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Apple Inc AAPL

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Apple’s Mac and iPad Sales Bolstered by Work-From-Home Trend in Q3; Raising FVE to $285

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

Apple reported fiscal third-quarter results ahead of our expectations led by Mac and iPad segments. The firm did not provide guidance last quarter and once more refrained from offering guidance due to uncertainty regarding the coronavirus. CEO Tim Cook noted weak sales in April were offset by better-than-expected demand in May and June led by the cheaper iPhone SE launch, continued economic stimulus in many regions, and the lifting of some shelter-in-place restrictions around the world. Management confirmed that supply of the upcoming iPhones will be available in October rather than September. We are raising our fair value estimate for narrow-moat Apple to $285 per share from $240 as we incorporate a stronger near-term outlook for the Mac and iPad segments due to the ongoing work- and learning-from-home dynamics as well as increased expectations for the upcoming 5G iPhone. Nonetheless, given the 70% appreciation of shares from mid-March lows, we recommend prospective investors wait for a wider margin of safety given the precarious state of the global economy.

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Company Profile

Business Description

Apple designs a wide variety of consumer electronic devices, including smartphones (iPhone), tablets (iPad), PCs (Mac), smartwatches (Apple Watch), and TV boxes (Apple TV), among others. The iPhone makes up the majority of Apple’s total revenue. In addition, Apple offers its customers a variety of services such as Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Card, and Apple Pay, among others. Apple's products run internally developed software and semiconductors, and the firm is well known for its integration of hardware, software and services. Apple's products are distributed online as well as through company-owned stores and third-party retailers. The company generates about 40% of its revenue from the Americas, with the remainder earned internationally.

One Apple Park Way
Cupertino, CA, 95014
T +1 408 996-1010
Sector Technology
Industry Consumer Electronics
Most Recent Earnings Jun 30, 2020
Fiscal Year End Sep 28, 2020
Stock Type Cyclical
Employees 137,000