saying that for how many years now? Share count going down, Android users switching in good numbers, China still early in 4G roll out, relatively small number of existing user base has upgraded to the bigger screen phones, FX won't work against them forever... And next year we have the 7 with an external refresh, which always gets people more excited. I think returns should be quite satisfactory at a below 10x multiple ex-cash (which at some point their might be able to repatriate if the tax code changes).

 

Yeah, that didn't come across -- but tongue in cheek.

[Liberty]

http://finance.yahoo.com/news/apple-reports-record-fourth-quarter-203000140.html

 

The Company posted quarterly revenue of $51.5 billion and quarterly net profit of $11.1 billion, or $1.96 per diluted share. These results compare to revenue of $42.1 billion and net profit of $8.5 billion, or $1.42 per diluted share, in the year-ago quarter. Gross margin was 39.9 percent compared to 38 percent in the year-ago quarter. International sales accounted for 62 percent of the quarter’s revenue.

 

Per share earnings only up 38%. Must be because last year was an easy comp. No-growth stock.

 

yes, yes, yes -- that's past growth. Doesn't count  ;)

 

I know, but people have been saying that for how many years now? Share count going down, Android users switching in good numbers, China still early in 4G roll out, relatively small number of existing user base has upgraded to the bigger screen phones, FX won't work against them forever... And next year we have the 7 with an external refresh, which always gets people more excited. I think returns should be quite satisfactory at a below 10x multiple ex-cash (which at some point their might be able to repatriate if the tax code changes).

 

Yeah, that didn't come across -- but tongue in cheek.

 

Ah, sorry, hard to differentiate between real and ironic comments sometimes...  :)

[Liberty]

14bn in buybacks. Past 3 Qs were: 10bn, 7bn, and 5bn. Nice acceleration.

 

CFO said that in constant currency, the fiscal Q4 growth would have been 8% higher. That's just incredible. In dollar terms, Apple's FX headwind is bigger than Google's net income...

[Palantir]

Great quarter, now let's pay a bigger dividend. :)

[Liberty]

http://mashable.com/2015/10/28/apple-phil-schiller-mac/#cFHpyHjLkkqR

 

Good piece. More and more access inside Apple under Cook, less secrecy about process.

[Liberty]

Meanwhile... Samsung is not doing too hot:

 

http://www.bloomberg.com/news/articles/2015-10-28/samsung-misses-estimates-as-new-phones-fail-to-revive-growth

[Liberty]

Great stuff by Ben Thompson: https://stratechery.com/2015/stop-doubting-the-iphone-the-macintosh-company-2/

[giofranchi]

Great stuff by Ben Thompson: https://stratechery.com/2015/stop-doubting-the-iphone-the-macintosh-company-2/

 

+1!

 

Very interesting article!

 

Cheers,

 

Gio

[TheAiGuy]

I've redone my valuation with their latest results and I wanted to point out something about taxes. I think the tax rate Apple reports is too low -- they assume a large portion of the undistributed overseas earnings are going to be indefinitely reinvested. This largely accounts for the difference in the statutory tax rate of 35% and their reported tax rate of 26% but overstates their earnings by a good amount.

 

Adjusting their earnings and cash balance for this (and a couple of other, largely immaterial, things) and I have AAPL at 12.7X ex-cash (net of debt). Still pretty cheep but cheapens here really depends on growth (which I personally think is a slam dunk, but, hey...)

 

 

Edit:

Oh, and this is probably one of the reasons the earnings have grown faster than the revenue -- most of the growth is overseas.

[Liberty]

I've redone my valuation with their latest results and I wanted to point out something about taxes. I think the tax rate Apple reports is too low -- they assume a large portion of the undistributed overseas earnings are going to be indefinitely reinvested. This largely accounts for the difference in the statutory tax rate of 35% and their reported tax rate of 26% but overstates their earnings by a good amount.

 

Adjusting their earnings and cash balance for this (and a couple of other, largely immaterial, things) and I have AAPL at 12.7X ex-cash (net of debt). Still pretty cheep but cheapens here really depends on growth (which I personally think is a slam dunk, but, hey...)

