WASHINGTON, DC — Tim Cook delivered, but just barely.

Over the past couple of months, investors have been worried whether or not Apple (NASDAQ: AAPL.US) would be able to grow iPhone unit sales in the fourth quarter. In October, Cook said iPhones should grow in terms of both units and revenue.

The company just confirmed that it did in fact post an increase, albeit a modest one. Apple sold 74.8 million iPhones during the busy holiday quarter, approximately 300,000 more iPhones than it sold a year ago. That translated into $51.6 billion in iPhone revenue, similarly a hair higher than the $51.2 billion from a year prior.

Apple also sold 16.1 million iPads and 5.3 million Macs. Total revenue was a record $75.9 billion, and gross margin was 40.1%. Net income added up to $18.4 billion, or $3.28 per share. What else did the Mac maker have to say?

Macro and currency uncertainties
Cook started off the call by acknowledging the unprecedented levels of macroeconomic volatility that global markets and economies are currently enduring. Many countries are experiencing slowing growth — particularly those that are driven by commodities — due to falling commodity prices. That’s leading to a wide range of currencies weakening, especially against the U.S. dollar. He cited a handful of extreme figures for various currency declines.

iPhone average selling prices hit a new all-time high of $691. Incredibly, this figure would have been a mind-boggling $49 higher if it weren’t for said pesky foreign exchange impacts. When we’re talking about 74.8 million iPhones, that all adds up to a $3.7 billion hit for the iPhone alone.

China continues to be a strong market for Apple, and Apple enjoyed the highest ever iPhone sales in The Middle Kingdom. However, Cook did acknowledge that Apple is just now starting to see signs of economic “softness,” which it hasn’t really experienced before. Still, “Greater China” revenue jumped to a record $18.4 billion, an increase of 14%. On a constant-currency basis, revenue would have grown 17%.

Speaking of constant-currency results: The foreign exchange environment has gotten so bad that Apple is now introducing non-GAAP results for the first time in recent memory. In constant currency, Apple’s revenue would have been $5 billion greater. Since fiscal Q4 2014, international revenue has taken a 15% hit based solely on exchange rate fluctuations after that revenue is converted to U.S. dollars. The pain is real, and it’s not going away anytime soon.

Cash and capital returns
Apple now has over $215 billion in total cash, although $200 billion of this is located overseas. The company repurchased nearly $7 billion in stock during the quarter, including its sixth accelerated share repurchase program. That’s a fairly low level of repurchase activity, which also explains why earnings accretion was similarly modest (earnings per share rose 7% while revenue rose 2%).

With its domestic cash position dwindling, Apple will continue to tap public debt markets to fund its share repurchase program. Apple now has $55.7 billion in total long-term debt, plus another $7.3 billion in commercial paper outstanding. Investors can continue to expect an annual update on its capital return program around April.

Watch and TV
Apple Watch and Apple TV both enjoyed record quarters. That doesn’t say a whole lot about Apple Watch, since it’s only been on sale for three quarters and this is its first holiday quarter. And detailed information is obfuscated since both are bundled into Apple’s “Other Products” segment, which was up 62% year over year.

The company also took time to highlight services growth, and pointed out that it has now hit a new milestone of 1 billion active devices. That installed base includes all iPhones, iPads, Macs, iPod touches, Apple TVs, and Apple Watches that have used Apple services over the past three months. Apple is trying to remind investors how much recurring revenue it can rely on, both in terms of services as well as ongoing hardware upgrades.

An iPhone decline is coming
This was always bound to happen sooner or later. Since it didn’t happen sooner (December quarter), it will now happen later (March quarter). Guidance for the current quarter left a little to be desired, but only because Apple is facing an incredibly tough year-over-year comparison. Last time around, Apple was so supply constrained on the iPhone that a lot of those sales were pushed into the March 2015 quarter.

This time around, iPhone channel inventory is within its target range, and the foreign exchange environment is getting tougher. Revenue should be $50 billion to $53 billion. At the midpoint, that would represent an 11% decline. Apple has officially graduated into a value play.

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Evan Niu, CFA owns shares of Apple. The Motley Fool UK owns shares of and has recommended Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

WASHINGTON, DC — What: Shares of fitness tracker maker Fitbit (NYSE: FIT.US) got crushed yesterday, falling by more than 18%, after the company unveiled a new smartwatch at the Consumer Electronics Show in Las Vegas as competition continues to heat up.

