Apple Inc. (AAPL): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


Apple reported mixed third-quarter 2014 results with earnings comfortably beating the Zacks Consensus Estimate despite modest growth in revenues. Strong iPhone and Mac sales drove robust performance in China. The company's growing market share in the BRIC countries as well as in the emerging nations is a major positive. The partnership with China Mobile will continue to boost iPhone sales in China. Although iPad reported a dismal quarter, its growing adoption in enterprises sector is positive. The partnership with IBM will improve Apple's position in the enterprise market. However, the company continues to face significant competition from Asian handset makers, such as Samsung. Moreover, ongoing litigation issues remain an overhang on the stock. We, therefore, maintain our Neutral recommendation on the stock and set a price target of $107.00.


Founded in 1977, Apple Inc. (AAPL) is headquartered in Cupertino, CA. Formerly known as Apple Computer, Inc., the company changed its name in Jan 2007. Apple designs, manufactures and sells personal computers (Mac), portable digital music players (iPod) and mobile communication devices iPhone and iPad), as well as related software, services, peripherals and networking solutions, worldwide.

Revenues are generated primarily from the sale of hardware, software, digital content and applications, and service and support contracts. Apple offers various software products and computer technologies including Mac operating system software, iOS mobile operating system software server software and related solutions professional application software and consumer, education and business oriented application software. In Oct 2011, Apple launched its iCloud service. The company also sells digital content and applications through its iTunes Store, App Store, iBookstore, and Mac App Store.

Apple primarily reports revenues in seven categories iPhone and related products and services, Macintosh, iPad and related products and services, iPod, Other Music related products and services, Software, service and other sales, and Peripherals and other hardware.

iPhone and related products and services consist of iPhone handset sales and Apple-branded and third-party iPhone accessories sales. In fiscal 2013, the company launched iPhone 5C and 5S (Sep 2013). Apple's tablet computer iPad continued its strong growth in fiscal 2013. In Oct 2013, the company introduced iPad Air and iPad Mini with Retina display.

Macintosh includes desktops (iMac, Mac mini, Mac Pro and Xserve) and portables (MacBook Air, MacBook Pro and MacBook). The iPod line (iPod Touch, Classic, Shuffle and Nano) consists of portable digital music players.

Other music related products and services consist of iTunes Store sales, iPod services and Apple-branded and third-party iPod accessories. Software, service and other sales include sales of Apple-branded operating system and application software, third-party software, AppleCare and Internet services. Peripherals and other hardware include sales of Apple-branded and third-party displays, wireless connectivity and networking solutions, and other hardware accessories including printers, storage devices, computer memory, digital video and still cameras, as well as various other computing products and supplies.

Additionally, Apple offers the Apple TV set top box, designed and marketed by Apple, which can store content on an internal hard drive or stream it across a network, depending on the needs of the user. Apple TV is a digital media receiver that plays digital content originating from any Mac OS X or Windows computer running iTunes on an enhanced-definition or high-definition (HD) widescreen television.

No single customer accounted for more than 10% of revenues in 2013. Apple faces significant competition in most of its markets such as smartphone and tablet, particularly from Asian equipment manufacturers such as HTC and Samsung. In the personal computer segment, the company also faces strong competition from Hewlett Packard and Dell. In the digital music and cloud services market, Amazon and Google are Apple's primary challengers.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: AAPL , HD

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