Apple Looks to India for Sales and Production

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Earlier last week, Apple (Nasdaq: AAPL) announced its second quarter results that surpassed market expectations. This was the second consecutive quarter that Apple reported a decline in the revenues. But the market was very pleased with iPhone sales that surged 15% due to the strong reception of iPhone 14 and iPhone 14 plus.

Apple’s Financials

Apple’s second quarter revenues fell 3% to $94.8 billion, significantly behind the market’s forecast of $92.96 billion. EPS remained flat at $1.52, ahead of the Street’s forecast of $1.43.

By segment, iPhone revenues grew 2% to $51.33 billion compared with market’s estimate of $48.84 billion. Mac sales were $7.17 billion, falling short of the estimate of $7.80 billion from the segment. iPad sales fell 13% to $6.67 billion, missing the market’s estimate of $6.69 billion. Revenues from other products fell 1% to $8.76 billion compared with the estimate of $8.43 billion. The services segment revenues grew 6% to $20.91 billion, but fell short of the expected $20.97 billion. It increased its subscriber base to 975 million paid subscribers across its Services portfolio, up 40 million over the quarter, and 150 million over the year.

During the quarter, the board authorized $90 billion in share repurchases and dividends. It had paid $23 billion in buybacks and dividends in the March quarter. It raised its dividend 4% to $0.24 per share.?

Apple did not provide an outlook for the quarter. The market estimates revenues of $84.11 billion for the quarter with an EPS of $1.21 and revenues of $387.99 billion with an EPS of $6.01 for the year.

Apple’s Product Expansion

While Apple had an impressive quarter given the macro conditions, most of the credit went to its iPhone division. The iPhone 14 and 14 plus have received positive reviews due to their long lasting battery and advanced camera. The Pro model has the most powerful camera system ever on an iPhone. Last quarter, Apple also expanded its emergency SOS via satellite to six new countries, taking the total to 12 countries where users can access this safety feature.

The macro conditions are impacting overall PC sales, and that was also evident in Apple’s Mac and iPad performances. Both the devices had difficult compares to the last year because of the rollout of M1 chip throughout the Mac lineup last year.

Within the streaming services, Apple continued to improve its content library. It added the movie Tetris, and will be releasing Martin Scorsese’s Killers of the Flower Moon later this year. Three years since its launch, Apple TV Plus programming has received over 1,450 award nominations globally and secured over 350 wins. The first season of its tenure partnership with Major League Soccer is also underway where it offers subscribers the ability to watch every match with no blackouts. Apple TV Plus subscribers can also watch baseball games return to Friday night baseball. This quarter, it launched Apple Music Classical, a standalone app that is focused on classical music lovers.

Apple remains mindful of user security and recently tied up with Google to address safety concerns surrounding location-tracking devices. While these devices are meant to help users find personal items like their keys, purse, and luggage, recent reports reveal that they have also been misused for unwanted tracking of individuals. Apple and Google recently submitted an industry wide proposal to help combat the misuse of Bluetooth location-tracking devices for unwanted tracking. The pioneering specification will allow Bluetooth location-tracking devices to be compatible with unauthorized tracking detection and alerts across iOS and Android platforms. The specification has been submitted as an Internet-Draft via the Internet Engineering Task Force (IETF), a leading standards development organization. Post the review period, Apple and Google will work together to address feedback and will release a production implementation of the specification for unwanted tracking alerts by the end of 2023 that will then be supported in future versions of iOS and Android.

For the second quarter, Apple saw its biggest revenue growth in the markets of Europe and Asia Pacific. To continue to support the growth in the Asia Pacific markets, Apple has opened brick and mortar stores in India. Apple has been selling its devices in India through third party resellers. Last month, it opened its flagship store in Mumbai and, recently another in Delhi. Apple is also looking at India for its manufacturing operations. Given the issues faced in China, Apple is planning to move a quarter of its production out of China to other countries by 2025. India is expected to get a pie of this divestment.

Meanwhile, Apple’s stock is trading at $172.07 with a market capitalization of $2.7 trillion. It touched a 52-week high of $176.15 recently. The stock was trading at a 52-week low of $124.17 in December last year.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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