So what: The company took the wraps off of its new Blaze smartwatch, which features a colour touchscreen alongside other expected functions like notifications and the requisite set of sensors to track fitness data. Blaze offers up to five days of battery life, and has interchangeable bands for user customization.

IMAGE SOURCE: FITBIT.

The new device will cost $200, and Fitbit has started taking pre-orders. Meanwhile, Under Armour (NYSE: UA.US) is jumping into the activity tracker market with a new suite of fitness products including a wearable band priced at $180.

Now what: As Fitbit continues its push upmarket to compete directly with other smartwatches, it’s seeing competition intensify in the lower-end market for stand-alone fitness trackers. Full-featured smartwatches are already beginning to cannibalize stand-alone trackers, and Fitbit is responding to changing market conditions. Investors were also disappointed that Fitbit didn’t introduce any meaningful updates to its current flagship Charge and Charge HR devices, which were released over a year ago.

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Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Source: Apple.

WASHINGTON, DC — It’s been a while since Apple (NASDAQ: AAPL.US) hosted a spring media event. Ever since the Mac maker shifted its iPad product cycle to fall updates alongside the iPhone, Apple hasn’t announced products in the spring. Well, the company has done just that, and it had a lot up its sleeve.

Game of iPhones
Tim Cook kicked things off with Apple TV. Apple is partnering with HBO for its new stand-alone streaming service that’s intended to challenge Netflix directly. Apple will be the exclusive launch partner when HBO Now launches in April, which is priced at $15 per month (compared to Netflix’s $9 per month).

While the Apple TV’s internal components are aging (last updated in early 2013), Apple has opted not to give the product a much-needed refresh. Instead, the company continues to increase the number of content providers that it partners with, and it did drop the price from $99 to $69. It’s better than nothing.

Apple has now sold 25 million Apple TV units to date. Additionally, Apple has now sold its 700 millionth iPhone.

An Apple a day keeps the doctor away
Apple wants to do what it can to help the medical research community, unveiling a Research Kit, a new software development kit for developers and medical researchers. The company pointed out many problems with the status quo: researchers currently face challenges with subjective data, infrequent data, and asymmetric communication.

As researchers create apps, they can turn iPhones into useful diagnostic tools that can also collect data with user consent, which will hopefully help the medical community at large by providing vast amounts of objective data. Importantly, Apple is even making this platform open source, so it won’t be exclusive to iOS. Privacy will remain a top priority, and users will decide whether or not they want to participate and how data is shared. Meanwhile, Apple will not have access to any of the health data.

One possible issue is whether or not there will be regulatory concerns, as Apple takes a step closer to such a highly regulated space.

Back to the Mac
The Mac has now outgrown the broader PC industry for a decade, and Apple unveiled a fresh new MacBook to maintain its momentum. It’s the 12-inch Retina MacBook Air that investors have been hearing so much about, except Apple is simply repurposing its “MacBook” brand.

New MacBook. Source: Apple.

The laptop features a 2304 x 1440 Retina display, Force Touch trackpad with Taptic feedback, and utilizes a fanless design made possible by Intel‘s Core M chips. Since there is no fan, the new MacBook operates silently. Apple is also using uniquely designed battery cells to fit the chassis, boosting battery capacity by 35%. Since this machine is built for mobility, the only ports are a new USB Type-C port and a headphone jack. The USB Type-C port is capable of 5 different functions: USB, DisplayPort, HDMI, VGA, and power.

The new MacBook starts at $1,299 and ships on April 10. The existing MacBook Air and MacBook Pro lineups got some incremental processor refreshes and other minor spec bumps.

And now our feature presentation
Of course, Apple Watch was always destined to be the main event. After spending some time reviewing features and apps that have mostly already been known, Apple finally detailed the most important aspect of its upcoming wearable: price.

Source: Apple.

That’s right, the rumours were true. Apple Watch Edition will start at $10,000 and top out at $17,000. With such a wide pricing spectrum, it’s anyone’s guess as to what kind of average selling price Apple will fetch, not to mention the insane gross margins it will surely enjoy on the gold models.

Apple is officially entering the market for high-end luxury fashion, which isn’t particularly surprising when you consider all of its coordinated appearances in the fashion scene (including shows and magazines) recently, building up anticipation for Apple Watch.

