Undervalued Apple Still Shines
Strong underlying demand for Apple products puts 2016 on track to be another growth year, writes Morningstar’s Brian Colello.
Apple sold 48 million iPhones in the September quarter, up 22% from the year-ago quarter. More impressive, iPhone average selling prices rose 2% sequentially to $670, as the firm continues to sell higher-priced "Plus" models and iPhones with increased storage capacity. iPhone unit sales in greater China were up 87% year over year, and Apple saw no major signs of economic deceleration in the region. Total revenue from Other Products was $3.0 billion, up 15% sequentially, which we think only implies modest revenue growth from the Apple Watch. We remain optimistic that the device will take off at some point, especially as customer satisfaction metrics (per Wristly) are encouraging.
Apple's revenue forecast for the December quarter is in the range of $75.5-$77.5 billion, which would represent only 1%-4% year-over-year growth. However, Apple expects its topline to be hindered by more than $5 billion of negative currency effects in the period. On a constant currency basis, Apple foresees 8%-11% growth. Combined with Apple seeing more switchers from Android than at any point during the past three-plus years, we still think that Apple's competitive position remains as strong as ever.
Morningstar Premium Members gain exclusive access to our full Apple Report, including fair value estimates, consider buying/selling prices, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.