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It is a tremendous amount of fun when you can get involved with a company early in its growth cycle and just watch it develop while you're invested in it! Apple (NASDAQ: AAPL) just reported its September 30th fiscal fourth quarter results and they were stunning. Not only were the results better than expected, but the guidance going forward is just as strong. Apple is now fast approaching a market capitalization of $160 billion -- now greater than IBM (NYSE: IBM).
Wall Street estimates called for $0.85 per share for the September quarter, yet the company came in at $1.01 per share. Revenues were $6.22 billion and the Street's estimates were at $6.06 billion. Apple's management endorsed a December quarterly estimate of $9.22 billion and earnings per share of $1.42. Although the December quarter is Apple's fiscal first quarter, it is the biggest due to Christmas sales. So what will drive this company to higher levels of growth, profitability and of course, share price?
A solid 40% of Apple's revenues come from the international markets taking advantage of the weak U.S. dollar as local currency transactions are converted into dollars. Such powerful international revenues also mitigate any possibility of the U.S. market slowing down. Apple has not experienced a slow down in the U.S., but in the event our economy does slow, the cushion for Apple is in place.
Gross margins came in at 33.6% due to excellent pricing at the component vendor level. Chip manufacturers want to sell to Apple because of revenues and the prestige of being an Apple partner. Component pricing is now a real part of the Apple story as it will help keep margins at the high end.
Apple is hitting it on all cylinders: the iPod, the Mac and its related software, and of course, the iPhone. Mac sales were 400,000 more this quarter than the June quarter, putting Mac sales at 2.2 million units, well above any analyst estimate. iPhone sold 1.12 million units and that product line is just beginning. iPod sold 10.2 million units during the quarter and its market share still remains at a robust 75%+. The retail stores are gearing up for the hectic December quarter and Apple has indicated its product inventories are in excellent shape.
Street analysts, including myself, will be re-evaluating fiscal 2008 estimates and initiating 2009 estimates. Be sure about one thing: the estimates are going higher ... as is the stock. My price target remains $225 over the next 12 months.
Apple shares opened this morning at $188.56, surging up over $14 or 8%.
Georges Yared is the CIO of Yared Investment Research and the author of "Baby Boomer Investing...Where do we go from here?"
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Reader Comments (Page 1 of 1)
10-23-2007 @ 10:33AM
BILL said...
Always good to see a Georges Yared report.
Positive, intelligent, authoritative. And the most important part. Following him can make your wallet thicker. Missed your comments recently. Glad to see you are back.
Bill
10-23-2007 @ 3:18PM
Beltway Greg said...
Overlooked? The yoy increase in store traffic. I'm not sure how they measure this accurately but 67% is astounding. Perhaps they should hold classes for Lee Scott and the Wal-Mart crew. And, btw, I called earnings at $1.01, a Friday close at $187.33 and I called the last post-earnings bounce to $150.00.
So how do you like those Apples. If interested, I charge 20% of profits.
Beltway Greg
Let's Keep Steve Healthy.
Beltway Greg
10-23-2007 @ 7:41PM
MFord said...
What will keep Apple going forward? Simple, the creativity and ingenuity that they have displayed in the last ten years. Few companies know how to sell a product like Apple. They make high quality, simple products that they know you want. With Apple's experience http://www.newsvisual.com/newsvisual/2007/10/could-apple-pul.html and leading the way, we might just be beginning to see the re-emergence of tech stocks.