Apple to Support RCS, The Real “Why” Behind iMessage’s U.S. Superiority, EU Leaning Against Regulating iMessage
We kick off the update with Neil’s thoughts on Apple announcing it will support RCS (rich communication services). The discussion then turns to why iMessage is so strong in the U.S. The narrative involving blue and green messages is incomplete. The update concludes with the latest developments involving the EU and iMessage regulation.
An Above Avalon membership is required to read this update. Members can read the full update here. (Members: Daily Updates are accessible via the archive. If you haven’t logged into the archive before, fill out this form to receive an invite.)
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.
An audio version of this update 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-on.
More on Apple Share Buyback vs. Market Cap, Thoughts on Apple and a $4 Trillion Market Cap, Thursday Q&A
There is one question that was carried over from last week’s Thursday Q&A that we will address today. What does the current Mac upgrade cycle look like? In addition, there were a few incoming questions regarding Apple’s market cap and buyback. We will tackle those questions first.
An Above Avalon membership is required to read this update. Members can read the full update here. (Members: Daily Updates are accessible via the archive. If you haven’t logged into the archive before, fill out this form to receive an invite.)
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.
An audio version of this update 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-on.
AAPL Closes Above $3 Trillion for Second Time, Apple’s Recent Stock Price Strength, Apple Valuation Update
Today's update begins with Neil’s thoughts on Apple closing above a $3 trillion market capitalization for the second time. We then look at Apple’s recent stock price strength and what may be behind the move higher. The update concludes with an examination of AAPL valuation metrics (forward P/E, EV/FCF, and free cash flow yield).
An Above Avalon membership is required to read this update. Members can read the full update here. (Members: Daily Updates are accessible via the archive. If you haven’t logged into the archive before, fill out this form to receive an invite.)
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.
An audio version of this update 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-on.
Introducing the Financial Models Add-on for Above Avalon Membership
For the past few years, Above Avalon members have been customizing their memberships with optional add-ons. In 2020, the Podcast add-on was launched with the option to listen to the updates in podcast form. The add-on was later enhanced to include reports in audio form. To date, nearly 600 episodes have been recorded. In early 2021, Inside Orchard, which compliments my Apple-focused analysis with broader thoughts on the technology industry, was positioned as the second add-on for members. To date, 125 Inside Orchard essays and podcast episodes have been published.
One of the most requested features from Above Avalon members has been access to more of the financial models that I (Neil Cybart) use to analyze Apple and derive my financial estimates.
I am excited to announce a new membership add-on dedicated to Apple financial modeling.
Details
Designed for anyone with an interest in Apple’s financials and product strategy, the Financial Models add-on provides access to three of my Apple installed base models (iPhone, iPad, and Apple Watch). This is the first time that my installed base models have been made available to others.
The models are built in Excel but also usable in Numbers. While the models include my estimates and assumptions, all inputs can be adjusted to reflect your own assumptions. The add-on also includes the ability to reach out to me with questions about the models.
A general rule with financial models is that the best ones are constantly being improved. As new information becomes available, the installed base models will be updated.
The models, which have been built over the course of years, make it possible to estimate:
Device unit sales.
The number of devices in the wild over time.
Percent of device sales going to new users vs. existing users by year.
Product upgrade cycle length.
The upgrade path that users take.
And more…
The preceding metrics will be of interest to everyone from AAPL investors modeling Apple’s financials to Apple competitors and suppliers needing to better understand the marketplace.
Pricing
The Financial Models add-on can be attached to an Above Avalon membership for $850 per year. Instead of needing to spend thousands of dollars on a financial data subscription or send trading volume to a broker in return for research access, you will find ease and value with the Financial Models add-on. I am confident the value found with just one installed base model will far exceed the add-on’s price. Subscribers will receive seamless online access to my installed base models at any time.
Group Pricing. If you have a friend or co-workers interested in utilizing the Financial Models add-on, take advantage of special group rates. Fill out this online form and indicate you are interested in subscribing to the Financial Models add-on at the group rate.
Signing Up
The Financial Models add-on can be attached to an Above Avalon membership for $850/year. If you need to become a member, fill out the following payment form which includes the Financial Models add-on:
Already an Above Avalon member? Attach the Financial Models add-on to your membership for $850/year by filling out this payment form.
Payment is hosted by MoonClerk and secured by Stripe. Apple Pay is accepted. Paid invoice receipts are available upon request. The full charge associated with purchasing the Financial Models add-on will go through at signup. At your next membership renewal, your charge will include a pro-rated amount for the add-on. For members who have specific payment/invoice requirements dictated by their employer, please reach out to me with that information.
