Apple has never purchased so many iPhone components

And other juicy tidbits from Apple’s 10-K.

From a note to clients by RBC’s Amit Daryanani that landed in my inbox Tuesday:

Our analysis of AAPL’s 10-K resulted in the following key highlights:

1) Off balance sheet manufacturing and purchase commitments were up sharply at an all-time high of $37.6B, +31.3% Y/Y and 60.5% q/q (iPhone 6 cycle, it was up 31.7% y/y), potentially indicating strong ramp for iPhone X;

2) Warranty accruals was up 12% q/q but down -8% y/y—logical given delay in iPhone X delay;

3) Vendor non-trade receivables were up 31% y/y, reflecting component purchases by AAPL for EMS partners and overall inventory on AAPL’s balance sheet was $4.9B, up 128% y/y – we think reflecting memory price and purchase dynamics;

4) Operating Margins were slightly down in the US, reflecting carrier discounts on new iPhones;

5) There was 60bps FX impact on gross margin this qtr.

Net/Net: We maintain our positive stance on AAPL as we see multiple tailwinds that should enable double-digit EPS growth not just in FY18 but also in FY19 as AAPL benefits from 1) ASP tailwinds from iPhone X and higher memory; 2) GMs benefit from services and better mix; and 3) potential tax reform.

Maintains Outperform rating and $190 price target.

My take: The scale of Apple’s purchase commitments stands out in this bar chart.

Component orders

Click to enlarge.

Link: Apple’s Form 10-K

2 Comments

  1. Fred Stein said:

    Nice. Ties back to the TSMC & Apple’s big bet story, https://www.ped30.com/2017/10/23/16706/ and to the current high cost of the OLED screens.

    Projects forward to an upgrade of the iPhone and iPad installed base the bionic chip series and OLED screens

    0
    November 14, 2017
  2. Gregg Thurman said:

    “Production constraints my ass”.

    0
    November 14, 2017

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