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Shares of Apple (NASDAQ: AAPL), the largest tech company in the world, rose 7.5% on Friday as it beat Wall Street revenue and earnings estimates in the September quarter. In Apple’s fiscal Q4 of 2022 (which ended in September), it reported:
- Revenue of $90.15 billion, compared to estimates of $88.9 billion. Sales surged by 8.1% year over year.
- Adjusted earnings of $1.29 per share, compared to estimates of $1.27 per share
- iPhone sales of $42.63 billion, compared to estimates of $43.21 billion. Sales were up 9.7% year over year
- Services revenue rose 5% to $19.19 billion, compared to estimates of $20.1 billion
- MacBook sales surged 25.4% to $11.5 billion, above estimates of $9.36 billion
- iPad revenue fell 13% to $7.17 billion and was below estimates of $7.94 billion
- Other products revenue rose 9.85% to $9.19 billion and above estimates of $9.17 billion
We can see Apple’s revenue in core product categories was below estimates, which was offset by strong sales in verticals such as Mac and wearables.
Due to the ongoing uncertainty surrounding global economies, Apple once again did not provide sales guidance for the December quarter, which is the strongest sales season for the company.
Let’s now see what drove Apple sales in fiscal Q4.
Apple MacBook sales might decline in fiscal Q1
Apple CFO Luca Maestri emphasized revenue growth in fiscal Q1 of 2023 will be lower than the 8.1% experienced in the September quarter. Mac sales might decline in Q1 year over year and will be offset by the Services business. A strong U.S. dollar will continue to act as a headwind as Apple generates a significant portion of sales from international markets.
In Q4, foreign exchange fluctuations impacted sales by more than 600 basis points. So, on a constant currency basis, Apple’s sales growth would be over 10% year over year in the September quarter.
The demand for Apple products due to strong customer loyalty and a massive brand presence has allowed the company to report record sales in Q4. Its installed base of active devices also hit an all-time high as iPhone and Mac lineups reported a quarterly record for updates. Further, there was a double-digit increase in customers switching to iPhones, and almost 50% of Mac buyers were new buyers. Similarly, more than 50% of iPad buyers and 67% of Apple Watch buyers were new to these products.
What next for AAPL stock price and investors?
Apple CEO Tim Cook confirmed the company has slowed its pace of hiring to combat an economic slowdown and tepid consumer demand. But the company is well positioned to withstand an economic downturn. It reported a free cash flow of $20.84 billion in Q4, which was lower than estimates of $21.1 billion.
Apple also ended Q4 with $169 billion in cash and $120 billion of debt, indicating a net cash position of $49 billion. Its stellar financials allowed Apple to report $29 billion to shareholders via dividends ($3.7 billion) and repurchases ($25.2 billion).
Apple stock has created massive wealth for investors in the last two decades. It has returned 65,000% to investors in dividend-adjusted gains since October 2002. Despite its outsized gains, AAPL stock is valued at 5.8x forward sales and 22.6 forward earnings, which is not too steep.
Analysts remain bullish on AAPL stock price and expect shares to rise by more than 15% in the next year.