Apple released the Q4 earning numbers few hours ago. The Cupertino company reported a +20% YoY in total sales, with digital services topping $10B for the first time ever out of a total revenue of $62.9B. Simply impressive. Guidance for the current quarter is between $89B and $93B. Analysts weren’t particularly pleased by this estimate, with the lower number essentially projecting flat growth YoY. The stock is expected to decline sharply when Wall Street opens later today Nov 2nd, dragging the company market cap below the $1T threshold.

While not an expert, bear with me:

  • 92 days in total in the last quarter of the year, October – December
  • for simplicity, choosing $92B as a potential target for the current quarter in the range provided by Apple
  • simple math, that translates in a $1B per day, including Dec 25th and 31st, typically not two top days for retailers, at least in Western countries.

So, Apple is expecting to generate $1B of revenue per day or $11,574 per second throughout 24 hrs. Considering an average price for the iPhone X S Max of $1,300, the daily billion translates into over 770K per day. Clearly Apple sells many other products and services, but that math is an interesting mental visualization of the challenges such a corporation has to face. This is a short list of US cities with around 700K inhabitants: Seattle, Boston, Detroit, Charlotte, Washington DC, …. Let me provide another stat: 7.4B people on earth right now. That’s equivalent to $0.13 per human being living on this planet right now, per day.

How can Apple grow and please financial analysts? I guess the answer is extremely simple: by selling more expensive items. Higher penetration in existing and new markets (which one though?) could still play a role, but clearly not the driving factor. Offering richer experiences and therefore charging more per unit the only viable strategy.

That’s why I personally consider the aspiration to deliver constant growth and the discontent manifested by financial analysts last night quite surprising and – to a certain extent – illogical. In the last quarter, Apple has returned $23 billion to shareholders in dividends and share repurchases a number that speaks for itself. Guess what tools or calculus courses some financial analysts took to calculate estimates and what criteria inspire their statements.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Menu