Apple's Remarkable Quarter Confirms Its Dominance

Apple (NASDAQ: AAPL  ) had a remarkable quarter as it reestablished itself as the preeminent smartphone maker in the world. Analysts were saying that Apple was losing market share to its competitors and losing its technological edge, but Apple does not just compete on those fronts. In fact, Apple holds only 15% of the global smartphone market based on units sold and it has always had a relatively small share there. In the U.S., Apple holds a 40% share of the smartphone market while Android phones from Google have 52%.

It's the premium prices Apple commands for its phones that make Apple such a great business and cash generator. The company captures 60% of the profits in the smartphone market through its high-margin strategy with only 40% of the U.S. market and 15% of the world market. This testifies to Apple's business model and the affinity for its smartphones in the U.S. and international markets.

Embracing technology without overdoing it
Although Apple integrates new technology into its phones such as the fingerprint sensor, its products are known more for user-friendliness and simplistic design -- Steve Jobs' credo. So the company has to maintain a technological edge, but it does not have to complicate its products with all of the latest sensors and capabilities that it can possibly integrate into them.

The future iPhone will likely have a bigger screen, a popular feature of competitors' phones, and rumors claim it contains weather sensors that detect temperature, humidity, and air pressure.The new phone is also believed to contain technologies that will help its users monitor their health through metrics such as blood pressure, oxygen levels, sleep quality, and blood sugar. All of the metrics will be synced through an app that the user can manipulate to gain insights.

Source: http://store.apple.com/us/buy-iphone/iphone5s

Earnings and a treat for shareholders
Apple's most recent quarter was truly stellar as it increased iPhone sales 14% from the prior year's quarter. The company also increased its quarterly revenue and earnings per share to $45.6 billion and $11.62 per diluted share from $43.6 billion and $10.09 in last year's quarter, respectively. Apple's gross margin also expanded to 39.3% from 37.5% in the year-ago period.Apple's generous capital return program was evident in CFO Peter Oppenheimer's remarks from the earnings release:

We generated $13.5 billion in cash flow from operations and returned almost $21 billion in cash to shareholders through dividends and share repurchases during the March quarter. That brings cumulative payments under our capital return program to $66 billion.

Following the earnings, CEO Tim Cook announced that he is confident in the company's future and believes that the stock is undervalued. So Cook and Apple's board ramped up Apple's capital return program by increasing the share repurchase authorization to $90 billion from $60 billion and hiking the dividend 8% to $3.29 per share. In addition to the increased return of capital, the company's board also instituted a seven-for-one stock split, effectively increasing the liquidity of the stock and its appeal to smaller investors. The stock jumped over 8% after the news.

Apple for the future
Apple's innovative and user-friendly designs will afford the company continued success and loyalty from its die-hard users. Along with its envious financial position, Apple has the ability to wade through any ups or downs and come out on the other side with a hefty amount of cash. Even after the bump in the stock, Apple still trades at a low P/E multiple of 14 with a dividend yield of 2.3 percent. The company perennially generates returns on equity and capital north of 25% and enormous amounts of free cash flow, as it generated $44.5 billion just last year.

In addition, the stock has seen significant insider buying lately with over 200,000 shares acquired by Apple's board and management in the month of March. Investing along with company insiders is one of the smartest moves an investor can make and an opportunity exists in Apple to do so. Given its valuation, future, and financial success, Apple should prove to be a prudent investment choice and lead to good returns along the way.

Apple's next big thing is the biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2947567, ~/Articles/ArticleHandler.aspx, 10/25/2014 7:58:02 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement