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The reaction to Q1 earnings was wrong and at some stage sense will return. The current quarter included 13 weeks instead of the 14 weeks included last year. Adjusting for this sales rose by 20%, EPS rose by 22% and unit sales increased by 6%. A level of growth that deserves a higher PE multiple than the current 16.4.
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The iPhone X was only released on November 3rd meaning it only contributed to sales for 8 weeks and probably delayed purchases prior to that. The true impact of the iPhone X will become much clearer in Q2 and with significant contribution to revenues and margins. The iPhone X is the best selling iPhone and has pushed up the average selling price by about $100 to $796. That momentum has continued through year end and until the end of January and shows no sign of slowing down. Priced from $999 that by itself will drive margins higher.
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Finally from Cook's comments on the call, Apple seems to be planning to use about $160 billion of its cash to pay dividends and buyback stock. At current market cap of $800 billion that represents an incredible 20% of stock outstanding.
Given these three factors alone, I fully believe the EPS forecasts are achievable and that a PE multiple expansion is possible. However even assuming the PE multiple remains unchanged, the earnings growth alone would increase the SP by 20% from current levels.
This post is not a recommendation to buy or sell any security or derivative. Stocks are not suitable for all investors. Please do your own research.
Submitted February 06, 2018 at 03:25PM by InterestingNews1 http://ift.tt/2EK9NEf
