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Moo Earnings wrote a post · Oct 30, 2022 12:58

Apple Q4 FY22 Investment Note

Apple earnings beat in Q4, whereas continuing pandemic streak on iPhone sales and services.
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Apple Q4 FY22 Investment Note
Apple Q4 FY22 Investment Note
Key Takeaways:

Attitude: The September quarter of 2022 was still a record quarter on Revenue and EPS. The active installed base of devices reaches all-time high for all major product categories. The quarter results continue to demonstrate Apple's ability to effectively execute in spite of a challenging macroeconomic background. Specifically, Q4 revenue is $90.1 billion, up 8% YoY and Q4 diluted EPS is $1.29, up 4% YoY. Annual revenue was $394.3 billion, up 8% YoY, and annual diluted EPS were $6.11, up 9% YoY. Besides, Apple generated over $24 billion in operating cash flow, and returned over $29 billion to its shareholders during the quarter. According to Tim Cook, Apple is continually committed deeply to protecting the environment, user privacy, and strengthening accessibility.
Guidance: Given the uncertainty around the world in the near term, Apple is not providing revenue guidance but the company believe its total year-over-year revenue performance will decelerate during the December quarter as compared to the September quarter. Apple expects Mac revenue to decline substantially YoY during the December quarter. For service, the company expects to grow but to be impacted by the macroeconomic environment increasingly. Apple expects the gross margin to be between 42.5% and 43.5% during the December quarter. The opex to be between $14.7 - $14.9 billion. The company also expects OI&E to be around negative $300 million and its tax rate to be around 16.5%.
Moreover, Apple's board has declared a cash dividend of $0.23 per share of the company's common stock. The dividend is payable on November 10, 2022 to shareholders of record on November 7, 2022.
Product: iPhone 14 models are packed with groundbreaking innovations, including a new camera system as well as always-on display and the Dynamic Island, which offers a whole new way to interact with iPhone. Besides, every iPhone 14 is made with 100% recycled rare-earth elements in all magnets. The tenth-generation iPad, which looks and performs better than ever, landed in stores in October. For iPad Pro, now it's turbocharged by the M2 chip. In wearables, home and accessories spurred 10% YoY revenue growth during the September quarter. Meanwhile, Apple TV Plus productions continue to earn accolades. In November, Apple is going to give audiences an even better entertainment experience when the all-new Apple TV 4K hit stores. For the second year, Apple Card has been ranked highest in customer satisfaction for midsized credit card issuers by J.D. Power.
Challenge: Apple continues to experience headwinds associated with macroeconomic conditions. Firstly, Apple expects about 10% of negative YoY impact from foreign exchange (FX). Secondly, the macroeconomic environment increasingly affecting the digital advertising and gaming, which might result in a negative impact on services revenue. Thirdly on Mac, Apple has a challenging compare against last year, which had the benefit of new M1 MacBook Pro launch and associated channel fill.

Q: Could the management talk about the demand for iPhone lineup so far and how the trend could be in the future, taking into account the Marco uncertainties?
Tim Cook: iPhone grew 10% in the Q4 to $42.6 billion. Customer demand was strong and better than we expected. Please keep in mind that this is on top of FY2021 that had iPhone revenue grow by 39%, and so it's a tough compare. In terms of the new products need, it's still very early to determine. But since the beginning, we've been constrained on the 14 Pro and the 14 Pro Max supply.
We were really pleased with the broadness of the iPhone strength and we feel very good about how we performed in Q4. Specifically, we had three of the top four smartphones in the U.S. and the U.K., the top three in Urban China, the top six in Australia, four out of the top five in Germany and the top two in Japan. Customer satisfaction for the iPhone remains very strong at 98%.
Q: Could the management talk about the overall gross margin puts and takes? How do we think about it flowing through when we look forward?
Luca Maestri: The 42.3% gross margin was a September quarter record for the company. Now, we have guided Q1 to 42.5% to 43.5% in spite of the negative FX fact that we have, on a YoY basis, 330 basis points. So obviously, the strong dollar makes it difficult in a number of areas.
Obviously, our pricing in emerging markets makes it difficult, and the translation of that revenue back into dollars is affected. But on the positive side, we are seeing commodities behave fairly favorably for us. So we believe we can offset the negative foreign exchange that we're seeing. It takes into account some level of inflationary pressures. But overall I think the outcome is a good one.
Q: For the services, It looks like there's been some price adjustments to Apple Music, TV Plus and the One bundle. How you think about balancing the consumer price versus your own costs?
Tim Cook : On the last week of October, we announced a price increase on Apple Music and on Apple TV Plus and then the corresponding Apple One. There are two different situations here. With Music, the cost of licensing increased. So we are paying more for music. The good thing is the artist will also get more money for their songs that are enjoyed on streaming.
For Apple TV Plus, we are very focused on originals and so we had four or five shows in the beginning, when we priced it quite low. But now we have lots of contents and are coming out with more on each month. In that condition, we have increased the price to represent the value of the service. Apple One is just the consolidation of those two price changes.
Q: Could you give us a sense for what drove the Wearables result and the strength there this quarter? Was it from the iPhone attach rates or the new products announced this quarter?
Tim Cook: If you look at Wearables, we grew 10% which we were very happy with. In particular, the new Apple Watch lineup was a contributor, including the Ultra and the Series 8 and the SE. The Ultra continues to be supply constrained during this quarter so far. So we're working hard to satisfy the demand bearing. Moreover, I should mention that about two-thirds of the Apple Watches that we sold were to customers who had not previously owned an Apple Watch. We're still very much selling to new customers.
We also launched the AirPods Pro in September, whose reviews have just been off the charts in terms of the noise cancellation features and the sound quality. We're getting great reviews from there. On the contrary, FX was a headwind that affected wearables, home, and accessories, just like it affected the rest of our products and services. We also had negative impact from the business in Russia obviously.

