IB Net Payout Yields Model

Apple: Don't Panic

After the close, Apple (AAPL) updated the market with a big guide down for FQ1. The new revenue target is down about 7% from expectations.

The company originally guided to revenues for $89 billion to $93 billion with a slightly higher gross margin. The interesting point is that Tim Cook calls out all of the issue as related to Greater China and new products were constrained.

The stock is already down substantially from highs of $233. The initial after-hours dip has Apple back below $150 and the trading tomorrow isn't likely to improve. Apple is down 36% all ready so the question to watch tomorrow is whether the stock holds the $146 lows.

The company ended the quarter with $130 billion in net cash, up from $123 billion to end FQ4. The company projects about 4.77 billion shares outstanding, down from 4.85 billion last quarter.

Normal FCF would support a large buyback in the quarter and sets up the company to make massive share repurchases in CY19. The Services business hit a $10.8 billion quarterly record so don't panic on the warning. The Greater China numbers will improve as the trade war is likely headed toward a conclusion at this rate.

Apple is loading up on shares and the cheaper price only helps.

The numbers average out to an EPS estimate of $4.16 compared to estimates up at $4.65. The company only earned $3.89 last FQ4 due to tax reform. Either way, a stock below $150 with this level of earnings is dirt cheap.

Disclosure: Long AAPL. Please review the disclaimer page for more details. 


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