Tim Cook also noted that Apple Watch’s battery should last for about 18 hours, which was another big question mark regarding the product. The pricey gold models will only be available in limited quantities in select markets. Pre-orders will start on April 10 and Apple Watch ships on April 24.

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Evan Niu, CFA owns shares of Apple and Netflix. The Motley Fool owns shares of Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

WASHINGTON, DC —  Of the major tech giants, Google (NASDAQ: GOOG.US) (NASDAQ: GOOGL.US) is one of the few companies that have yet to implement a capital return program. Microsoft andIntel have long had programs in place, while Apple (NASDAQ: AAPL.US) started one in 2012.

Amazon.com and Facebook do not give cash back to shareholders, since Amazon.com doesn’t really make much money and Facebook is still in growth mode (and the social network is relatively young). But Google is large, mature, and quite profitable.

One Street analyst, RBC Capital Markets’ Mark Mahaney, thinks that Google could implement a capital return program starting in 2015. Is it time for the search giant to start giving back?

A capital return programme could help prop up shares

For starters, Google shares have had a rough year. Peers Apple and Microsoft have handily outperformed the Nasdaq Composite, while Google lagged by a fair margin.

GOOGL data by YCharts

As Google continues to mature, investors may not be able to count on capital appreciation like they could during the company’s growth days.

Implementing a capital return program could help prop up shares. A dividend could potentially attract income-oriented investors, broadening Google’s investor base, while a share repurchase program could drive earnings accretion to the extent that it offsets the dilutive effects of equity compensation.

But at what cost?

If Google wanted to offer a dividend yield that’s competitive to its peers, it might want to pay out anywhere from 1.5% to 2.5%. That’s approximately how well Apple, Microsoft, and Intel pay their respective shareholders.

Source: Reuters. TTM = trailing 12 months

Not counting the super-voting Class B shares, Google has a combined 624.1 million Class A and Class C shares outstanding. If Google wanted to pay a 2% dividend yield, then that would translate into approximately $10.60 per share per year, or $6.6 billion total. This is before considering any type of share repurchase authorization. That’s a modest sum and Google can afford it.

There’s plenty more where that came from

Google’s balance sheet is quite strong. The search giant currently has $62.3 billion in cash and marketable securities on the books. That’s up from $42.6 billion in total cash three years ago. As Google’s cash position continues to grow, as will the case for giving some of that money back to shareholders.

Even if you net out the company’s modest debt position of $5.2 billion (including short term and long term debt), Google still has a net cash position of $57.1 billion. Operating cash last quarter alone was $13.4 billion, so Google is generating cash at a healthy clip.

However, the bigger hurdle would be where all that cash sits. Of its total, $41.8 billion sits overseas held by foreign subsidiaries. That’s over two-thirds of Google’s cash residing abroad. But much like other companies before it, including Apple, Google could turn to public debt markets to fund a capital return program as a way to avoid repatriation taxes. Google could likely issue paper at a 2% interest rate, substantially less than the 35% repatriation rate.

If Google chooses to repurchase shares and funds this program with debt, then Google’s weighted average cost of capital would also decline, just like Apple.

Who’s the boss?

There’s another challenge though. Google’s capital structure includes three different share classes, a structure that was implemented earlier this year with the addition of the third class. Class A shares get one vote per share, Class B shares (only held by company insiders) get 10 votes per share, while Class C shares get no votes per share. The net effect of this new structure is further consolidation of voting rights for Larry Page, Sergey Brin, and Eric Schmidt.

That triumvirate owns 92.5% of all Class B shares, representing nearly 61% of all voting power. As such, these three execs call all the shots, and the structure severely limits the possibility of any activist investor accumulating the sufficient voting power to enact any type of meaningful change. In order for a capital return program to become a reality, Larry, Sergey, and Eric have to want it to.

To be fair, even though Apple has a simpler, single-class share structure, its sheer size also precludes the notion of an activist investor accumulating a large position with meaningful voting power. Even a 5% stake in the Mac maker would cost $33.5 billion right now. At last count, Carl Icahn had 53 million shares, or just over $6 billion worth. But at the same time, large institutional investors can join forces (and voting rights) and rally together to enact change. This can’t be said for Google.

Mahaney believes that Google would have nearly $80 billion in cash by the end of 2015, which is approaching the roughly $100 billion that Apple had on hand when it implemented its capital return program. It’s time for Google to start giving back, and 2015 is as good a year as any.