Already an Above Avalon member subscribed to “The Works”?, Fill out this online form to get the Financial Models add-on at the special $700 bundle price. Once your request has been processed, a customized coupon will be emailed to you to use with the online payment form.
If you aren’t an Above Avalon member, take advantage of special bundle pricing found with the Financial Models by signing up for an Ultra membership. Receive all three add-ons at a $150 discount. This amounts to getting the Podcast and Inside Orchard add-ons for free.
Above Avalon membership ($200 per year)
+ Podcast add-on ($100 per year)
+ Inside Orchard add-on ($50 per year)
+ Financial Models add-on ($700 per year - $150 off)
Total: $1,050 per year
Accessing the Models
Once payment has gone through, you will receive an email containing a personalized link to the installed base models. This personalized link tied to your membership will remain active as long as the add-on is attached to your membership.
You will also be able to access the models via the Above Avalon payer portal (accessed via "Member Login" over at AboveAvalon.com). A new “Digital Package” tab will appear that will bring you to your personalized download page. There are no new logins or passwords required.
Questions about the Financial Models add-on can be addressed to me using this contact form.
Apple Opens Chip Lab to Press for First Time, Why Now?, Apple Announces Amkor Partnership in U.S.
Today's update will take us into Apple Silicon territory. Apple opened its chip lab to the press for the first time. We discuss why Apple decided now is the time for such exposure. We will then go over some Apple news on the U.S. manufacturing front with the company announcing an expanded partnership with Amkor.
An Above Avalon membership is required to read this update. Members can read the full update here. (Members: Daily Updates are accessible via the archive. If you haven’t logged into the archive before, fill out this form to receive an invite.)
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.
An audio version of this update 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-on.
Apple Discussing Apple TV+ and Paramount+ Bundle, Verizon Announces Netflix and Max Bundle, Combatting Video Streaming Churn, Above Avalon Gifts (2023)
We kick things off with Neil’s thoughts on an Apple TV+ / Paramount+ streaming bundle. The discussion then turns to Verizon unveiling a Netflix and Max streaming bundle. We look at these developments from the perspective of companies attempting to combat video streaming churn.
Above Avalon Gifts are now available for the 2023 holiday season. The full list of exclusive gift options available to members are found at the end of the update and here.
An Above Avalon membership is required to read this update. Members can read the full update here. (Members: Daily Updates are accessible via the archive. If you haven’t logged into the archive before, fill out this form to receive an invite.)
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.
An audio version of this update 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-on.
The Inside Story of Huawei’s Kirin 9000S Chip, NASCAR Announces New Media Rights Deal, Thursday Q&A
Hello everyone. Happy Thursday. We kick today’s update off with a closer look at Huawei’s new system on a chip. The discussion then turns to takeaways from the latest sports right deal involving NASCAR. The update concludes with the latest round of Thursday Q&A and the question: How does Apple’s Vision Products Group fit within Apple’s organization, and what does it mean for the future?
An Above Avalon membership is required to read this update. Members can read the full update here. (Members: Daily Updates are accessible via the archive. If you haven’t logged into the archive before, fill out this form to receive an invite.)
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.
An audio version of this update 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-on.
Apple to Exit Goldman Sachs Partnership, Apple’s Problem With Banks, Apple’s Solution
Hello everyone. In today's update, we will go over the big Apple / Goldman Sachs news. Neil looks at what the news means and doesn’t mean. In addition, the discussion includes a look at Apple’s major problem with banks and possible solutions management can pursue to overcome the problem.
An Above Avalon membership is required to read this update. Members can read the full update here. (Members: Daily Updates are accessible via the archive. If you haven’t logged into the archive before, fill out this form to receive an invite.)
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.
An audio version of this update 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-on.
Sonos FY4Q23 Earnings, Sonos Discloses New Installed Base Data, Sonos’ Product Roadmap for 2024
Happy Tuesday. Today’s update will be dedicated to discussing Sonos. The company reported earnings a few days prior to the Thanksgiving break. Sonos is on a path to being a more direct competitor to Apple.
Let’s jump right in.
Sonos FY4Q23 Earnings
Two weeks ago, Sonos reported FY4Q23 earnings (July through September).
