Apple’s policy of steady growth and rewarding investors payed off in Q3

Autor: Article based upon analysis from Reuters Breakingviews | Link: Apple isn’t safe when neighborhood is aflame
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Apple continued to grow its service business in the quarter ending Sept. 24, with revenue increasing 5% against the same period last year.

Apple’s market share on smartphones is now 18% of the global market, up from 15% a year ago, estimates research outfit Canalys, cited by Reuters.

As illustrated in quarterly results released on Thursday, the $2.4 trillion iPhone maker’s steady growth and policy of returning cash are far more attractive than cyclical and splurging peers like Meta Platforms.

Tim Cook, Apple’s Chief, is showing restrain with research and development, where the budget is kept at less than 8% of Apple’s rising revenue. He chose to pay out nearly $30 billion via dividends and share repurchases, while operating costs rose 16%.

As a result, Apple’s shares are down just 3% over the past year, as against Meta’s, which plummeted almost 60%. So Cook’s mix seems to be paying off.

But even if Apple seems to learn how to squeeze more from customers by selling advertising, financial services and apps, the company has its problems, too. A rising dollar and declining consumer demand erode the company’s valuation strengths.

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When dollar is so strong, gadgets and services become less affordable overseas. And that’s a problem since well over half of Apple’s revenue comes from outside America.

The holiday quarter is the champion in retail sales, but prospects are negative. Moreover, Apple’s strong stock has made its valuation look stretched at 23 times estimated earnings over the next year, according to Refinitiv, as of Thursday’s close. That’s 35% higher than its average over the past decade.

Existing environment allows fewer business moves even to a strong company, while its strengths become less appealing than usual.

Financial highlights

Apple posted a September quarter record revenue of $90.1 billion, up 8 percent year over year, and quarterly earnings per diluted share of $1.29, up 4 percent year over year. Annual revenue was $394.3 billion, up 8 percent year over year, and annual earnings per diluted share were $6.11, up 9 percent year over year.

Apple’s board of directors has declared a cash dividend of $0.23 per share of the Company’s common stock. The dividend is payable on November 10, 2022 to shareholders of record as of the close of business on November 7, 2022.