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Evan Niu owns shares of Apple and Facebook. The Motley Fool UK owns shares of Google and Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

WASHINGTON, DC — As 2014 winds down, it’s a good time to review Apple‘s (NASDAQ: AAPL.US) year. While the Mac maker performed incredibly well, with shares up 36% year-to-date, let’s look specifically at the company’s acquisitions. Apple had a historic year in this department, in more ways than one.

2014 had the biggest …
The obvious headliner here is Beats. At $2.6 billion, Beats is Apple’s largest acquisition in history – by far (that we know of). Prior to Beats, Apple’s purchases typically topped out at or around $500 million. The company acquired flash specialist Anobit a few years back for upwards of $500 million, which was more than the $404 million it paid to bring Steve Jobs back to Apple via the NeXT acquisition.

In Beats, Apple gets a premium headphone business that dominates its market segment, a small but growing streaming music service, and most importantly, talent. That includes the Beats execs that have deep ties within the music industry, but also the human curation team that differentiates Beats Music.

This isn’t the only way that 2014 stood out, though.

… and the most
This year isn’t quite over yet, so investors don’t know how many companies Apple may acquire in the fourth quarter. Apple did confirm that it picked up Seattle-based cloud networking start-up Union Bay Networks in November, but that’s about all investors have caught wind of.

But if we go by fiscal years, we can see how Apple’s acquisition strategy has evolved in recent years under Tim Cook. Cook became CEO at the tail end of fiscal 2011, and Apple has been scooping up companies hand over fist ever since.

Source: SEC filings and conference calls. Fiscal years shown.

Beyond Beats, here are Apple’s other smaller acquisitions that have made headlines this year.

Source: Various media reports.

This is far from a comprehensive list. Cook confirmed that Apple bought seven companies during the September quarter alone, and news only broke about one of them. Naturally, as the sheer number of acquisitions rises, so too do Apple’s cash outlays.

Source: SEC filings. Fiscal years shown.

Beats comprises the bulk of fiscal 2014’s acquisition spending, skewing the average paid per acquisition. Backing out Beats, Apple paid only $60 million on average per acquisition in 2014.

Source: SEC filings. Fiscal years shown.

At a time when tech heavyweights seem to be paying massive premiums for acquisitions, Apple is still playing fairly conservative in terms of price.

All about that race
Apple is now the proud owner of a wide range of innovative technologies that were in their early stages, technologies that it can integrate into future products. But this isn’t just a technological race; it’s also a dash to snap up the best talent before the competition does so. Apple is in the midst of an acqui-hiring spree.

Consider the January acquisition of SnappyLabs, a single developer that had developed a breakthrough JPEG-compression engine that was tailored for ARM processors like Apple’s A-chips. Thanks to the faster compression, SnappyLabs’ app allowed the iPhone 5 to capture photos at 20 frames per second, much faster than the Galaxy S4’s 7.5 frames per second (both were 2012 flagships). Apple puts a lot of emphasis on the iPhone’s photographical prowess, adding new photo and video modes each year, so this purchase makes perfect sense.

But most importantly, we’re not even close to the finish line of this race.

The next big thing is almost here
So with all of this in mind, what can investors expect of Apple’s acquisition strategy in the years ahead under Tim Cook? The CEO has said that Apple will not let price preclude it from acquiring a company that is a good strategic fit in the long-term. That said it’s unlikely that Cook intends to start buying up large companies with regularity.

Investors have seen a breathtaking increase in the rate at which Apple acquires smaller companies. This is as much offense as it is defense. Rivals have no problem buying companies that have long-term potential, and if Apple doesn’t start playing ball then it could potentially lose out on the next big thing.

In the years to come, investors should expect Apple to continue its brisk pace of smaller acquisitions, interspersed with the occasional jaw-dropper.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

WASHINGTON, DC — It’s taken 2 years to get back to this point. After peaking in September 2012 at approximately $705 (pre-split), Apple (NASDAQ: AAPL.US)) has now climbed all the way back after its prolonged pullback to fresh all-time highs. Shares have now traded over $105, the equivalent of $735 pre-split.

Naturally, with shares back to all-time highs investors are now wondering if it’s too late to get in, or if they can still buy Apple. Let’s take a look.

Word on the Street
For starters, let’s consider the Street’s opinion on Apple. According to Yahoo! Finance, the average price target for Apple is $115, which represents about 10% upside from here. That may not seem like a lot, and it’s also a modest hurdle for the S&P 500 to clear in the next year, which determines if Apple were to outperform or underperform should it hit that average price target.

