Analysts and media talking heads often act ambivalent, nonplussed or even disappointed when Apple reports its quarterly earnings. Such as, “Apple reported 2nd Quarter 2019 revenue of $58 billion, which was down 5% from the same quarter last year but in line with expectations.” Ho-hum, their revenues were less than last year’s same quarter, which is something we expected. And, la-di-da, their profits for the quarter were $11.6 billion, also about what we expected.
Admire It In Awe
Instead, let’s take a step back and just admire Apple’s revenue and earnings. $58 billion of revenue and $11.6 billion of earnings during the quarter after Christmas? That is incredible! It doesn’t seem that the iPhone era is dying out any time soon. Even absent any new blockbuster products since the iPhone in 2007, Tim Cook and Apple have been able to produce and execute and create a profit machine that is without parallel.
Future Cash Uses
Investors seem happiest about Apple’s announcement as part of their earnings report that they intend to allocate $75 billion of their cash hoard in order to boost dividends and stock buybacks. Apple had over $80 billion of cash and short term investments on its balance sheet as of 12/31/18, and with the cash they generate through product sales, Apple should have no problem achieving the $75 billion dividend/buyback goal. This move also shows that Apple is maturing as a company, although it may also show they are having difficulty developing new products. This bears watching next quarter and beyond.
Shareholders seem to agree with my outlook rather than that of the naysayers in the peanut gallery. Apple’s stock rose from about $200 prior to the earnings report to about $210, an increase of about 5%. Shareholders appear to see a rosy, highly profitable future with Apple. The iPhone era may be slowly fading, as some in the media say, but it isn’t gone yet and it has a long, highly profitable remaining life.
I own an iPhone (also a MacBook Pro), and I have recently noticed that my iPhone sometimes is receiving 5G mobile internet signals since I live in a densely populated area. That’s nice, but my phone isn’t a 5G phone, so while it may be getting a 5G signal, my phone isn’t able to take advantage of the speed that 5G offers. As 5G continues to roll out, guess what? Anyone who wants to completely take advantage of 5G service will have to buy a 5G phone. Reports are Apple will begin to offer 5G-capable phones sometime in 2020. I like what 5G offers, and I like the concept of Apple customers trading in their current phones, even the latest Generation X phones, for 5G-capable phones. Another potential future mother lode of cash for Apple.
Kudos and congratulations to Apple and its management for this tremendous achievement! Though you may disappoint the analysts who follow you as well as some in the financial media, most people love your products and are very proud and excited for you.