Apple’s services include Digital Content and Services, AppleCare, Apple Pay, licensing and other services. Its other products include AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod Touch and other Apple-branded and third-party accessories. The reportable segments of the data include the Americas, Europe, Greater China, Japan, and the rest of Asia Pacific.
Apple Inc. has always been an industry leading brand with a track record of solid financial performance. The company has been growing rapidly at a 5-year compounded annual growth rate (CAGR) of 8% in sales and still has strong drivers of long-lasting growth in the future. Apple now has $245 billion cash on hand, according to its first-quarter 2019 earnings report, raising its market cap to a world-record $1.1 trillion. That's 3 percent more than it had on hand in the previous quarter, when it reported $237.1 billion in cash. So it’s no surprise that the iPhone-maker’s 33% drop since then has emboldened the analyst community to declare that Apple (aapl, +0.71%) is now really cheap. At first glance, the standard metrics that gauge expensive versus bargain valuations even back the optimists.
Apple said a year ago that it would be contributing $350 billion to the U.S. over the next five years due in part to the new tax law. Part of this contribution will come through taxes on repatriated cash, the company has said.
CEO Tim Cook and his team had issued a shocking alarm on January 2, warning that Apple’s earnings would fall well below his previous forecast. Apple posted $88.3 billion in revenues for the quarter, and achieved a “gross margin” of 38%. That’s in line with Cook’s alert at the start of the year, and far below his super-upbeat guidance on November 1, the day Apple unveiled its record numbers for fiscal 2018, and Cook predicted sales for the December quarter of $89 billion to $93 billion, and operating margin as high as 38.5%. As in the Jan. 2 release, Cook blamed the shortfall on a sharp slowdown in China, a market that accounts for one-fifth of Apple’s sales, and consumers’ resistance to spending $1,000 and up for an upgrade to its new iPhone XS line.
Apple is also investing $1 billion to build a new campus in Austin, Texas, for an initial 5,000 employees, with the capacity for 15,000 total. When it announced the new campus in December, Apple said it would also be adding new sites and adding over 1,000 employees in Seattle, San Diego and Culver City, California, over the next three years. Apple also said at the time it will expand its existing operations in Boulder, Colorado; Portland, Oregon; New York, Pittsburgh and Boston.
Just how much cash does Apple have on hand? As per the company's quarterly filing, CEO Tim Cook and his team now have a whopping $44.7 billion in the bank and another $41.6 billion worth of marketable securities that could be quickly turned into cash. Apple could afford to outright acquire giants like Wells Fargo (NYSE: WFC ), Pfizer (NYSE: PFE ), Procter & Gamble (NYSE: PG ), or any of the other thousands of organizations with lesser valuations.
So how exactly should those Apple cash reserves be deployed?
Apple is still behind the video and film eight ball, though, and it may struggle to catch up with competitors on its own. Dealmaking will be the only way it can catch up. Such a deal would most definitely push Apple Inc. toward its goal of becoming a services-oriented outfit. Buying Disney would be more than enough of a draw to pull consumers into the Apple ecosystem.
The on-demand streaming giant is still bleeding money, but Apple could easily absorb it after scooping up Netflix for even a hefty premium above its current market cap of $145 billion. Better still, Netflix's existing user base of 148 million are already accustomed to paying subscription fees. Selling them another digital product or service wouldn't be a huge hurdle to clear.
Apple’s expansion plans may include acquisitions. Though Apple has made nearly 100 mergers and acquisitions since 1988. With its colossal pile of cash, Apple can easily kick start acquisition spree. According to Citi Research analyst, Apple should restart its acquisition journey with video game companies like Activision Blizzard, Electronic Arts, and Take-Two. But Mr. Cook may not be interested in taking over the gaming software companies as iOS games are already minting more money than popular games like Nintendo and others.
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