The high price target is $143. After giving up the Street high target temporarily, Cantor Fitzgerald analyst Brian White is back at the top of the list. White seems to always want to have the Street high price target on Apple, and reclaimed his title from JPM Securities analyst Alex Gauna earlier this month. The low price target is $60, but we’ve already covered how silly that sounds.

For the most part, the Street remains bullish overall, suggesting that it’s not too late to buy.

Apple pays
Re-initiated in 2012 after a 17-year hiatus, Apple’s dividend continues to climb higher as the company remains committed to returning its copious amounts of cash to shareholders. While the majority of Apple’s capital return program is being allocated to share repurchases, its still paying out hefty amounts of cash in the form of dividends.

Apple increased its quarterly payout by 15% in early 2013, following up with an 8% increase earlier this year. The Mac maker usually updates its capital return program in March or April, which is likely when investors will find out more about the next dividend boost.

Importantly, Apple’s dividend is sustainable — its dividend payout ratio has averaged 30% since bringing its dividend back.

Source: SEC filings and author’s calculations. Fiscal quarters shown.

There’s no magic number when it comes to payout ratios, but generally investors prefer a figure in the 30% to 60% range. A payout ratio that’s too low may have investors asking for more, while a ratio that’s too high could potentially suggest that the company is being toogenerous and a dividend cut could be in the cards.

At current levels, Apple’s dividend represents a 1.8% yield. That’s less than some fellow tech giants like Microsoft and Intel, both of which yield around 2.7% right now, but it’s still a respectable yield nonetheless. There’s something for income investors here too.

Apple buys (itself)
As mentioned, the other aspect of Apple’s capital return is its massive share repurchase authorization, which currently sits at $90 billion. This is where Apple has been focusing most of its capital return efforts, believing shares remain cheap.

It should be telling that Apple just embarked upon its fourth accelerated share repurchase program while shares are at all-time highs. That’s literally Apple telling you that it thinks its shares are cheap at current prices and putting its money where its mouth is — because it’s also repurchasing shares itself. While many companies have rather bad timing with repurchases, it’s hard to argue that Apple is overpaying for itself when it’s trading at just 16 times earnings (a discount to the S&P 500).

Thanks to the resulting earnings accretion, EPS growth has been continuously outpacing net income growth by a healthy margin.

Source: SEC filings. Fiscal quarters shown.

Considering the sheer magnitude of Apple’s repurchase program, it’s also worth noting that share repurchases can drive capital appreciation. As Apple continues to amplify EPS growth through aggressive repurchases, its earnings multiple will contract (all else equal) due to a larger denominator.

If Apple’s earnings multiple contracts, shares look even cheaper, which creates buying interest. If the market is willing to simply maintain Apple’s earnings multiple, then that requires prices to go higher still.

An all-time record quarter is around the corner
Apple’s guidance for the current quarter is mind-boggling. The roughly $14.4 billion that the company expects to make over the holidays is well above what any other company in the S&P 500 is capable of producing, including oil companies. As Apple has just dramatically broadened its addressable market by launching larger iPhones (opening up a whole new world of potential Android switchers), Apple could very well have another blowout quarter up its sleeve. The iPhone and Mac businesses are as strong as ever, and the iPad’s recent woes are possibly temporary hiccups.

When the company releases its fiscal first quarter earnings in January, the figures could potentially be a positive catalyst as the quarter is expected to set new all-time records in both top and bottom lines. Shortly thereafter, Apple Watch will ship, potentially boosting investor confidence (and share prices) further.

Yes, you can still buy Apple.

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Both Evan and The Motley Fool UK own shares in Apple.

This article originally appeared on Fool.com

WASHINGTON, DC — For the most part, it doesn’t seem that investors are all that happy with Facebook‘s (NASDAQ: FB.US) latest earnings release. After tapping fresh all-time highs in the regular session, shares fell as much as 11% in after hours trading. Shares have recovered today, but the drop still represents a clear buying opportunity for investors looking to get into the largest social network on the planet.

Were the figures even that bad?

The figures were good
Total revenue jumped 59% to $3.2 billion. Of that total, $246 million was payments and fees revenue with the remaining $3 billion coming from the core advertising business. At this point, two-thirds of ad revenue is mobile, which translates into $2 billion this quarter. Facebook is up to $6.2 billion in trailing-12-month mobile ad revenue. For a business that practically didn’t exist two years ago, that ain’t half bad.

