"bond valuation" and "Business description"
Finance
FIN 350 PROJ ON APPLE
Industry Analysis:
This year Apple turns 40. Throughout out the years, Apple has had a few key drivers that help them not only get their name on the map, but have also change the way people live and interact with each other. The Macintosh was one of Apple first industry driver back in the early 80’s selling almost around 250,000 units. In 2003, another key driver was when Apple launched the iTunes Music Store, which change the way people could purchase their music. Over the last 14yrs the ITunes store has sold over 70 billions songs. Each year Apple always trying to outdo themselves and their competition but the one key driver that will change the way people interact with each other today, would have to be the IPhone which launched in 2007 and will be the trendsetter for all smart phones today. With Apple leading the market in smartphones sales, they are still looking for industry driver that will push the company over the top. Earlier this year Apple as announced that they will be getting in the smart car market, with self-driving cars. It’s unknown how Apple will do in the smart car market, but base of their past accomplishment, it safe to say they will be ok.
With Apple being around for 40yrs, the company is bonded to have few key risk factors. Some of these key risk factors were Apple manufacture their product outside U.S. The potential reason for this being a risk is that it gives Apple less control over their products which could cause delay in production. Quality issue is another risk factor the company faces. With Apple producing a new line of iPhones and MacBook’s every year. With that short of a production cycle that could end up hurting them financial, due to all defect and bugs within their software and hardware that Apple would have to fix. If Apple had a lengthy production cycle, they would be able to catch and fix a lot of the defect and bugs before launch. Apple themselves could be a risk factor. Every year Apple is trying to change the way the world works in terms of technology. By doing so Apple is potentially taking short cuts which could cause poor launches, poor quality of hardware and software. And with competitors like Samsung, Apple will need to keep themselves in check.
Apple has picked up few key success traits that as help them over the last 40 years, one key trait is how they make sure their product is easy to use. Apple publicly stated that they want the consumer to be able to pick up any of their products and can understand it and pick it up without any hesitation. Apple also has made their customer service top notch by having in store experience. In 2002, they launched their first Store in Tokyo, and later launching few more store in the states in 2003. One thing that Apple have done well over the years that could be considered a great success traits is how they are able to stay ahead of all competitors. Apple does this by working on their products two years’ head of anyone else, which is a key factor to why they are able to pump out a new MacBook and IPhones every year.
Apple can be considered the biggest tech juggernaut for the past 10 ten years, but with that being said there are few industry risk factors that have come into play. One of the risk factors is Samsung and their smartphones. Over the past 4 years.Samsung has been trying to keep up with Apple with smartphones like their Galaxy series, and Note series. This year Samsung as release their newest phone the galaxy S8. And as of now the tech world is going crazy over the new Samsung’s phone, stating that Apple is now behind in it smartphone trend and design. Apple is working on the rumor IPhone 8 which is due to come out later this year, so will just have to wait and see how the tech world reacts to this new phone. Last year Apple face a key industry risk, that risk was to come up with a new software would eliminate security protection on customers IPhones. The government has been trying to get Apple to do for years now, and now it as lead to a legal case. Apple is resisting it because they believe that this is a violating their first amendment rights. The government believe that this will help prevent terrorist attack against the U.S. One potential reason for why Apple is also against it, is because their second-largest market is China and that could cause an issue between Apple and China.
Apple’s competitive position has been strong over the last four year in the diagram below you can see how each year from 2012 they have been dominating Samsung.
Apple mindset of always being head of their competition every year, they're going to stay as one of the top competitive companies for years to come. A few growth opportunities for Apple could be better quality control of their products, with a new product coming out every yr, with that short of a production cycle, could cause for low quality products. Apple should spread out their production cycle, with having newest Macbook come out one year then have the newest iphone out the next. With this new model idea they will always have one product coming out each year but each individual product will be on a 2yr cycle. Apple could also use that 2yr cycle to market their products better.With the way technology is forever changing the world, this model is something that we may never see from Apple.
Historic Financial Analysis (Quarter to Quarter)
Table of Operating Trends
($ in millions)
| Template for fiscal year ended | Q1 2017 | Q4 2016 | Q3 2016 | Q2 2016 | Q1 2016 |
| Net Revenue | 78,351.00 | 46,852.00 | 42,358.00 | 50,557.00 | 75,872.00 |
| Gross Margin % | 38.51% | 38.02% | 38.02% | 39.40% | 40.10% |
| SGA % | 5.04% | 7.43% | 8.12% | 6.77% | 5.07% |
| Operating Income | 23,359.00 | 11,761.00 | 10,105.00 | 13,987.00 | 24,171.00 |
| Net Income | 17,891.00 | 9,014.00 | 7,796.00 | 10,516.00 | 18,361.00 |
| Debt Ratio | 0.600 | 0.601 | 0.586 | 0.573 | 0.563 |
| Working Capital | 19,202.00 | 27,863.00 | 22,275.00 | 19,327.00 | 127.00 |
| Current Ratio | 1.23 | 1.35 | 1.31 | 1.28 | 1.00 |
| Quick Ratio | 1.20 | 1.33 | 1.29 | 1.25 | 0.97 |
| Inventory Turnover Ratio | 59.89 | 60.44 | 59.82 | 60.05 | 60.91 |
| ROA | 13.65% | 14.20% | 15.64% | 16.60% | 18.32% |
| ROE | 34.15% | 35.62% | 37.77% | 38.85% | 41.89% |
Q1 2016
In Q1 2016 Apple reported record high revenue. Their sales were mainly driven by the sales of the latest iPhone over the holiday season. Even though the iPhone excelled and revenue was its highest ever; not everything was positive for Apple in Q1 y only sold 16.1 million iPads, down from 21.4 million from Q1 2015. They only sold 5.3 million Macs, down from 5.5 million from Q1 2015. Overall it was a good quarter for AAPL.
Q2 2016
Despite a broad correction of the market in Q2 2016, AAPL still posted results that people get excited about. They generated excellent cash flow of $11.6 billion and returned $10 billion of that to shareholders. The board of directors authorized an increase of $50 billion to their program that returns capital to shareholders the board of directors declared a 10% increase of their quarterly dividend. There revenue did decline from Q2 2015.
Q3 2016
Apple posted another impressive quarter in Q3 2016. They launched the iPhone SE and got extremely positive feedback about their software and services. Revenue from services increased by 19% from Q3 2015. The App Store recorded its highest sales and usage numbers. Still, Apple's revenue declined from Q3 2015
Q4 2016
Apple reported earnings that were slightly above analyst expectations. Still, skepticism rose. Critics began to point out that Apple's revenue declined on a year to year basis for the first time in 15 years. Revenue was down year over year in Q2 and Q3 as well but was masked by Apple's other accomplishments. Analysts pointed out that if the iPhone's sales declined, Apple would not be able to adapt.
Q1 2017
Apple reported all-time high quarterly revenue of $78.4B revenue during Q1 2017. Apple is usually extremely successful in Q1 because that is the holiday season, but it was especially reassuring for investors to see Apple post such a strong response considering the criticism it was receiving. Apple sold a record number of iPhones, Services, Macs, and Apple watches. CEO Tim Cook said he is “very excited about the products in our pipeline.”