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Disclaimer
This article is a script from the AAPL Q4 FY22 earnings conference call. In order to facilitate reading, we have made appropriate cuts and revisions. Comments above are made available for informational purposes only. Before investing, please consult a licensed professional. Moomoo Inc. ("moomoo") provides mobile and online technology solutions for securities trading. Moomoo is not an investment adviser or a broker-dealer and it provides neither investment or financial advice nor securities trading services. All contents such as comments and links posted or shared by users of the community are opinions of the respective authors only and do not reflect the opinions, views, or positions of moomoo, its affiliates, or any employees of moomoo or its affiliates. Please consult a qualified investment or tax advisor for your personal financial planning and tax situations. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. In the U.S., investment products and services available through the moomoo app are offered by Moomoo Financial Inc., a broker-dealer registered with the U.S. Securities and Exchange Commission (SEC) and a member of Financial Industry Regulatory Authority (FINRA)/Securities Investor Protection Corporation (SIPC). In Singapore, investment products and services available through the moomoo app are offered through Moomoo Financial Singapore Pte. Ltd. regulated by the Monetary Authority of Singapore (MAS). Moomoo Financial Singapore Pte. Ltd. is a Capital Markets Services License (License No. CMS101000) holder with the Exempt Financial Adviser Status. This advertisement has not been reviewed by the Monetary Authority of Singapore. In Australia, financial products and services available through the moomoo app are provided by Futu Securities (Australia) Ltd, an Australian Financial Services Licensee (AFSL No. 224663) regulated by the Australian Securities and Investment Commission (ASIC). Please read and understand our Financial Services Guide, Terms and Conditions, Privacy Policy and other disclosure documents which are available on our websites https://www.moomoo.com/au. Moomoo Technologies Inc., Moomoo Financial Inc., Moomoo Financial Singapore Pte. Ltd. and Futu Securities (Australia) Ltd are affiliated companies.
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  • Milk The Cow : For me, I think hold & wait as the economy is filled with negativity but yet the stock price rally like crazy, maybe due to mid term election...[undefined]

    If hit near the high once again, I think I may sell [undefined].
    No matter how I look at it, the economy is no good.
    Fair value adjustment should happen in the end overall.

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  • THEWIZARD : By Bloomberg News:
    October 30, 2022 at 3:52 PM GMT+8
    Updated on October 30, 2022 at 6:36 PM GMT+8

    Workers are departing Apple Inc.’s biggest iPhone plant in China, seeking to escape hastily enacted Covid measures that left many of the 200,000 staff grappling with inadequate living conditions.

    So for now, I don't know, you can tell me, if you know?
    Or better, let the market show us in the next few days?

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  • 吉大 : Latest: Apple Inc contract manufacturer Foxconn Zhengzhou plant has been closed, Henan Province and Zhengzhou set up emergency offices.

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  • Frank_Gu : I will continue to choose to support Apple Inc forever until the emergence of Apple Inc 20, which will be an epoch-making mobile phone product.

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  • Jamesim : No special gimmicks, simple low-fat flavors are attractive enough.  But why does this picture seem familiar? [undefined]
    $Apple (AAPL.US)$ price has rebounded rapidly since hitting 134 on October 13, and the current price is 150.  The stock is down about 16% since its high this year, showing some resilience compared to the Nasdaq (-30%).  Apple still has ample cash flow and spends billions of dollars a year on share buybacks and dividends, and investors in the tech sector may still be tempted to factor in Apple because it's stable enough.

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  • Winwin1 : Apple Inc's earnings continued to climb in the fourth quarter, and it is believed that the stock price will continue to rise.

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  • AwesomeNewbie : Holding on to the stocks that you have done due diligence and much research will definitely help in boosting the investments in near future! Don't sell/buy emotionally! [undefined][undefined][undefined]

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  • Zhao Dick Goh : seriously every year there's Apple Fans waiting on the store to buy the latest Iphone guess what I don't see other brand having long queue for their latest release

    #hold and wait~it will be there

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  • meruson : $Apple (AAPL.US)$ is at resistance zone after the rally on resilient earnings. i like the part where there is demand but limited by supply constraints.

    from the pnf % and traditional chart, we can observe that aapl is in the resistance zone. if it continues to rally, the next resistance zone is another percentage point. this is due to downward trend line connecting the highs. and the next next resistance zone is another percentage point increase. this is when it reaches its recent high. the orange line is $U.S. 2-Year Treasury Notes Yield (US2Y.BD)$ . as interest rate increases, aapl starts to yield when us2y reached 0.5%. as long as interest rates keeps increasing, aapl will have limited upside of 3%.

    from the pnf traditional, we can better observe that aapl has reached resistance zone and may slide due to profit taking and up coming fed meeting on nov 2 where a 75 bps hike it highly anticipated. this hike will likely cause aapl to yield. we can also observe that the short percent is on a increasing trend. this shows that the bears are not letting up.

    highly likely aapl will retrace to 146 region before rallying again.


    bon courage

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  • Miao85 : Wow.. Go apple go,although I am an Android user, undeniably holding Apple share is a better investment than other phone companies in the market. [undefined][undefined]

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