Sonos is feeling the impact of the consumer gadget recession. Revenue was down 3.5% to $305M as the number of products sold were down 8% and speaker registrations were down 13%. The 500 basis point gap between products sold and registrations is due to channel inventory fill. This means quarterly results were boosted by Sonos putting speakers into the channel ahead of the holidays. The stronger revenue total (-3.5%) versus products sold (-8%) was due to higher speaker ASP.
The following exhibit shows Sonos speaker sales on a TTM.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon 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.
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More on the Mac, Judging Mac Sales, Assessing Mac Success
Hello everyone. It feels good to be back in the swing of things.
As it turned out, the OpenAI saga reached something of a temporary lull right before Thanksgiving last week. Sam Altman was reinstated as CEO but with a new board not of his preference (Adam D'Angelo, Larry Summers, Bret Taylor). In going back over last Monday’s update, there isn’t much that needs to be changed or updated. Some of the latest reporting, which appears to be accurate, had Altman recently trying (unsuccessfully) to make inroads in gaining board control. Such action would likely have played a role in the subsequent boardroom drama. As we discussed, the “we are moving to Microsoft” development was then a negotiation tactic on Altman’s part. If there are any new twists and turns that jump out at me, we will revisit the subject.
Two quick notes:
Last week, a new Above Avalon Report, "The State of the Mac," was published. As a reminder, an audio version of the report was also recorded and released to members with the podcast add-on attached to their membership. To get the add-on, fill out this form.
Above Avalon Gifts will go live on Monday, December 4th. More information will be available at that time.
Today’s update will cover some of the member feedback and questions that came in about the report.
More on the Mac
For the past 18 to 24 months, Mac and iPad results have led to some head-scratching.
Revenue growth rates for both product categories have been all over the place. On a quarter-to-quarter basis, it may be difficult to make sense of it all. Supply interruptions, combined with channel inventory shifts and different product launch timing have added noise to the mix. However, looking at unit sales on an annual basis, things become clearer to see. iPad unit sales were down 7% in 2023 (my estimate) while Mac unit sales were down an adjusted 10% or so (my estimate). Actual Mac unit sales were down closer to 25% due to one-time issues at the end of FY2022 / start of FY2023.
In what will likely catch many people off guard, Mac unit sales in 2023 were at the same level as they were in the mid-2010s, years before the Apple Silicon transition. Even after we adjust sales to reflect one-time factors, we are looking at a sales run rate that is just 10% higher than 2014 to 2017 sales. This leads to an obvious question: Why hasn’t Apple Silicon led to stronger Mac sales?
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon 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.
Special Inside Orchard bundle pricing is available for Above Avalon members. Additional membership customization is available via the Podcast and Financial Models add-ons.
The State of the Mac (Above Avalon Report)
An examination of Apple’s oldest product category.
Written by Neil Cybart - November 21st, 2023
Three years into the Mac’s Apple Silicon transition, the product category has never been stronger. It’s a stark difference from where the Mac was a decade ago. And yet, Mac sales are back to the same level as they were pre-Apple Silicon. This report reflects on where the Mac has come from and where it is going as Apple heads into spatial computing.
The Mac’s Past
The 2010s represented a complicated decade for the Mac. While Apple never lost its optimistic and upbeat tone with the Mac, the product category experienced a few highs but also the lowest of lows.
The best way of describing Apple’s old approach with the Mac (pre-2017) was aggressiveness in getting users to shift to mobile devices. (For this Report, we won’t go over Mac strategy pre-iPhone).
Apple was seeing unprecedented demand for iPhone and iPad with strong installed base growth. Even though Apple was continuing to add new users to the Mac installed base, the rates were not at the same level as what was unfolding with its mobile siblings.
In the early and mid 2010s, a going theory on display with Apple’s product development strategy was that many Mac users would eventually migrate to iPad (and iPhone). These Mac users were not developers and had no need for pro Mac software. Instead, they were sticking with the Mac for other reasons, including familiarity. Based on subsequent Apple disclosure, parts of that theory proved correct. In early 2017, Apple said 70% to 85% of Mac users weren’t relying on professional Mac software. This group was thought to be a prime target market for the iPad.
The implications of this Mac mindset went far. As workflows migrated from the Mac to iPad, the Mac line would be winnowed down to essentially three models: the MacBook, iMac, and Mac Pro. At least, that was the theory. Although this goal wasn’t directly telegraphed in ad campaigns or commercials, Apple’s actions with the Mac spoke volumes. The Mac mini went years without an update. The now infamous butterfly keyboard debacle was ultimately Apple trying to make MacBooks as thin as possible (keys stability was positioned as another selling point). Other new ideas included the Touch Bar and the 12-inch MacBook form factor. The takeaway wasn’t that Apple gave up with the Mac or was losing interest (far from it). Some of the Mac features were clearly inspired by the success seen with Apple's mobile devices. Instead, Apple appeared to be struggling with understanding what users, especially those with pro workflows, were looking for in a Mac.
