Apple Q1 FY23 Investment Note
Apple revenue dropped 5% since 2016, what to expect?
Claim your Earnings Season offer by winning Rewards Points and discovering Investment Opportunities!
Key Takeaways:
Attitude: Apple continues to navigate a challenging environment and remains focused on investing in long-term growth plans. The company grew total company revenue on a constant currency basis. Besides, Apple generated $34 billion in operating cash flow and returned over $25 billion to shareholders during the December quarter. Looking ahead to 2023, "we are determined to do things with unmatched creativity and unrivaled innovation, which makes me more confident about the future of Apple," said CEO Tim Cook.
Guidance: Given the continued uncertainty, Apple doesn't provide specific revenue guidance, but expects the March quarter YoY revenue performance to be similar to the December quarter. Foreign exchange will continue to be a headwind, and Apple expects a negative YoY impact of 5%. For services, Apple expects revenue to grow. For iPhone, Apple expects the March quarter revenue performance to accelerate relative to the December quarter. For Mac and iPad, Apple expects revenue to decline double digits YoY because of challenging compares and macroeconomic headwinds. Apple expects the gross margin to be between 43.5% and 44.5% and the opex to be between $13.7 billion and $13.9 billion. The company's tax rate will be around 16%. Besides, Apple's board of directors has declared a cash dividend of $0.23 per share payable on February 16, 2023, to shareholders of record as of February 13, 2023.
Product: Apple introduced new MacBook Pro models powered by its latest developments in Apple silicon, M2 Pro, and M2 Max last month. The newest MacBook Pro gets the longest battery life ever in a Mac. Apple also introduced the M2-powered Mac mini, which will supercharge productivity for users. During the quarter, iPad revenue grew 30% to a total of $9.4 billion. Revenue for Wearables, Home and Accessories were $13.5 billion, which was down 8% YoY. Apple remains excited about the long-term opportunity in the category. Apple announced the next-generation HomePod, which helps users make homes safer with sound recognition. Later, HomePod will be able to send a notification directly to a user's iPhone if a smoke or carbon monoxide alarm sound is identified. Apple has over 2 billion active devices as part of its growing installed base, double what it was 7 years ago.
Challenge: Firstly, there was nearly 800bp negative impact to Apple on the Q1 foreign exchange headwinds. The second main factor was COVID-19-related challenges, which significantly impacted the supply of the iPhone 14 series and lasted through most of December. The third was a challenging macroeconomic environment, like inflation, the war in Eastern Europe and the enduring impacts of the pandemic.
Earnings Q&A
Q: For the strong gross margin guidance, what is helping you out there from 43.5% to 44.5%?
Luca Maestri: For the March quarter, we've seen a margin expansion from 43.5% to 44.5%. We're doing a lot of work around cost. The mix will continue to help, both within categories and services mix as we move away from the holiday season. We're doing a lot of work on the cost structure, and that is paying off. Foreign exchange is still a negative, about 50 basis points sequentially, but it's mitigating. In the last couple of weeks, the dollar has weakened a bit. As we go through the year, hopefully, things will improve. But for now, as you correctly state, we are in a good position on margins.
Q: Are you seeing the Chinese consumer come back on the demand side? What are they buying? What do you think about your position there?
Tim Cook: Last quarter, we declined by 7% on a reported basis, but we actually grew on a constant currency basis. And that was despite some significant supply constraints. Obviously, the sort of COVID restrictions throughout China that happened in various places throughout the country also impacted the demand during the quarter. When you look at the opening that started happening in December, we saw a marked change in traffic in our stores compared to November. And that followed through to demand as well. We did see a marked change from December compared to November.
Q: Can you provide the installed base for the iPhone at year-end? Is there anything you see in this new cohort of users that might look different from past cohorts?
Tim Cook: The installed base is now over 2 billion active devices and we set records across each geographic segment and major product category. And so it was a broad-based change. We also saw strong double-digit in several of the emerging markets, which is very important to us. For example, India and Brazil are just two examples. Obviously, it bodes well for the future.
Q: What do you think about the role of AI in your strategy, particularly in the services segment? Is it something that you're implementing strategically there?
Tim Cook: It's' a primary focus of ours. It's incredible in terms of how it can enrich customers' lives. You can look no further than some of the things that we announced in the fall with crash detection and fall detection or backways with ECG. I mean these things have literally saved people's lives. So we see enormous potential in this space to affect virtually everything we do. It's obviously a horizontal technology, not a vertical one. It will affect every product in every service that we have.