 

I think we're about due for some tax reform in the US (becoming more and more widely understood that it's a huge competitive disadvantage and pushes jobs and companies to invest outside of the country and keep their foreign cash out). But even if it takes 10 years, I think Apple will be patient and won't throw tens and tens of billions away to bring back capital that they don't need to run the business anyway (even with the 15bn of capex planned for 2016). They have an extremely low borrowing cost, so if they want to return more capital than they generate in the US, they'll just borrow. But that's just my guess...

[TheAiGuy]

I think we're about due for some tax reform in the US (becoming more and more widely understood that it's a huge competitive disadvantage and pushes jobs and companies to invest outside of the country and keep their foreign cash out). But even if it takes 10 years, I think Apple will be patient and won't throw tens and tens of billions away to bring back capital that they don't need to run the business anyway (even with the 15bn of capex planned for 2016). They have an extremely low borrowing cost, so if they want to return more capital than they generate in the US, they'll just borrow. But that's just my guess...

 

Sure, its possible. If we assume something like a 15% repatriation tax (no real basis -- just for argument sake). I have that adding something like $4 a share in net cash and ~$.75 - $1.00 in eps.

[Liberty]

I think we're about due for some tax reform in the US (becoming more and more widely understood that it's a huge competitive disadvantage and pushes jobs and companies to invest outside of the country and keep their foreign cash out). But even if it takes 10 years, I think Apple will be patient and won't throw tens and tens of billions away to bring back capital that they don't need to run the business anyway (even with the 15bn of capex planned for 2016). They have an extremely low borrowing cost, so if they want to return more capital than they generate in the US, they'll just borrow. But that's just my guess...

 

Sure, its possible. If we assume something like a 15% repatriation tax (no real basis -- just for argument sake). I have that adding something like $4 a share in net cash and ~$.75 - $1.00 in eps.

 

What if they go to a territorial tax system like the rest of the world and just don't tax it? Can sell it politically as "when the money comes back in the country, it'll end up being reinvested in all kinds of things, creating jobs, increasing tax take indirectly, etc". Might not happen, but would make sense for the US to get on the same system as the rest of the world to be on a level playing field.

 

Even Icahn is using the Pfizer-AGN news to push on tax reform:

 

"1/3 Unfortunately, my warning concerning the imminent exodus of many of our best companies is coming true."

 

"2/3 Today Pfizer confirmed they are planning to move out of the country. The situation is much more dangerous than most people believe."

 

"3/3 There is no reason Congress cannot act now to pass international tax reform with the Highway Bill.Read my letter https://t.co/fbbB8mNWMR"

 

http://www.wsj.com/articles/pfizer-ceo-says-u-s-tax-regime-pushing-him-to-seek-alternative-1446140269

[TheAiGuy]

What if they go to a territorial tax system like the rest of the world and just don't tax it? Can sell it politically as "when the money comes back in the country, it'll end up being reinvested in all kinds of things, creating jobs, increasing tax take indirectly, etc". Might not happen, but would make sense for the US to get on the same system as the rest of the world to be on a level playing field.

 

Even Icahn is using the Pfizer-AGN news to push on tax reform:

 

"1/3 Unfortunately, my warning concerning the imminent exodus of many of our best companies is coming true."

 

"2/3 Today Pfizer confirmed they are planning to move out of the country. The situation is much more dangerous than most people believe."

 

"3/3 There is no reason Congress cannot act now to pass international tax reform with the Highway Bill.Read my letter https://t.co/fbbB8mNWMR"

 

http://www.wsj.com/articles/pfizer-ceo-says-u-s-tax-regime-pushing-him-to-seek-alternative-1446140269

 

I don't know how to handicap that possibility, but in that case AAPL would be worth 15% more.

[Liberty]

I don't know how to handicap that possibility, but in that case AAPL would be worth 15% more.

 

Times like these I wish this tax issue didn't exist and they could have done a 100bn tender when the stock was at 60... Oh well.

[TheAiGuy]

I don't know how to handicap that possibility, but in that case AAPL would be worth 15% more.

