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Purchase $1 Trillion Apple (AAPL) Inventory on iPhone 11 & Streaming TV Potential? – jj

Purchase $1 Trillion Apple (AAPL) Inventory on iPhone 11 & Streaming TV Potential?


Apple AAPL is once again a $1 trillion company, joining Microsoft MSFT, with shares up 8% in the past month. The tech giant’s shares have also jumped over 5% this week as Wall Street seems pleased with Apple’s latest round of iPhones and its streaming TV plans.

iPhone Updates

Apple unveiled its newest iPhones at its now customary pre-holiday shopping season event on Tuesday, led by CEO Tim Cook and other top executives. The firm showed off three new iPhones, under the new 11 branding.

The smartphones feature Apple’s somewhat standard updates, which include better battery life and faster processors. What separates the two new higher-priced smartphones (iPhone 11 Pro & 11 Pro Max: starting at $999) from their less expensive peer (iPhone 11: starting at $699), is a triple-camera system. Apple also dropped the price of last year’s iPhone XR by 20% ($599), with the iPhone 8 starting at $449.

Consumers might be more prone to buy the higher-end iPhone 11s because the price points roughly match last year’s new high-end models—after years of rising prices. Perhaps more importantly, the new iPhone 11 base model is actually $50 cheaper than last year’s comparable offering. Clearly, Apple wants to give consumers every reason possible to upgrade to new phones after a year of poor iPhone sales, especially since there is nothing earth-shattering about the new phones.





Apple TV+ & Services 

Wall Street, investors, and Apple fans have waited for more details on Apple’s foray into the streaming TV world for months. They now have all they can hope for until they get to use the streaming service for the first time on November 1—Disney+ debuts on Nov. 12. Anyone who buys a new iPhone, iPad, Mac, or other qualifying devices will get a year worth of Apple TV+ for free. The service will otherwise cost $4.99 per month, after a seven-day free trial and be available on the Apple TV app.

Apple’s streaming TV offering is clearly priced to move, as it comes in well below HBO Go’s T $14.99 per month, Netflix’s NFLX $15.99 premium plan, Amazon AMZN Prime’s $12.99—which comes with shipping perks—and Disney+ at $6.99. Aside from trying not to force users into a decision between Apple+ or Netflix, the price-point represents how little content will be available at launch.

Apple TV+ will feature roughly 10 shows at launch, including a fictional space race-era show called For All Mankind, a show starring Jennifer Aniston, Reese Witherspoon, and Steve Carell titled The Morning Show, and post-apocalyptic drama See.  

Apple will then slowly build up its library of shows, which is set to feature more A-list Hollywood stars both in front of and behind the camera. The iPhone maker is also likely viewing Apple TV+ as a kind of loss-leader for now, since it reportedly spent roughly $15 million an episode to make See.

Apple is making a long-term play to convert more of its roughly 1 billion hardware users into services customers. This business, which includes its app store, Spotify SPOT challenger Apple Music, a monthly magazine-heavy news service, and an Apple credit card, will also soon feature Apple Arcade. The company’s big push into the video game world will feature access to roughly 100 titles for $4.99 per month and launch on September 19. Apple hopes to grab a piece of the $68.5 billion global mobile game market.

What Else?

The ongoing U.S. and China trade war spooked some Apple investors early, but Cook has been in constant contact with President Trump and its biggest products have remained untouched. Plus, the last few days have seen both China and the U.S. slightly change their tunes as the two sides prepare to meet once again in a few weeks.

Apple’s iPhone sales did slip in each of the last three quarters, as did the firm’s Greater China revenue. The company has found it harder to sell its higher-priced smartphones in a market with so many less expensive options available.

Meanwhile, iPhone sales slipped on the back of hard to compare periods, which means a 2020 turn around could be in store. In fact, Apple’s sales popped 1% last quarter (Q3 fiscal 2019) after revenue slipped 5.1% in Q2 and 4.5% in Q1. 





Q4 Outlook & Beyond

Looking ahead, Apple’s fourth-quarter 2019 revenue is projected to slip 0.56% from the year-ago period to $62.55 billion, based on our Zacks Consensus Estimates. This, however, comes against Q4 2018’s 20% top-line expansion. Overall, AAPL’s full-year fiscal 2019 revenue is projected to dip 2.7% to reach $258.28 billion.

Apple’s first quarter 2020 revenue, which includes the key holiday shopping period, is expected to jump 1.5% to $85.54 billion. Peeking further ahead, AAPL’s fiscal 2020 revenue is projected to climb 3.8% above our 2019 estimate to touch $268.01 billion and top 2018’s figure.

At the bottom end of the income statement, Apple is expected to see its Q4 earnings sink 2.75%, with full-year 2019’s EPS figure set to fall 1.85%. Then, Apple’s Q1 2020 earnings are projected to surge 6.2% over the prior-year quarter, with full-year 2020 expected to come in 11.5% above our 2019 estimates.

Bottom Line

Along with Apple’s strong 2020 growth outlook, the firm has seen its earnings estimate revision picture trend heavily upward recently, especially for Q4 and fiscal 2019. AAPL is a Zacks Rank #3 (Hold) at the moment that sports an “A” grade for Momentum in our Style Scores system.

We can see that Apple has traded at a higher forward price/sales ratio over the last year (4.2 vs. current 3.8). More importantly, Apple is the only of the so-called FAANG stocks that pays a dividend. The company’s current annualized dividend is $3.08 per share, for a 1.38% yield. This compares relatively favorably to the 10-year U.S. Treasury note’s 1.7%.

Apple also has over $200 billion in cash on hand, which means it is likely to continue its massive buyback program. Therefore, investors should consider AAPL stock as a safe-haven investment, amid our current market uncertainty, with the added potential for big gains.

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