All of Facebook’s pertinent user metrics also continue to march higher, albeit at a slower pace given how large the social network has become. This isn’t like Twitter , which got crushed following its own earnings report on continued user sluggishness. For Facebook, with a monthly active user base nearly five times as big, deceleration is indicative of relatively high penetration rates.

For instance, Facebook’s home market of the U.S. and Canada added just 2 million MAUs this quarter. The geography with the most MAU additions was Asia, adding 16 million MAUs. The U.S. and Canada is Facebook’s bread and butter from a monetization standpoint, and the key there is focusing on further growing average revenue per user. In that department, Facebook delivered in spades this quarter, sequentially growing total ARPU in the U.S. and Canada from $6.44 to $7.39.

Over 1.1 billion of Facebook’s total MAUs now access the service on a mobile device, representing 83% penetration. In fact, 456 million, or 34% of total users, exclusively use Facebook on a mobile device.

After everything was said and done, Facebook walked away with adjusted net income of $1.15 billion, a 73% jump from last year.

Cost guidance was scary
The real culprit behind the drop was Facebook’s guidance, specifically as it relates to the company’s cost structure going forward. Total costs this year are expected to jump 45%-50% from 2013, driven primarily by the two sizable acquisitions that Facebook closed this year, Oculus VR and WhatsApp. Since both deals entail considerable amounts of stock, Facebook must recognize hefty stock-based compensation charges.

Additionally, Facebook expects 2015 to be a year of “significant investment” in future growth opportunities. Expenses are expected to rise another 55%-75% from 2014 levels.

It’s worth the wait
To be clear, those are some big numbers when we’re talking about cost growth, numbers that will inevitably drag on profitability. But at the same time, we’re talking about a stock that’s priced for growth, trading at 80 times earnings and 21 times sales. For Facebook to ever live up to that valuation, it has to invest in future growth opportunities. You can’t have one without the other.

Among other things, video ads are a huge opportunity for Facebook, and pursuing video requires significant infrastructure investments to bolster performance due to the bandwidth requirements. The domestic TV advertising market is estimated at $66 billion, and Facebook wants a piece of it. Mark Zuckerberg noted that Facebook hit a new milestone with videos this quarter, achieving 1 billion video views in a day for the first time ever.

Make no mistake, this is part of the growth process. Tens years from now when investors look back, they’ll fondly recall how those investments made in 2015 were totally worth it.

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Evan Niu, CFA owns shares of Facebook. 

WASHINGTON, DC — Throughout the years, I’ve countered many Apple (NASDAQ: AAPL.US) bears, poking holes in their bearish theses. That includes Ed Zabitsky of ACI Research (Part 1 and Part 2), Paul Schatz of Heritage Capital, and David Trainer of New Constructs, among others. Of course, sometimes, the bears can be right, like Jeff Gundlach of Doubleline Capital — even if Gundlach is now in the Apple bull camp.

What bear should we poke at next? Adnaan Ahmad of Berenberg Bank, come on down!

Is Apple worth just $60 per share?
Apple’s latest earnings release has received a mostly warm reception from investors and Street analysts. Not Ahmad, though, as he has long maintained a “sell” rating on Apple shares alongside a $60 price target, a rating he reiterated the day after the report.

Ahmad acknowledges that the iPhone 6 is a compelling upgrade and a strong product, but perhaps too compelling and too strong. So much so, that the effect may be to pull demand forward, and that future iPhone models will lack a meaningful selling feature. As a result, Ahmad expects 2015 to be a good year for Apple — but then, he thinks the company risks substantial deceleration in 2016. For what it’s worth, he’s also bearish on Samsung.

Stop me if you’ve heard this one before
If the whole Apple-is-doomed-but-wait-a-year thesis sounds familiar, it’s because Ahmad has said exactly the same thing before. Almost exactly two years ago in October 2012, Ahmad said, “As we have stated before on many occasions, Apple’s time to turn from a tech titan into a dinosaur will come, but we still think that we are at least a year away.”

At the time, Ahmad’s pessimism was predicated on the notion that Apple’s premium pricing strategy was unsustainable, and Apple would be forced to cut prices in the face of escalating competition, or simply lose market share. The resulting margin pressures would be painful for the company and its shareholders, according to Ahmad.

