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  • Apple Is Walking Up The Down Staircase [View article]
    6034700:

    Thank you for your comment. I wanted to publish this particular series of revenue and earnings charts for Apple as the company returns to a cycle of net income growth.
    Mar 30 01:07 PM | 3 Likes Like |Link to Comment
  • Apple Is Walking Up The Down Staircase [View article]
    Jurassic:

    Even with the current four-year $100 billion cash distribution program, Apple is continuing to add to the company’s cash and marketable securities balances. This is in the midst of a slow-growth revenue cycle.
    Mar 30 01:04 PM | 7 Likes Like |Link to Comment
  • Apple Is Walking Up The Down Staircase [View article]
    masteq:

    Thank you for your comment. The numbers suggest a much different outcome.
    Mar 30 12:55 PM | 7 Likes Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    DoctoRx:

    If I were to respond to your query concerning market valuation relative to book value or other asset-based valuation metrics, the response would be at least as long as the article above. article.

    At this point in time with $140 billion in cash net of debt earning a mere pittance of a return and cash being consumed (or at least a high percentage of new cash generated being consumed) for purposes of share repurchases and dividends, I’ll shy away from that for now but may cover the topic in a future article.

    In the current market valuation of the company, cash has a relative value as to how the market perceives it is being used or deployed for the benefit of shareholders. For example, both the old Einhorn proposal and the recent Icahn proposal suggested cash was underutilized for the benefit of shareholders. Both proposals suggested an alternative use of cash would increase the share price based on the market’s view of more effective cash deployment.

    I believe the market’s view of the cash at this time relates not so much to a classic metric of premium over book value or any other asset/debt metric but a view of how the cash is being deployed for the benefit of shareholders.

    In other words, the value or potential value of the cash assets are viewed based more on utilization and the ability of the cash to facilitate growth. In my view, Apple isn’t a “value” stock at this time. I consider it a growth stock in the midst of a multi-quarter cycle or negative net income growth. If I were interested in Apple as a value play I would factor the cash differently than I do today.

    I am not reviewing the above to be didactic in any way but to tie into the essence of the article and explain my approach to all readers.

    In my view, share repurchases in an environment of no net income growth represent nothing more than a balance sheet exchange and a reduction of both assets and equity. Earnings per share growth without net income growth is nothing more than a static profit level distributed over fewer shares in the count.

    In contrast, the rising deferred revenue balances are carried as a liability. The line-item represents a pick-up in cash offset by a liability until the revenue is recognized. It is future recognized revenue that will work its way to the equity line with a reduction to the liability as the revenue is recognized in future quarters. The asset value (cash) will not be diminished as the equity value rises over time.

    At this time, I consider the rising deferred revenue balances to be a factor in current and future market valuations of the company

    Is it likely there will be years Apple will lose money? Not anytime soon. With an earnings base of between $35 billion and $40 billion per fiscal year, it would be a calamitous outcome and not likely anytime in the next few years.

    I view Apple not by “Jobsian eras” but product epochs and leaps in geographic reach. Jony Ive, Apple’s chief designer, was a presence at Apple years before the return of Steve Jobs and the company’s current CEO has guided the company’s day-to-day operations for at least a decade.

    Apple manages its business on a geographic basis and there’s still much of the world’s geography and population that remains underserved by the company and its products and services.

    I consider the growth in the company’s global customer base an important attribute along with the rising post-purchase revenue streams being realized by the company. The 600 million iTunes accounts doesn’t have its own classic asset classification, but the company’s large and growing customer base is the source of revenue and earnings growth moving forward.

    On the issue of growth and without forecasting the impact of unannounced new products and services, I consider 10% revenue growth sustainable for the next two years based in part of continuing geographic expansion. At that growth rate I expect a consequential rise in net income of between 11% and 12% and a resulting eps outcome amplified by the ongoing share repurchases.
    Feb 26 02:03 AM | Likes Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    fneww1212:

    I discount speculation of a summer release of the next flagship iPhone handset. The next iPhone will be released in tandem with iOS 8 and I don’t expect volume production of the A8 SOC to commence until summer.

    There are no indications from publicly-traded component suppliers of inventory builds ahead of a new iPhone handset. I expect inventory builds to be revealed by component suppliers in June quarter results. Additionally, it’s expected the next flagship handset will have a new form.

    The market is data driven. The company’s market cap is in the vicinity of one-half trillion dollars and moving that number appreciably higher requires real data. Apple’s March quarter guidance disappointed the market even with the explanations provided during the December quarter conference call. Strong June quarter guidance signaling a return to profit growth would be a catalyst for the share price.
    Feb 24 11:33 PM | Likes Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    Following the return to net income growth, the rising deferred revenue balances will assist in margin expansion. But first things first. Earnings growth is Apple’s primary share price catalyst.
    Feb 24 11:19 PM | Likes Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    John Court:

    Taking mobile payments off the table for now, a return to net income growth coupled with the ongoing share repurchase program and rising deferred revenue balances will move the share price significantly higher. The share repurchase program and the rising deferred revenue balances are constituent catalysts.

    Apple will deliver aggregate high single-digit to low double-digit revenue growth this fiscal year even without new products and services. Modest but positive Mac unit sales will also benefit top line growth. China Mobile and DoCoMo will deliver a boost to iPhone unit sales for the balance of the fiscal year.

