Apple- A Test in Patience

August 10, 2015

A message from our Al Frank Value division.

We believe Apple offers a fine illustration of one of the most important facets of our investment philosophy, patience.

Long-time fans of Apple, we are consistently impressed by the ability of the firm to grow revenue and earnings. In the third fiscal quarter of 2015, the consumer electronics giant earned an adjusted $1.85 per share on $49.6 billion of revenue, $0.04 and $300 million ahead of the estimates, respectively. In the quarter, AAPL sold 47.5 million iPhones, 10.9 million iPads, 4.8 million Mac computers, although the company declined to state how many units of the new Apple Watch were sold.

Ever-positive CEO Tim Cook said, “We’re very hard at work on our exciting pipeline of new hardware, software and services and we’re continuing to expand our global reach into new markets. And we’re passionately committed to leaving the world better than we found it.”

Overall, we were pleased with the quarter and believe the strength of Apple’s product lines leave shares still trading below fair value, especially after the 4% earnings-related share-price pullback. Management continues to chip away at its $200 billion capital return program, having completed $126 billion. AAPL expects $49 billion to $51 billion of revenue next quarter with gross margins between 38.5% and 39.5%.
No matter how much research a company conducts, there will always be some poor selections along with good selections, but over the long term our winners have won far more than our losers have lost!

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