An Above Avalon membership is required to continue reading this report. Members can read the full report here. An audio version of this report is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Reports are accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon 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.
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Member Privileges and Benefits
Receive Exclusive Daily Updates. The cornerstone of Above Avalon membership is access to Neil Cybart’s exclusive daily updates about Apple. Updates are sent via email and go over current news and developments impacting Apple, its competitors, and the industries Apple plays in (or will play in). Approximately 200 daily updates are published throughout the year. Sample daily updates can be viewed here, here, and here.
Receive Exclusive Reports. Members have access to Neil’s reports, which are in-depth examinations of Apple's business, product, and financial strategy.
Customization Options. Members have the option of attaching various add-ons to their membership to customize their membership to their liking. Podcast, Inside Orchard, and Financial Models add-ons can be attached and then later removed seamlessly online.
Access Neil’s Earnings Model. Members have access to Neil’s working Apple earnings model (an Excel file that also works in Numbers). The model is fully functional and adjustable and provides the ability to alter earnings drivers.
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Archive Access. Read 1,500+ daily updates and reports that have been previously sent to members. The Above Avalon member archive is unmatched in the marketplace in terms of the sheer amount of Apple analysis found in one location. The daily updates archive can be viewed here while the reports archive is available here.
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The OpenAI Saga, AI Shortcomings and Apple’s Opportunity
Happy Monday.
The tech news flow had no interest in taking a breather ahead of Thanksgiving this year.
In today’s update, we will talk about the OpenAI situation which is still unfolding as of Monday afternoon. There are some connections to Apple when it comes to the broader AI space.
Let's jump into today's update.
The OpenAI Saga
There are some tech news stories that simply need time to pass before taking a deep dive into them. That applies to OpenAI, the AI start-up responsible for kicking off the generative AI buzz/hype cycle with ChatGPT. Some of the OpenAI drama ends up being irrelevant to these updates. However, there is enough here, especially with Microsoft’s involvement that would be of interest to Apple. Once more time passes, we can revisit the takeaways.
Here’s a very quick recap of what happened.
This past Friday, OpenAI's board fired co-founder and CEO Sam Altman. As part of the board’s decision, co-founder Greg Brockman, who was Open AI’s chairman and president, was booted off the board. He quit instead. This kicked off something of a social-media fueled frenzy involving Altman and Brockman trying to return to OpenAI via an employee and investor uprising. Instead, both announced they would head to Microsoft. OpenAI employees are now pledging to do the same.
Here are a few of my prevailing thoughts:
1) Blindspot. In what may end up being the biggest lesson from this drama, Sam Altman had a major blindspot in terms of not having firm control over the OpenAI board. While there is an unusual governance hierarchy at play when it comes to the OpenAI board and its responsibilities (described below), Altman should have known that the possibility of being fired existed. This was not a Black Swan event, although most will say it was. The fact that the OpenAI board was not reinforced after key departures (Reid Hoffman etc.) to be closely aligned with Altman was a huge mistake on his part.
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This update is also available in audio form to members via the Podcast add-on. Attach the add-on to your membership here.
Meta 3Q23 Earnings, Meta Hints at Sluggish Quest 3 Sales
Hello everyone. Meta reported earnings back on October 25th, a few weeks after the company’s Connect conference (discussed in greater detail here). When looking at the competitive landscape, Meta has become one of Apple’s top competitors. Accordingly, we continue to fully cover the company’s business performance and strategy. Let’s jump right in.
Meta 3Q23 Earnings
Meta’s reported 3Q23 numbers were strong.
23% revenue growth
143% operating income growth
168% EPS growth
Much of this strength was expected. Revenue exceeded the midpoint of management’s guidance by just 3%, boosted by a FX tailwind.
Meta continues to see stabilization in its core business of monetizing user attention via advertising. This is the third consecutive quarter that showed such stabilization. A very easy year-over-year compare is certainly helping Meta. The company had a tough 2022. The stronger dollar is helping as well. However, there is legitimate improvement found within Meta’s core business, such as better Reels monetization.