    There’s no way to accurately forecast the revenue and earnings impact of unannounced new products and services. However, Apple’s huge investment in data centers in Nevada, North Carolina and Oregon suggest anticipation of an immense escalation of content and services delivery demand. The agreement with GT Advanced Technologies for the manufacture of sapphire glass suggests a new product or product category no later than 2015.

    Apple’s gross margin will improve beginning no later than the June quarter and through at least the March quarter of FY2015. The market will have cause to reevaluate Apple’s current trading range, absent a new product announcement, with the announcement of June quarter guidance.

    Long-term there is plenty of potential for strong share price appreciation. The purpose of the article is not to dampen long-term expectations. The purpose of the article is to chronicle Apple’s current performance metrics and, based on the facts that are known, forecast the beginning of a return to net income growth in the months ahead.
    Feb 24 11:15 PM | Likes Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    LowRiskValue and TimmiesRegular:

    Apple may take a unique approach to mobile payments. I suspect Apple will handle the transaction with the bank and provide the retailer with only the information necessary to complete the transaction. For example, this might be nothing more than a transaction code that becomes no longer valid upon completion of the transaction or 60 seconds, whichever occurs sooner.

    The card or account information isn’t transferred to the retailer, only the authorization code. If Apple can secure the device used for payment, Apple could provide security and theft protection as if the transaction occurred in what’s called a card present environment.

    In other words, Apple would be bringing the Apple customer to the retailer while maintaining primacy in the relationship with the customer. This would not be an environment in which Apple functioned only as a transaction facilitator. As an Apple product and services customer, I’d feel more secure if Apple handled the transaction and that my personal information wasn’t shared with a retailer I may or many not ever visit again.
    Feb 23 09:30 PM | 1 Like Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    ctownzoo:

    I expect Apple to return to a cycle of real net income growth as early as the June quarter. I’m confident Tim Cook will keep his word on the introduction of new products. Until those new products are announced, it’s not possible to accurately quantify the revenue and earnings impact for the company.

    Positive net income growth coupled with the massive share repurchase program will deliver low double-digit eps growth on a quarterly basis by the end of this fiscal year.
    Feb 23 08:31 PM | Likes Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    HISTORY repeats itself:

    The patience of long-term shareholders may be well rewarded over the next two years. The first step in moving the share price higher is a return to net income growth. That may commence as early as the June quarter.
    Feb 23 08:24 PM | 1 Like Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    Sacto Joe:

    I am a proponent of Apple accelerating the massive share repurchase program to complete the repurchases this calendar year. As net income growth returns, the reduced fully diluted share count will work as an afterburner to amplify the impact of the rising earnings on earnings per share.

    Even six months from now, Apple’s purchases to-date will look as if management went bargain shopping due to the prices at which the shares were acquired.
    Feb 23 08:18 PM | Likes Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    Apple Diner:

    Apple’s 91-day results are nothing more than a static snapshot of a fast-moving enterprise object. I don’t think senior management decisions are based on the fiscal calendar.

    The benefit of the share repurchase program will be maximized as Apple returns to real net income growth and rising earnings prompts the Street to adjust the company’s valuation. The share repurchase program and rising deferred revenue balances are both constituent share price catalysts. Apple has on its December quarter balance sheet $11.428 billion in deferred revenue to be recognized over time.
    Feb 23 06:27 PM | Likes Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    Rootarmo:

    In FY2013, the iPhone represented 53.41% of revenue and the iPad line represented 18.71%. That concentration of revenue rose to 75.82% for the two product lines combined in the recent December quarter.

    The market is looking for something more than the iPhone and iPad lines to drive revenue and earnings growth. I can not quantify a value or offer projections and analysis on future products Apple has yet to announce.
    Feb 23 06:03 PM | 1 Like Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    Camden:

    Thank you for your comment. Beginning with the June quarter, the impact of the increase in deferred revenue per unit sold will gradually diminish. The iPhone 5s appears to less challenged from a warranty cost standpoint than the original iPhone 5. I don’t expect Apple to repeat the extraordinary $1.551 billion warranty cost set-aside that occurred in the March quarter last year.

    Apple is seeing its fastest growth in Greater China and Japan. Japan delivers the highest percentage of revenue to the regional operating income line of any of Apple’s regional revenue segments and I expect the foreign exchange issues that complicated results in the December quarter to ease.

    Additionally, I expect stronger rates of revenue growth in the June and September quarters this year fueled in part by positive single-digit unit sales growth for the Mac line through the balance of the fiscal year versus negative unit sales growth for the line in all four quarters of FY2013.

    Both China Mobile and DoCoMo will provide a revenue growth benefit for the balance of the fiscal year
    Feb 23 05:03 PM | 2 Likes Like |Link to Comment
  • Apple: Net Income Growth Is The Name Of The Game [View article]
    TimmiesRegular:

    I agree. Apple carefully chooses its new product steps and I do expect a new product offering this year. A return to net income growth and a new product will excite the Street. Combined with the impact of the ongoing share repurchase program, patient investors may be well rewarded over the next two years.
    Feb 23 04:48 PM | 1 Like Like |Link to Comment
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