Saxo Bank’s head of FX strategy John Hardy takes a closer look at how global currencies are being affected by developments in the US - China trade war.
Article / 25 January 2012 at 14:10 GMT

Apple: Wow – iPhone powers ahead!

Strategist & Equity Analyst / Private

Bottom line in Apple’s Q1 result is: iPhone powers ahead and now comprises 53 percent of the total sales. The estimates for the Q1 results were not even close to the right level of revenue in Q1, see blue marking in chart 1.


The iPhone sales just blew all analysts away (including me – see my article from before the release). Sales grew 122 percent in the quarter, which is normally the best given the Christmas sales. But taking four quarters rolling iPhone revenue then it is up 30 percent, really impressive.

Margins improved substantially as they once again managed to reap the full benefits of the operational leverage. Net income margin of 28.2 percent is the best they have provided yet. The massive extra volume did not demand substantial extra SG&A, and the incremental margin (what they earn on the extra sales) rose to 36 percent.

If they are able to ramp up volume in iPhone and iPad for that sake and keep a tight cost control then margins are well underpinned. As I have stated before from my side of the desk I do see a rising risk of margins suffer at some point – but Apple will prove me wrong if the volume growth keeps this pace.

Given the rising competition it would be natural that prices are under pressure. Looking at the unit prices this time then Apple has not been able to or wanting to hike prices as per usual, see chart 2.

Stock Price
Earnings for 2012 are already well underway with this Q1 result. P/E has decline for a long period and this result will bring it down even more. The price of Apple’s growth is small at the moment, and investors are probably going to willing to pay up some more for this. If this is the fact then the stock price should at least rise in tandem with earnings and probably a bit more.



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