Apple, not just iPhone: more revenue from services. Stock is expensive on the stock market

Not only that. The technology giant's numbers are all higher than consensus estimates. Wall Street, for example, had forecast revenues of 94.5 billion (lower than the company achieved).

Despite this, in the two sessions following the publication of the balance sheet, the share price on the stock exchange fell by a total of 1.47%. Which seems a paradox. The contradiction has been - by various experts - justified in various ways. The first, more immediate, concerns Apple's guidance for the current quarter. The company expects an increase in sales in the low to mid-single-digit percentage range. Gross margin, for its part, is expected to settle between 46% and 47%. These are - some experts explain - rather weak indications. Guidelines which, by showing how the business does not seem to be maintaining the expected cruising speed even in the wake of Artificial Intelligence (AI), have justified the stock market's turning up its nose.

Another cause of the operators' disappointment concerns Artificial intelligence (Ai). The reasoning of various experts is as follows. Apple, since the media attention on the new technology exploded, has allegedly kept a low profile. As if - analysts point out - the company was lagging behind on this front. In June, the group - which instead seems to want to appear not late but cautious on the subject - presented Apple Intelligence. That is to say, a programme - to put it simply - which, on the one hand, aims to combine the generative models of Ia with products and services; and which, on the other hand, wants to continue to guarantee the privacy of private users even when Ai is involved (the protection of data has always been an atout of Apple's ecosystem). Well, the 'contamination' of Apple's solutions by Ai is gradually taking hold. For example: the iPhone 16, presented at the beginning of September, has seen the long-awaited software update 'added' with artificial intelligence (in America) come into operation at the end of October. In addition, the Ia train has brought the virtual assistant Siri on board, and the iPads and Macs themselves. So why the market disappointment? Because the so-called 'wow' effect was missing. The surprise that enlightens the minds of children, 'techno-addicts' and - often - list-makers. A context which, combined with the above-mentioned forecast on the first quarter of 2024-2025, facilitated the idea of some delay and sales on the stock exchange.

However, the reaction does not seem appropriate. Above all, with respect to the fundamentals. The do-it-yourselfer evidently turns his gaze towards the dynamics of the business. The group, from the point of view of segments, divides the business into five categories: iPhones, Macs (PCs based on the macOs operating system), iPads (tablets based on iPadOs), Weareables, Home and accessories (from Apple Watch to AirPods to Apple TV) and Services. Well: the Apple phone, with regard to the fiscal year that has just ended, reported in the first three quarters - sales - on a sequential basis - always declined. In the last quarter, however, there was a turnaround. Smartphone revenues rose to 46.2 billion (they had been 39.3 in the third quarter). True! Over the entire year, the segment's revenues were flat. Moreover - although the company points to the recovery of business in China - the weakness in the former Middle Kingdom remains as a result of competition from local products. Having said that, however, the slowdown is undeniable. On the rise, on the other hand, is the Mac world, where turnover for 2023-2024 is expected to expand by 2%. On the other hand, the iPad (-6%) and Wearable, Home and accessories (-7%) are shrinking. Even on this double front and in the last quarter, however, on the one hand Apple Watch & co rose again; and, on the other hand, tablets limited their descent. That is to say: Apple showed solidity on the business front last quarter. With Ia, albeit not so clearly, bearing fruit.

It would therefore have been logical - some experts say - for a different reaction with reference to the fundamentals. The bearish movement, however, finds a rationality when it is not only considered as an assessment of the quarter's results, but is placed in the broader context of Apple's share price. The House of the Bitten Apple, according to the Bloomberg terminal and as of 5/11/2024, boasts a forward-looking P/e 2024-2025 of 30.7. The multiple, although not at the highest level since 2011-2012, is at the upper end of the range of the indicated time frame. Similar is the case for Ev/Ebitda. More. According to Seeking Alpha, as of 7/11/2024, the prospective non-GAAP Peg is 3.03 times compared to 1.9 of the median of the reference sector. Of course! A single number does not tell the whole story. And, however, other indicators (from Price to Sales to Price to Book) are also well above those of the sector. Here, then, is the reason for the dynamics on the stock market. With a stock that is not at a discount, every slightest difference between data, guidance and market expectations can give the 'go' to sales. Just as the same perception - right or wrong - of not being in the first class of the Ai convoy so far, can induce selling. Which, hypothetically, may come back more in the long run. The do-it-yourselfer must, therefore, be very careful and handle the subject matter with caution.

FOCUS
Operating Expenses
In the last financial year of 2023-2024, total operating expenses were USD 14.3 billion. This compares with the $13.46 billion posted by the company a year earlier.

Share trend