In what is still difficult to get one’s mind around, Meta’s employee count at quarter end was down 24% year-over-year. This is obviously helping to cut expense growth and boost operating margins.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
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Disney FY4Q23 Earnings, Another Disney Bomb at the Box Office
Happy Tuesday. In today’s update, we will go over Disney's earnings. The discussion will also cover the latest box office developments.
Disney FY4Q23 Earnings
Disney’s legacy business performance was fine in FY4Q23 (July through September). Bob Iger spent months talking down expectations for those businesses to the point of there not being too many negative surprises. At this point, the lack of implosions would lead to a sigh of relief on Wall Street.
While Disney’s linear TV business is shrinking (revenue down 9% last quarter), the assets are kicking off roughly the same amount of cash. Linear Networks generated $805M of operating income, unchanged from last year. Disney benefited from a one-time gain in FY4Q23 related to its A&E investment.
ESPN saw similar results to last year with flat revenue of $3.5B while operating income was up 16% to $987M due to the non-renewal of the Big Ten.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
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Apple Demos More Vision Pro Spatial Videos, 3D Movie Icon Appears on Apple TV, Humane Ai Pin vs. Spatial Photos/Videos
Hello everyone. Welcome to a new week. We do have a few CY3Q23 earnings reports to go over. However, today’s update will take a spin through Vision Pro land.
Apple Demos More Vision Pro Spatial Videos
Over at Daring Fireball, here’s John Gruber:
“Yesterday Apple released developer beta 2 of iOS 17.2, the first version of iOS to include support for capturing spatial video with iPhone 15 Pro models. Today came the public beta, enabling the same feature. Apple invited me to New York yesterday, not merely to preview capturing spatial video using an iPhone, but to experience watching those spatial videos using a Vision Pro.
The experience was, like my first Vision Pro demo back at WWDC in June, astonishing…
My demo yesterday was expressly limited to photography in general, and spatial video in particular, and so my demo was, per Apple’s request, limited to the Photos app in VisionOS. It was tempting, at times, to see where else I could go and what else I could do. But there was so much to see and do in Photos alone that my demo — about 30 minutes in total wearing Vision Pro — raced by.”
The full post made for an interesting read, especially if you want the details regarding how Apple is implementing spatial videos via iPhone 15 Pro. For example, the iPhone 15 Pro needs to be held horizontally “to put the two capturing lenses on the same plane. The iPhone uses the main (1×) and ultra wide (0.5×) lenses for capture when shooting spatial video, and in fact, Apple changed the arrangement of the three lenses on the iPhone 15 Pro in part to support this feature.”
When Apple announced this past September that the iPhone 15 Pro and 15 Pro Max would be able to capture spatial video, my assumption was that iPhone videos
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
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Apple Share Buyback Update, Apple's Paid Subscriptions Growth Update
Hello everyone. Today’s update will conclude our Apple 4Q23 earnings review. It’s been a busy week and we covered A LOT of ground. There are a few broader topics dealing with the Mac and iPad that extend far beyond any one earnings report. We will address / tackle those topics in due time.
As a recap, here were the earnings review sections:
November 3rd: Initial Impression From Apple’s 4Q23 Earnings, Key Numbers From Apple 4Q23, About Apple’s 1Q24 Guidance
November 6th: Three Interesting Charts for Apple’s 4Q23
November 7th: Reading Between the Lines of Apple’s 4Q23 Earnings Q&A With Analysts
November 8th: Apple 2Q23 10-K Takeaways
In today’s update, we will discuss Apple’s share buyback trends and paid subscription tally.
Apple Share Buyback Update
There were a few interesting observations regarding Apple’s share buyback activity.
Here is quarterly data from the past three years for Apple's share buyback via open market transactions:
4Q20: $18.0B. Average repurchase price per share: $106.68
1Q21: $24.0B. Average repurchase price per share: $120.19.
2Q21: $19.0B. Average repurchase price per share: $128.89.
3Q21: $17.5B. Average repurchase price per share: $128.48.
4Q21: $20.0B. Average repurchase price per share: $146.41.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
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Above Avalon Membership
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More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Apple 2023 10-K Takeaways
Hello everyone.
Today's Above Avalon daily update includes Neil’s key takeaways from Apple's annual 10-K filing for 2023. The update covers 16 Apple financial topics. Published at the end of the fiscal year, 10-K filings include a more in-depth examination into Apple’s financials and business versus the 10-Q filings published at the end of 1Q, 2Q, and 3Q. Said another way, 10-Ks are a treasure trove of granular financial data. We will also use this opportunity to recap some of Apple’s financial totals for FY2023 and how they compared to prior years. Share buyback is one topic that is mentioned in Apple's 10-K that we will talk about in greater detail tomorrow.