Ironically, Ahmad actually had a “buy” rating on Apple (and Samsung) at the time, but believed the writing was on the wall for the iPhone business.

Sell Apple… but Apple should buy Tesla?
Five months later, Ahmad downgraded both Apple and Samsung to “sell,” saying competition in the smartphone market would kill ASPs and margins for both companies. He figured gross margin would fall to the 30% level, and could potentially even decline to the 20% level like other consumer electronics manufacturers.

Ahmad makes numerous comparisons to other handset vendors that have suffered this fate in the past, including Motorola, Nokia, and LG, to name a few. Ahmad thought shares were heading to $360 (approximately $51.43 split-adjusted).

Later that year, Ahmad would also write an open letter to Tim Cook and Apple’s board, suggesting that Apple should buy Tesla, and enter the auto market with an iCar.

Back to the future
That brings us back to the present, and Ahmad’s forecast of Apple’s future. Ahmad’s predictions about gross margin have not played out. It’s true that gross margin was under pressure in 2012 — but mostly because they had reached unsustainably high levels. It was good while it lasted, but some contraction was always inevitable.

Margins have now stabilized around the 38% level, and Apple has some margin tailwinds going forward, including a higher-priced iPhone 6 Plus, and commodity prices remain favorable. In fact, the biggest margin headwind that Apple faces in the current quarter is foreign exchange rates as the U.S. dollar continues to strengthen against most other currencies. Apple’s hedges can only mitigate this risk to a certain extent.

More importantly, Apple’s pricing power remains intact. The company does not want to suddenly adjust prices in foreign markets based solely on fluctuating exchange rates (known as price harmonization). Foreign exchange headwinds are temporary, and don’t play a part in Ahmad’s bearish thesis.

Put another way, Ahmad’s $60 price target implies a $352 billion market cap. Backing out Apple’s $130 billion in net cash would then translate into an enterprise value of $226 billion. That would be less than the enterprise value of rivals like Google, even as Apple’s implied net income guidance for the current quarter ($14.4 billion) is more than Google makes in a year ($13 billion).

Wait for it
At the heart of it, Ahmad’s basic premise is that Apple’s profitability is unsustainable, and that it will succumb to historical trends of mean reversion. That’s similar to David Trainer’s thesis (linked above), except Trainer was looking at net operating profit after tax, or NOPAT, instead of gross margin.

You’d think that, by now, it should be obvious that Apple has unrivaled pricing power, which allows it to maintain margins better than any other consumer electronics company on Earth, subject to natural fluctuations. Apple is far from the average company, so mean reversion is less applicable to the Mac maker. More broadly speaking, comparing Apple to hardware-only OEMs is misplaced, because Apple’s unique pricing power comes precisely from its integrated hardware/software strategy in the first place.

So far, Ahmad’s calls — or Zabitsky’s, or Trainer’s, or Schatz’s — haven’t come to fruition. Maybe next year.

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Evan Niu, CFA owns shares of Apple and Tesla Motors. The Motley Fool owns shares of Apple.

WASHINGTON, DC — Summer is usually a slow time for Apple (NASDAQ: AAPL.US), much as it is for other consumer-electronics companies. For the iPhone maker specifically, summer is right before its widely publiciSed iPhone launches, which should intuitively create purchase delays as consumers wait for the latest and greatest. Not this time.

Apple just crushed expectations.

Starting with the headliners
Most of the pertinent metrics tapped new records for the quarter ended in September. Revenue came in at $42.1 billion, which translated into $8.5 billion in net income. That’s $1.42 per diluted share. Gross margin stayed strong at 38%, a modest sequential decline. Apple also declared a $0.47-per-share quarterly dividend.

The Street was modeling for $39.9 billion in revenue, $1.29 in EPS, and a gross margin of 37.9%. Apple’s own guidance topped out at $40 billion and 38% gross margin.

iPhone is officially a $100 billion business
Despite all of the speculation surrounding the iPhone 6, iPhone unit sales came in well above expectations at 39.3 million, a 16% jump from a year ago. Analysts were expecting just 37.5 million units. Average selling prices put up an encouraging $42 jump to $603. That helped trailing-12-month iPhone revenue cross the $100 billion threshold for the first time ever.

Source: SEC filings. Fiscal quarters shown. TTM = trailing 12 months.

Even better yet, Apple normally puts up another ASP increase during the calendar fourth quarter following the launch of new models, so the company could have an ASP tailwind this holiday quarter.

