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Apple Inc AAPL

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Morningstar’s Analysis

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Economic Moat

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Capital Allocation

PREMIUM

Apple Records New June Quarter Highs, but Growth Likely to Slow; Raising FVE to $124

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

Apple reported fiscal third-quarter results ahead of our expectations led by the iPhone segment. The firm did not provide guidance the last five quarters and once more refrained from offering specific financial expectations due to uncertainty regarding COVID-19. Apple’s iPhone revenue grew 50% year over year to $39.6 billion, thanks to the new 5G iPhone 12 family. Although we anticipate strong double-digit iPhone growth in 2021, we think growth rates will moderate in the coming years as the 5G upgrade cycle matures. We are raising our fair value estimate for narrow-moat Apple to $124 per share from $115 as we incorporate a stronger near-term outlook due to the current 5G iPhone cycle and ongoing work- and learning-from-home dynamics bolstering Mac and iPad segments. Nonetheless, we think shares are currently overvalued, as we think recent growth trends could be unsustainable past 2021.

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Company Profile

Business Description

Apple designs a wide variety of consumer electronic devices, including smartphones (iPhone), tablets (iPad), PCs (Mac), smartwatches (Apple Watch), AirPods, and TV boxes (Apple TV), among others. The iPhone makes up the majority of Apple’s total revenue. In addition, Apple offers its customers a variety of services such as Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Card, and Apple Pay, among others. Apple's products run internally developed software and semiconductors, and the firm is well known for its integration of hardware, software and services. Apple's products are distributed online as well as through company-owned stores and third-party retailers. The company generates roughly 40% of its revenue from the Americas, with the remainder earned internationally.

Contact
One Apple Park Way
Cupertino, CA, 95014
T +1 408 996-1010
Sector Technology
Industry Consumer Electronics
Most Recent Earnings Jun 30, 2021
Fiscal Year End Sep 30, 2021
Stock Type Cyclical
Employees 147,000

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