Apple 2023 10-K Takeaways
Quarterly Cash Dividends. Regarding Apple's quarterly cash dividend (a 0.5% dividend yield given Apple's current stock price), Apple's share repurchases have led to a declining share count which makes it less costly to pay the same amount of cash dividends. Despite the quarterly cash dividend increasing by 154% since being reinstated in 2012, Apple's dividend expense has increased by just 40%.
Here is Apple's annual dividend expense:
2013: $11B
2014: $11B
2015: $12B
2016: $12B
2017: $13B
2018: $14B
2019: $14B
2020: $14B
2021: $14B
2022: $15B
2023: $15B
Debt. In 2023, Apple issued $5.3B of debt (floating- and fixed-rate notes) while repaying $11.2B of debt and $4.0B of net repayments of commercial paper.
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Reading Between the Lines of Apple’s 4Q23 Earnings Q&A With Analysts
Hello everyone. In today’s update, we will focus on Apple’s 4Q23 earnings Q&A session with analysts. After recapping each question-and-answer exchange that occurred on the call between Apple and sell-side analysts, we will go over my response to the exchange. Let’s go beyond what was talked about on the call.
NOTE: The following earnings call questions (“Q (Sell-Side Firm)”) and answers (“Cook” or “Luca”) have been cut, summarized, paraphrased, and rearranged for clarity. To read the full question and answer exchanges, Yahoo Finance offers a written transcript here.
Reading Between the Lines of Apple’s 4Q23 Earnings Q&A With Analysts
Customer Behavior
Q (Goldman Sachs): Are consumers opting for higher storage iPhone models or iCloud+? How are you thinking about trade-offs between the two storage options?
Cook: There have been no significant changes, although we started selling iPhone 15 Pro Max at 256GB.
My response: iCloud+ has long-term momentum. Attributes such as Family Sharing and being included in Apple One are iCloud+ adoption tailwinds. New iCloud+ features such as iCloud Private Relay and Hide my Email add to the paid service’s appeal.
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Three Interesting Charts for Apple's 4Q23
Hello everyone. Welcome to Monday and a new week. We will continue our Apple 4Q23 earnings review.
Like last quarter, we will focus on three charts that go a long way in summarizing Apple’s current financial trends. We will cover the granular takeaways from Apple's 4Q23 earnings call in tomorrow’s update.
As a reminder, if you have questions about Apple’s earnings, please send them way. The questions can be covered as we proceed through the earnings review.
Three Interesting Charts for Apple's 4Q23
1) HW vs. Services Gross Profit Growth
Over the years, we have had various opportunities to compare key financial differences between Apple HW and Apple Services.
The former is heavily influenced by upgrading trends. For Apple to report HW revenue growth, the company needs to replace all of the revenue from the prior period just to be in a position to then grow. For products like iPhone, upgrading is responsible for approximately 75% of revenue. The percentage is lower – closer to 50% - for Mac and iPad.
During the pandemic, Apple device upgrading was strong as work from home and online/distance learning drove interest in new(er) devices. This benefit extended to companies paying for their employees to have the latest computing devices (at home).
Over the past 12 to 18 months, device upgrading has slowed across the industry.
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Initial Impression From Apple’s 4Q23 Earnings, Key Numbers From Apple 4Q23, About Apple’s 1Q24 Guidance
Hello everyone. Welcome to a special Friday edition of the Daily Update. We will begin our Apple’s earnings review. The discussion will be purposely kept broad for now. Next week, we will dive into some of the nitty gritty. Let’s jump right in.
Initial Impression From Apple’s 4Q23 Earnings
Apple’s financial performance is trending very close to our existing assumptions. Underlying demand for Apple hardware appears to be down low single digits driven by slowing upgrading trends, especially with the iPad, Mac, and AirPods. Mostly offsetting HW weakness, Services revenue momentum continues to build with growth re-accelerating despite Apple working with a much larger base.
While Apple’s 1Q24 guidance may have disappointed some, when excluding one-time factors including calendar year differences and COVID supply issues, Apple guided to roughly flat revenue growth. Meanwhile, Apple’s 45% to 46% gross margin guidance was stellar. The Apple story remains firmly intact heading into 2024 and Apple’s most important product launch in nearly a decade with Vision Pro.
Key Numbers From Apple 4Q23
Here are Apple’s reported 4Q23 results versus my expectations with brief commentary for each item.
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