Last but not least,
Why not speak out with mooers on AAPL's investment insights through the below comments? Get inspired by sharing! Join us!
Rewards:
1) Inspiration Reward: Based on comment originality, quality and engagement, one mooer has a chance to win 600 points! The other two mooers will win 300 points each!
2) Participation Reward: We will provide 60 points for everyone who comments here with relevant posts over 15 words. For sure, any comment is welcome!
*You can exchange abundant gifts at the Rewards Club. Comments before Feb 18 ET will be counted. The above rewards are mutually exclusive.
For more information:
Disclaimer
This article is a script from the AAPL Q1 FY23 earnings conference call. In order to facilitate reading, we have made appropriate cuts and revisions. This presentation is for information and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Before investing, please consult a licensed professional. See this link for more information.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
Read more
Comment
Sign in to post a comment
Moomoo Community Official Account
Trade like a pro.
38KFollowers
80Following
26KVisitors
Follow
阿姚朋友 : There are two main reasons for the serious decline in iPhone shipments.
First, the pandemic has caused Apple's supply chain to break down, causing iPhone production to be unable to be produced normally or even forced to be cut. In November 2022, Apple issued a rare warning to investors, saying that although market demand for iPhone 14 Pro series models is strong, due to declining production capacity, shipments of Pro series models are expected to fall below previous expectations, and consumers will also wait longer to receive the new models.
When the supply chain was most disrupted, consumers in the US waited 34 days to buy iPhone 14 Pro series models, while consumers in mainland China even had to wait 36 days.
Market research agency TrendForce pointed out in a research report that since Foxconn's Zhengzhou plant has been continuously affected by the epidemic since October 2022, it has been difficult for the operating rate to break through 70%. Shipments of the iPhone 14 series are expected to drop 15 million units to 20 million units. At the same time, the agency also expects iPhone shipments to drop to about 47 million units in the first quarter of 2023, a decrease of 22% over the previous year.
Second, Apple has yet to launch a folding screen phone. Although the decline in the smartphone market is already obvious, shipments of folding screen phones have repeatedly reached new highs. According to IDC's tracking report data, the number of folding screen phones shipped in 2022 was close to 3.3 million units, an increase of 118% over the previous year. The growth rate was higher than expected, and the share of the Chinese smartphone market has risen to 1.2% from 0.5% in 2021.
In the smartphone market, where the downward trend has continued for several years, folding screen phones have struggled to find their way. However, at present, almost all mainstream smartphone manufacturers other than Apple have launched folding screen phones. According to the latest survey data from Qunzhi Consulting, shipments of folding screen phones are expected to exceed 70 million units in 2025. Undoubtedly, folding screen phones have already forcibly removed three acres of land from Apple's site.
In order to cope with the dilemma where iPhone sales may decline further in the future, Apple is speeding up the development of the Indian market. In a conference call after the financial report was released, Tim Cook said he was “very optimistic about development in India,” and also said that during the pandemic, all Apple's businesses in India developed rapidly and achieved good results in all areas. “We will continue to increase investment in the Indian market in the future.” According to reports, Apple is preparing to open its first retail store in India this year, and will open more stores in Mumbai and New Delhi later.
Mars Mooo : With its highest ever market share in Q4 2022 and better performance from iPhones, $Apple (AAPL.US)$ will continue to grow in 2023.
A small talk about Apple in Q1 2023
https://www.moomoo.com/community/feed/109811252920326
GodSpeed289 : After losing much in china market, Apple are now very much dependent on India. From setting up of manufacturing sites to plans of opening up more retail stores in view of the Indian potential. iPhone sales should soar along with Apple stock market given India is the world’s second biggest population. Although household income there remains low, it’s worth noting that India is expected to become one of the world’s fastest-growing economies over the next decade.
Aside from products, Apple also benefits from higher services revenue from its app store, music subscriptions, advertising, etc.
More importantly, the Apple continues to facilitate large returns to shareholders. Not forgetting Apple will, as reported, be spending billions in stock buybacks. It’s for those above reasons Apple stock will still be a buy stock for investors.
Selinna Puliston :
Liu Yongshu Handsome: Apple's check has always been viewed from a long-term perspective; its potential is huge
Deep Value : Long-term investors should keep focused on the company's results, rather than the market's reaction, as there could be a seeming disconnect.
romancer :
Srikanth Reddy : I like Apple
はやじろう :
BrandonnW :
View more comments...