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.
Click to enlarge.
Link: Apple’s Form 10-K