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Apple Inc (AAPL) Com Stk NPV (CDI)

Sell:$318.81 Buy:$318.89 Change: $2.04 (0.64%)
Market closed |  Prices as at close on 22 May 2020 | Switch to live prices |
Sell:$318.81
Buy:$318.89
Change: $2.04 (0.64%)
Market closed |  Prices as at close on 22 May 2020 | Switch to live prices |
Sell:$318.81
Buy:$318.89
Change: $2.04 (0.64%)
Market closed |  Prices as at close on 22 May 2020 | Switch to live prices |
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

HL comment (1 May 2020)

Second quarter revenue of $58.3bn was up slightly on last year. That's better than the market expected after the group warned the coronavirus outbreak meant it wouldn't meet previous revenue guidance of $63-67bn.

However higher costs meant operating income was down 4.2% compared to the same time last year at $12.9bn.

Apple declared a cash dividend of $0.82 per share, an increase of 6%.

The shares fell 2.6% in after-hours trading.

View the latest Apple share price and how to deal

Our view

The full impact of coronavirus is as yet unknowable. Talk of problems with supply chains and demand in key markets aren't ideal, but given the bulk of any disruption is yet to come, no one can truly say what the eventual fallout will be.

Trends prior to the outbreak were more positive. Newer models of the iPhone resonated well with consumers and wearables offset lacklustre performance elsewhere.

While iPhone sales are now under pressure because of things very much outside of Apple's control, it's reassuring to see that wearables and services are still popular. The popularity of AirPods and the Apple Watch may well have been bolstered by the new working from home cultures, and increased health awareness being seen across the globe because of coronavirus.

That's crucial because Apple is still very much a hardware company. Convincing people to upgrade their phones is becoming trickier, as the differences between models become more nuanced, and competitors edge into Apple's pie. That's perhaps behind the recent launch of the new iPhone SE, which at around $399 is less than half the price of some current models.

Apple customers are incredibly loyal and Apple's looking to take advantage of that with its Services business - now comfortably the second largest division. It makes money from charging subscriptions for its music service and getting fees from app developers to use the App store. The more recently launched TV+ is Apple's attempt to keep its loyal groupies out of Netflix's clutches and secure an even larger share of their wallets. Service margins are higher and revenues should be reliable - even in this environment - which all being well will take the pressure off the group to deliver constantly rising hardware sales in the future.

Unusually for the tech giants, Apple offers a prospective yield of 1.2% alongside a sizeable share buyback programme.

Overall we think Apple's core remains strong, but future spoils rely on growing higher-margin areas of the business while also creating another generation of coveted products. Coronavirus has the potential to disrupt both supply and demand on that front for a while, but investors should keep in mind the big picture hasn't really changed.

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Second quarter trading details

Hardware sales fell 3.4% to $45bn. Within that, iPhone sales were down 6.7% to $29bn while Mac and iPad sales also fell. However, record Services, and Wearables, Home and Accessories sales grew 16.6% and 22.5% respectively, to $13.3bn and $6.3bn.

Sales fell in every region apart from Europe and Asia Pacific (ex. Japan). The greatest fall came from Greater China, where sales were down 7.5%.

There was a 15.6% increase in research & development spending, and an 11.1% rise in general & admin costs. Earnings per share were $2.55, compared to $2.46 last year.

Free cash flow was $39.9bn, compared to $32.1bn last year, and the group has cash and cash equivalents of $94.1bn. Net debt stands at $15.5bn, but the group's cash and cash equivalents still far outweigh any current liabilities, which are items that usually require payment within the next twelve months. The increase in debt reflects Apple's longer-term loans, which it's using to repurchase shares.

Apple has increased the current share buyback programme by $50bn.

Find out more about Apple shares including how to invest

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.


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Data policy - All information should be used for indicative purposes only. You should independently check data before making any investment decision. HL cannot guarantee that the data is accurate or complete, and accepts no responsibility for how it may be used.

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