Apple just released its Q1 2020 quarterly report. With record-setting gross receipts, the company is mystifying analysts.
By Chand Bellur
January 31, 2020 at 8:25 p.m. PDT
Apple Reports Record Setting Revenues
Analysts and investors anxiously await the results of Apple’s quarterly reports. With so many individuals and institutions invested in Apple, it’s no longer about one company. Apple is the harbinger of the global economy.
The latest report for Q1 2020 sets another record. Apple beat last year’s revenues by nine percent, raking in a whopping $91.8 billion. Tim Cook credited the gains to solid iPhone 11 sales and a growth in services:
“We are thrilled to report Apple’s highest quarterly revenue ever, fueled by strong demand for our iPhone 11 and iPhone 11 Pro models, and all-time records for Services and Wearables. During the holiday quarter our active installed base of devices grew in each of our geographic segments and has now reached over 1.5 billion. We see this as a powerful testament to the satisfaction, engagement and loyalty of our customers — and a great driver of our growth across the board.”
Can Apple Keep it Up?
Apple is firing on all cylinders, but it remains to be seen whether the Cupertino tech giant can keep this momentum going. Macro economically, Apple is subject to recessions just like any other company. Although the trade war has yet to have a significant impact on Apple, things could change. Politically, a change in presidential leadership could also impact Apple.
The global economy is doing well by most measures, however, the US labor participation rate hasn’t budged much since the Great Recession. Although unemployment rates are low, people drop off these statistics in a matter of months.
Customers buy iPhones, Macs and Apple TV+ subscriptions when they have income. When people are unemployed, these items with elastic demand tend to sell poorly. Unemployed consumers tend to eventually cancel superfluous subscriptions.
A future recession may be on the horizon. With interest rates already low, the usual economy stimulating tricks may not work. A looming recession could devastate Apple’s revenue stream, as there are many less expensive alternatives.
Trump’s trade war with China has so far avoided any collateral damage for Apple. This might not be the case in the future. If the president slaps a huge tariff on iPhones, Apple would have to scramble to adjust. The company is already working on manufacturing the iPhone in several nations, in order to avoid such policy.
Bernie Sanders, who beats Trump in almost every poll, could possibly be our next president. He and other left wing politicians see Apple’s monopoly as a threat. The App Store monopoly, in particular, has recently come under Congressional scrutiny.
A Sanders presidency could prove challenging for Apple, as he has long supported trade policies benefitting the American worker. It’s possible he may set the corporate tax rate back to 35%, however, corporations like Apple are already adept at dodging taxation and have proven that lowering the corporate tax rate does not result in repatriation of corporate cash reserves. It’s also highly unlikely that the legislative branch, completely entrapped by interest groups, would have the political will to make such a move.
Apple’s Uncertain Future
Apple’s present looks amazing, but the future is murky. They, along with IBM, may be one of the few tech companies to persevere for decades or maybe even a century. They could also virtually disappear, like former Silicon Valley stalwarts AOL, Silicon Graphics and Yahoo. Apple almost disappeared until Steve Jobs came to the rescue. That can’t happen again.
The bigger they are, the harder they fall. The general consensus for now is that Apple stock is overpriced. Embarrassed analysts have been scooting up price targets with every rally, however, Apple’s massively overvalued stock has little rationality to back it up. Regardless of the far future, most see a short term correction in the coming months.