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Is Apple Ready For The Holidays?

Updated on November 25, 2015

If you think Q3 profitability for Apple was good, wait for Q4!

Apple Inc Defies Consensus Estimates and Weighs in with Massive Revenues & Profits

In October 2015, Apple Inc (AAPL) posted strong figures for revenues and profitability. Revenues came in at $51.5 billion and earnings were reported at $11.1 billion. What is surprising about Apple Inc's performance is that analysts’ forecasts have consistently been below actual figures for two years. What is particularly exciting about Apple Inc is the holiday shopping season up ahead. It all begins on Black Friday, continues through Thanksgiving and all the way through Christmas and New Year. Apple Inc has six weeks of bumper sales ahead and analysts are not mincing their words about what expectations they have of the world's most valuable company.

If we are to extrapolate future performance from past performance, Q4 2015 looks set to be one of the best yet. The US economy has finally turned the corner and has been posting consistently strong gains in GDP growth, non-farm payrolls and even real wage increases. That the Fed is considering raising interest rates in December is testament to the strength of the recovery in the US economy. And all the while, consumers have been saving massive amounts of money with the reduced cost of gasoline vis-a-vis crude oil prices. Those savings can now be put to good use in the retail sector, and Apple Inc is certainly one of the most popular selections for holiday shopping. In Q4 2015, Apple Inc is looking at revenues in the region of $75.5 billion-$77.5 billion. Last year, those figures came in at $75 billion in revenues and $18 billion in profits.

The biggest increase in sales in Q3 2015 was recorded with iPhones which spiked by 36% to $32 billion, up from $23.7 billion in 2014. During the quarter some 48 million iPhones were sold, slightly beneath analyst projections, but 22% higher than Q3, 2014. After Apple's financials were released, the stocks surged to $118 in the after-hours trading session. Now, several weeks later the price of Apple stock is still hovering around $118.78 slightly down from its November 3 high of $122.57. At present prices, Apple Inc has a market capitalisation of $662.24 billion with a price/earnings ratio of 12.88 and an earnings per share (EPS) of 9.22. The company's dividend is 2.08 and the yield is 1.83%. The 1-year target estimate price for Apple is $148.88. In terms of overall analyst opinion, Apple Inc has a mean recommendation of 1.9 (20 November 2015) – unchanged from a week ago. On a scale of 1.0 - 5.0, where 1.0 represents a strong buy, Apple is certainly perceived as a stock with plenty of upside potential, and is a strong buy.

On 25 August 2015, the research firm Wells Fargo upgraded its analysis of Apple from a market perform rating to an outperform rating. Apple is regarded as a buy based on multiple positive measures including the fact that Apple outperforms most other stocks in its sector. Its EPS figures are strong, and its net income growth is robust. Apple also features expanding profit margins and a positive return on equity (ROE). For the year to date, Apple shares have surged 7%, but there are concerns that technically, the stock will start to recede. For example the 200-day moving average is proving to be a resistance for Apple Inc. The resistance level could be hovering at the $122 ceiling, and if Apple pushes through that price barrier the stock will likely rally. The 200-day moving average is definitely something to bear in mind as it relates to the price of Apple stock.

Apple store in Beijing

Concern over Apple Inc (AAPL) moving forward?

The sale of iPads continued to decline in 2015 with actual sales figures coming in 20% lower than Q3 2014. The China slowdown has not helped Apple, since the burgeoning Chinese middle class is facing increasing pressures as a result of equity weakness, declining GDP, plunging import figures for September and October and an economy that is in the midst of doing an about turn from an export-driven market to a consumer-centric market. It should be pointed out that China remains front and centre for Apple Inc. Combined, Taiwan, Hong Kong and China contributed $12.5 billion to Apple's revenue stream.

And Apple has bucked the trend in the personal computer industry which has been declining, with a 3% uptick for the year in Apple Mac sales to 5.7 million units sold. However, when compared to Q2 2015 the sale of Apple Macs is 19% lower. There is a degree of consternation in the tech sector about why Apple has been so tightlipped about sales of its iWatch. However, Apple industry analysts are upbeat about this and stated that the sale of Apple TV, iPod and iWatch product items increased from $2.6 billion in Q2 $2015 to $3 billion in Q3 2015. For the quarter, (year-on-year) there has been a dramatic increase of $1.9 billion.

Apple TV – The Future of Television?

For many folks, the problem with TV is that you have to watch what you are being fed, instead of watching only what you want to watch. Apple TV is all about customizing your television viewing experience by way of apps. In other words the Apple TV experience allows you to select your preferred TV channels, and other services by choosing from a palette of apps. Among others, Apple TV presents viewers with options such as HBO Go, YouTube, Showtime, Hulu and Netflix. And then there are the games – lots of them available on Apple TV. The technology that goes into facilitating high-grade entertainment on Apple TV is second to none. The A8 chip is powerful enough to make gameplay highly responsive, crystal clear and interactive.

The Apple TV Siri Remote is a voice-activated control that is fully compliant with the Apple TV. It allows you to speak into the microphone and have Apple TV respond accordingly. Users are able to play back soundbites, fast forward, rewind, skip to other channels; turn the system on/off and so much more with the Siri Remote. Users are even able to search for specifics within movies such as featured appearances by celebrities in movies, funny lines and so forth. The search is still in its infancy stages, but already it is quantum leaps ahead of the competition. There are some things to bear in mind however. The number of apps available for Apple TV is rather limited but change is coming. The new Apple TV looks similar to the old version but has a larger chassis. And while Apple TV is unable to stream 4K video at present, there is no rush to do so. Other plus points for Apple TV include the following:

  • It's easy to set up
  • Bluetooth functionality supported
  • Apple TV provides quality streaming of apps that are not games

Whether Apple TV is superior to its competitors like Amazon Fire and Roku 4 remains to be seen, but it is definitely an upgrade on the previous version of Apple TV. It will be retailing in the $149-$199 price range and is likely to be a top seller over the holiday shopping session.

Apple TV Expirience

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