Evercore: Purchase commitments a positive sign for iPhone sales

Analyst Amit Daryanani read Apple’s 10-Q so you don’t have to.

From a note to clients that landed on my desktop Sunday:

ALL YOU NEED TO KNOW: 1) Off balance sheet purchase commitments fell 5% y/y, better than the 7% decline in the first half of FY19. 2) Operating margins fell across all regions, but the decline was least severe in the Americas and China. 3) Warranty accruals were down 3.3% y/y and had a < 10bps positive impact on margins. 4) Apple lowered its planned FY19 capex spend from $12.0B to $10.0B (normal for them to lower capex). 5) There was a < 10bps gross margin headwind from FX hedging.

Net/net: Minimal impact in the quarter from FX hedging or warranty accruals, while the improved trajectory of purchase commitments is a positive for FQ4:19 iPhone sales… We think AAPL is well positioned to sustain double digit EPS growth over the next few years and we see potential for POSITIVE revenue growth in FY20 & FY21.

Maintains Outperform rating and $237 price target.

My take: The 10-Q also indicated that R&D as a percentage of revenue hit a 15-year high in June. See here. I’m surprised Daryanani didn’t mention it.


  1. Fred Stein said:
    Apple can increase their R&D as a percent of revenue and remain below industry norms. Investors can read this increase as Tim Cook’s confidence in his people, the source of future earnings

    August 4, 2019
    • David Drinkwater said:
      I haven’t seen a Dediu piece on R&D spend for a while, but Appl’s R&D spend is a leading figure, so if Apple is increasing it now, we can expect a bump in revenues (I think the lag is somewhere around 2-4 quarters later).

      August 5, 2019

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