Apple: a fly in the ointment

 


 

Apple's financial results for the first quarter of 2021 were extremely impressive. Revenue increased by 53.7% YoY to $ 89.6 billion (above forecasts by $ 12.3 billion), net profit - by 111% YoY, to $ 23.6 billion, and EPS - by 119% YoY g, up to $ 1.40 (at $ 0.99 consensus).

Mac sales increased by 42% y / y, to $ 17.8 billion, iPad - by 57% y / y, to $ 16.2 billion, and services (services) - by 27% y / y, to $ 16.9 billion. The management increased the number of payments to shareholders by 7%, as a result of which the dividend yield increased to 0.66%. What is worth paying special attention to is that the company continued to actively buy back its own shares: in the previous quarter, $ 43 billion was spent for these purposes. Investors are always extremely positive about such actions.

However, it should be borne in mind that the shares are currently trading at Forward P / E at 26x. In other words, securities can hardly be called cheap, which means, perhaps, this money would be worth spending more profitably.

For example, to develop new technologies. In 2020, Apple spent $ 18.8 billion on “research and development” (R&D). This is 7% of annual income. For comparison, on Facebook, this figure was $ 18.4 billion (22% of annual revenue), and in Alphabet - $ 21.4 billion (16%). Recent iOS updates do not provide any noticeable advantages over previous versions of the system. If the situation does not change, then market participants may well begin to worry about the future of the manufacturer, which is able to repeat the fate of IBM, which has lost its former greatness due to weak research work.

 

 

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