 

Times like these I wish this tax issue didn't exist and they could have done a 100bn tender when the stock was at 60... Oh well.

 

Yeah, no joke. I can't complain too much, though. No hugely destroying acquisitions (buy Twitter!), plus the whole "buyback more stock when the stock goes lower" thing is nice.

[DeepSouth]

I've redone my valuation with their latest results and I wanted to point out something about taxes. I think the tax rate Apple reports is too low -- they assume a large portion of the undistributed overseas earnings are going to be indefinitely reinvested. This largely accounts for the difference in the statutory tax rate of 35% and their reported tax rate of 26% but overstates their earnings by a good amount.

 

Adjusting their earnings and cash balance for this (and a couple of other, largely immaterial, things) and I have AAPL at 12.7X ex-cash (net of debt). Still pretty cheep but cheapens here really depends on growth (which I personally think is a slam dunk, but, hey...)

 

 

Edit:

Oh, and this is probably one of the reasons the earnings have grown faster than the revenue -- most of the growth is overseas.

 

Earnings are growing faster than revenues because they can leverage growing revenues over a partially fixed cost base (op margin up 230bps over last 5 years). Their reported income tax rate has increased materially over the past 5 years (up 200bps).

 

[TheAiGuy]

 

Edit:

Oh, and this is probably one of the reasons the earnings have grown faster than the revenue -- most of the growth is overseas.

 

Earnings are growing faster than revenues because they can leverage growing revenues over a partially fixed cost base (op margin up 230bps over last 5 years). Their reported income tax rate has increased materially over the past 5 years (up 200bps).

 

 

Yeah, you're right. That's strange to me as their percentage of international income has increased over time. It's not likely to be material but any idea what is driving the difference in tax rate?

[portfolio14]

I think we're about due for some tax reform in the US (becoming more and more widely understood that it's a huge competitive disadvantage and pushes jobs and companies to invest outside of the country and keep their foreign cash out). But even if it takes 10 years, I think Apple will be patient and won't throw tens and tens of billions away to bring back capital that they don't need to run the business anyway (even with the 15bn of capex planned for 2016). They have an extremely low borrowing cost, so if they want to return more capital than they generate in the US, they'll just borrow. But that's just my guess...

 

Sure, its possible. If we assume something like a 15% repatriation tax (no real basis -- just for argument sake). I have that adding something like $4 a share in net cash and ~$.75 - $1.00 in eps.

 

I agree to factor in something like 15% reptriation tax as a conservative valuation. But I won't deduct the debt to get the ex-cash P/E. Think of the end-game. If Apple can bring the cash back and use it for, say, buybacks, what will they do to the debt? Is it not sustainable?

[TheAiGuy]

I think we're about due for some tax reform in the US (becoming more and more widely understood that it's a huge competitive disadvantage and pushes jobs and companies to invest outside of the country and keep their foreign cash out). But even if it takes 10 years, I think Apple will be patient and won't throw tens and tens of billions away to bring back capital that they don't need to run the business anyway (even with the 15bn of capex planned for 2016). They have an extremely low borrowing cost, so if they want to return more capital than they generate in the US, they'll just borrow. But that's just my guess...

 

Sure, its possible. If we assume something like a 15% repatriation tax (no real basis -- just for argument sake). I have that adding something like $4 a share in net cash and ~$.75 - $1.00 in eps.

 

I agree to factor in something like 15% reptriation tax as a conservative valuation. But I won't deduct the debt to get the ex-cash P/E. Think of the end-game. If Apple can bring the cash back and use it for, say, buybacks, what will they do to the debt? Is it not sustainable?

 

Sure, but that's the difference between being aggressive and conservative in your assumptions.

 

Also, Apple is unlikely to be aggressive financially as long as anyone from the 90s is still arround. You can build into you model Apple can disperse %125 of net cash, but they probably won't.

[innerscorecard]

AAPL has finally discounted Apple Watch...if you buy it along with an iPhone. I think it's necessary - you need network effects with something like Apple Watch, and so far the people you see it on in public are mostly geeks like Marco Arment and Jeb Bush. That has to change.

 

(I'm happy with mine, of course.)