If you’re an investor at any level, the past few months have probably left you feeling shook. The good news is that there’s an end to the lockdowns in sight. Now that the pandemic part of the crisis appears to be winding down, we’re finally getting some early indications about how all of this is affecting business and investments.
The Current Financial Picture
According to Apple’s quarterly earnings statement, the company garnered $58.3 billion in revenues during the second quarter of 2020. Although that’s well below the projection of $63 – $67 billion, it’s still a one percent increase over last year’s sales during the same time period.
At this point, any gains are good.
However, the fast-growing services sector experienced it’s highest revenues yet with a total of $13.3 billion, an increase of more than $2 billion over last year. They also gained in home accessories and the wearables market with their Apple Watch, which generated a quarterly record of $6.3 billion between January 1st and the end of March.
That’s not too surprising when you consider that most of us have been home-bound and dependent on these services and accessories for everything from work to schooling to home entertainment and staying connected with friends and family members.
What’s Affecting Growth?
Due to its business model, reputation for quality, and product lines, Apple was able to weather the storm better than some. Losses for the second quarter were prevented, in part, by the fact that Apple didn’t shut down it’s overseas manufacturing until March 13, which was two weeks before the quarter ended.
However, closed borders and disruptions to the supply chain may cause sales figures to dip significantly for the third quarter. More than 60 percent of iPhone revenues are generated by foreign sales, including sales to consumers in China. Unfortunately, the last quarter release updates for iPad Pro and MacBook Air came too late in the game to affect financial reporting for Q2. Only time will tell whether these product releases will offset any losses during Q3.
Despite less than stellar earnings in some areas, there is hope for the future of Apple products – and profits – in Q3 and beyond. The company will provide further information about product releases and updates during an online-only version of their annual Worldwide Developers Conference in June.
Is the Future Looking Brighter?
Because the bulk of Q2 earnings occurred before the pandemic really began hitting hard, it will be the last quarter that wasn’t completely influenced by halted production and mandatory closings. It’s possible that everything will come to a head when we receive the earnings statements for Q3 some time in July.
In the meantime, Apple is committed to complete transparency as per the Private Securities Litigation Reform Act of 1995 with a public announcement of their earnings to include full disclosure of the impact of COVID-19 on:
- Anticipated revenue
- Gross margins
- Tax rates
- Operating expenses
- Other income/expenses
However, there are several factors we can consider now that make prospects for the future of Apple look better than one might expect. In fact, the company is so optimistic about it’s future that CFO Luca Maestri announced a five-year commitment to inject $350 billion into the US economy.
They’re also working hard to help medical professionals and its customer base around the world through donations of millions of face masks and custom face shields and additional millions to charities like Global Citizen and America’s Food Fund. The company has even announced an unprecedented partnership between Android and iOS to work together on a seamless contact tracing app that’s due to launch this month.
Security Breaches Affecting App Market Growth
One of the fastest growing verticals are trading apps. As of 2020 there are over 150 trading apps available for download including many free portfolio trading apps as well as premium trading apps.
Apps have also been the most frequent target of hacks with everything from imposter apps being heavily promoted on the App Store as well as popular financial apps being used for financial malpractice. Earlier in April 2020, crypto platform CEO Changpeng Zhang warned of malicious malware being deployed across multiple iPhone apps. This issue has also occurred in the popular Forex market with some of the leading apps being subject to fake logins and credential phishing.
While security may seem to be a secondary condition for 2020 earnings it plays a vital role in maintaining a healthy marketplace for app developers and users. Apple’s product is trust and nefarious apps detract from that.
Factors That Might Save Apple
Many of us have pledged our business to companies that look out for customers, employees, investors, and the public at-large during the evolving crisis. Apple certainly fills that bill.
But, that’s not the only reason for getting the warm feelies about the Apple Corp.
For one thing, the company is re-entering the small phone market, a segment that ceded way to other manufacturers some time ago.
Because remote work will continue for some companies long after the pandemic is under control, the demand for smartphones, personal devices, and home technology will continue to rise. Apple has also reopened almost all of its stores in the US and elsewhere, except for locations in China and one store in South Korea. Then, there’s Apple’s reputation and progressive, innovative business model to recommend the brand.
What still remains to be seen are the effects of continued supply chain disruptions, possible manufacturing delays, and competition from other brands. There’s also the economy in general to consider.
Remote work will continue a need for Apple products and services. But, with so many others out of work already and many small businesses closing their doors for good, will there be enough demand in the wider population? It’s possible that the new, more affordable iPhone SE will allow Apple loyalists to have their cake and eat it, too.
So far, Apple seems to be looking out for itself and it’s customers. Although growth was slower than expected, they’ve still gained over this time last year.
That bodes well for shareholders and investors moving forward. Dividends for Q2 rose by 6 percent, and the company has authorized a $50 billion increase to their share repurchasing program.
Now that potential fears for the viability of the Apple Corp have been laid to rest, you’re free to worry about your own financial health. Protect your online trades to using a secured device and find a reputable online trading platform.
Here’s to a worry-free, profitable Q3 for each and every one of us!