Loup Ventures: Apple is leading for the long-term

Apple yesterday announced earnings results for its fiscal 2020 second quarter ended March 28, 2020 and Loup ventures has weighed in.

The company posted quarterly revenue of $58.3 billion, an increase of 1 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.55, up 4 percent. International sales accounted for 62 percent of the quarter’s revenue.

Prior to Apple’s earnings release, analysts consensus estimates were $54.54 billion in revenue and $2.26 EPS

Apple’s net sales by category:
• iPhone: $28.962 billion
• Services: $13.348 billion
• Wearables, Home and Accessories: $6.284 billion
• Mac: $5.351 billion
• iPad: $4.368 billion

Gene Munster and Will Thompson for Loup Ventures:

Apple was the most at-risk large US tech company for reporting a disappointing March quarter due to the company’s hardware businesses and exposure to China. Given these headwinds, reporting 1% revenue growth is a win and is representative of the strength of Apple’s presence in our lives. That said, 2020 will remain unpredictable for all companies, including Apple.

What’s lost in March earnings is the significance of the measures the company is taking to manage the business for long-term revenue growth and profitability. That means Apple is continuing its previous product release schedule along with plans to invest in future products and services. This approach will likely yield a stronger product roadmap versus other competitors and larger growth opportunities in 2021. Also lost is the company’s financial strength, increasing the share buyback by $50B, which is unprecedented in the face of little revenue visibility over the next several quarters.

Apple’s earnings power is often missed during these messy quarters, reporting $11.3B in GAAP net income. As a point of comparison, Amazon reported March GAAP net income of $2.5B. Despite the earnings power difference, both companies are essentially valued at $1.2T. Amazon is growing much faster, likely 20% in the June quarter compared to Apple, which will likely be down 5%+. Fast-forwarding to next year, we expect Apple will grow revenue at a similar rate to Amazon.

MacDailyNews Take: Yup.