From a note to clients by analyst Amit Daryanani that landed on my desktop Wednesday:
ALL YOU NEED TO KNOW:
- Off balance sheet purchase commitments were up 21% y/y vs. Mar-20. The increase likely reflects continued strong demand across Apple hardware.
- Operating margins were up in every region with the US (+660bps) and Europe (+545bps) recording the strongest y/y increase.
- Warranty accruals were down y/y and had a positive gross margin impact of ~130bps.
- AAPL returned $22.7B to shareholders in the Mar-qtr, down slightly from the $30.5B returned in the Dec-qtr. Apple’s net cash balance was essentially flat at $83B.
- We estimate FX was an ~60bps tailwind to gross margins and there was an additional 30bps benefit to operating margin.
Net/net: Purchase commitments remain elevated, pointing to continued strength that likely spans the entire hardware lineup. Capital returns remain very large and this should not change given the sizable net cash position.
Maintains Outperform rating and $175 target.
My take: At $83 billion, net cash isn’t getting any closer to zero.