Initial Thoughts on Apple’s 4Q24 Earnings
Hello everyone. There’s a lot to say regarding Apple’s earnings. In this special Friday edition of Above Avalon Daily, we will go over my initial thoughts. The discussion will continue on Monday.
Initial Thoughts on Apple’s 4Q24 Earnings
Heading into Thursday, expectations facing Apple were a tad elevated versus what the market was needing to hear over the summer. Despite those higher expectations, Apple’s underlying business performance had positioned the company well to not disappoint. That’s pretty much exactly how Apple’s 4Q24 earnings release played out. Revenue and adjusted EPS were spot on to my estimates. Looking ahead at 1Q25 guidance, we can call Apple’s commentary as good. There was no need to add a disclaimer or asterisk to that either.
Looking at Apple’s performance at a very high level:
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Apple’s 3Q24 in Three Charts
Hello everyone.
While recording the podcast episode for yesterday’s update, it occurred to me that one part of our discussion could have benefited from a bit more explanation. While such explanation was added to the podcast, which does routinely happen when episodes are recorded, to ensure everyone received the explanation, the following passage was from yesterday’s update:
“Back in 2019, [Warren] Buffett trimmed a very small part of Berkshire’s Apple stake. When asked why, Buffett didn’t actually provide an answer other than to say Berkshire’s overall stake in Apple continues to move higher due to Apple's buyback program.”
Since Apple is retiring the shares that it repurchases, the overall number of shares outstanding has been declining. This means that each remaining outstanding share is entitled to a larger share of Apple’s future cash flow (and business). If Berkshire didn’t buy or sell any additional AAPL shares, their stake in Apple would gradually rise thanks to Apple’s buyback program.
If we assume that Buffett cuts Berkshire's AAPL stake so that it’s slightly larger than the next largest equity holding (say $30B fair value at 140M shares), that would equate to 0.9% of Apple. Over time, assuming Apple continues to buy back shares and Berkshire doesn’t sell any more shares, that Apple ownership percentage will rise. The buyback is a major reason why Buffett finds AAPL shares attractive.
We will continue our Apple 3Q24 earnings review. Let's jump in.
Apple’s 3Q24 in Three Charts
Last Friday, we went over how Apple’s 3Q24 earnings compared to my expectations. Results came in close to my estimates. Nearly every line item beat (HW gross margin was the only thing that missed).
We also discussed the largest takeaway from earnings: iPhone fundamentals continue to gradually improve and are becoming less of a drag on Apple's overall ecosystem growth.
Turning our attention to secondary themes from earnings, there were three:
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Choose either a monthly or annual membership. Payment is hosted by MoonClerk and secured by Stripe. Apple Pay and other mobile payment options are accepted. After signup, use this link to update your payment information and membership status at any time. Contact me with any questions.
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An audio version of the newsletter is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here. Special Inside Orchard bundle pricing is available for Above Avalon members. Additional membership customization is available via the Financial Models add-ons.