Apple is unsure of when it will reach supply and demand balance, since it currently has a significant backlog of orders. The company is selling every unit it can make, and CEO Tim Cook said supply and demand are currently so far apart that they’re “not even on the same planet.”

iPad is still lagging
Technically speaking, the iPad remains a relative soft spot in Apple’s results, with unit sales falling 13% to 12.3 million. There’s a broader deceleration occurring in the tablet market, and Apple is not immune. Still, Cook continues to consider the current situation little more than a “speed bump” on the long-term road to riches.

He also added some useful context. First, since Apple has been in the tablet business for only four years, it’s difficult to determine what the upgrade cycle will be. Everyone expects it to be longer than smartphone upgrade cycles, but it remains unclear by how much. On top of that, what’s not shown in these high-level figures is which countries Apple is selling in, or the demand characteristics in those countries.

Adoption in developed markets was very quick to take off, and those users are still trying to determine their upgrade cycles. Sales are now shifting to emerging markets, where 50% to 70% of buyers are first-time tablet buyers. That has important long-term implications, since those users are now on the Apple upgrade track.

Cook is less interested in the quarterly trends and remains extremely bullish on the bigger picture.

Macs set a new record
Apple sold 5.5 million Macs during the quarter ended in September, a new record and again outpacing the broader PC market. The back-to-school season was particularly kind to the company, according to Cook.

Management attributed this strength to its laptop lineup, which is even more impressive considering the mid-2014 upgrades were modest, as Apple is still waiting for Intel to ship its Broadwell chips in volume.

Cranking up share repurchases
Last quarter, Apple kind of slowed its rate of share repurchases, which made sense, since shares have recovered and it gets marginally less bang for its repurchase buck. This quarter, Apple cranked up the repurchase again, embarking upon its fourth accelerated share repurchase program, or ASR.

Source: SEC filings. Fiscal quarters shown.

Share repurchases this quarter totaled $17 billion, consisting of a $9 billion ASR program and $8 billion in open market repurchases. Even as Apple shares are now within spitting distance of all-time highs, it clearly still thinks the current valuation is compelling. Cook more or less agrees with Carl Icahn.

Once again, the buybacks helped juice EPS growth. Diluted EPS was up 20%, outpacing the 13% jump in net income. Apple has now repurchased nearly $68 billion to date, leaving over $22 billion of its total $90 billion repurchase authorization. That should hold it over until the next update to its capital return program, which is typically in March or April.

Some reporting changes
Starting in fiscal 2015, which just kicked off, Apple is also making changes to its reporting methods. The last reporting change occurred about two years ago, when the company unbundled accessories and peripherals from their related segments and established the iTunes/Software/Services segment.

Going forward, iTunes/Software is being renamed the Services segment, but this will also include other services such as Apple Pay. Other Products will include the current accessories business, along with the iPod, Apple TV, and forthcoming Apple Watch.

Source: Conference call.

One analyst asked whether grouping Apple Watch into the Other Products segment says anything about Apple’s expectations for its upcoming wearable. Cook responded decisively, “It says nothing about our expectations.” Rather, the decision was based on current revenue bases, and Apple may decide to break out Apple Watch performance at a later time.

More importantly, Apple knows that its smartwatch competitors are watching its every move and are very interested to get figures and data points surrounding this nascent business — figures and data points that Apple doesn’t want to share with its rivals. Not sharing with rivals entails not sharing with public investors.

That may be somewhat frustrating, especially at first, but if Apple Watch becomes material to the business, then Apple will probably begin disclosing pertinent figures. Until then, Apple will probably tout various milestones as it hits them from time to time.

Additionally, Apple’s retail results have long been a distinct segment, which has always made its geographical disclosures incomplete. For instance, all retail stores have been included in this reportable segment, regardless of where they are located. Apple is dissolving the Retail reporting segment and will begin including those results in the stores’ respective geographies. That will make the geographical segments much more relevant and usable (finally), particularly the all-important Greater China segment.

It’s the time of the season
As Apple heads into the holiday season with a fresh product lineup, it’s expecting another all-time record quarter. Revenue is expected in the range of $63.5 billion to $66.5 billion, which represents 13% growth at the midpoint. That would be the highest growth in eight quarters, before even considering the possibility of a blowout.

So much for slow summers — or falls or winters for that matter.

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Both Evan and The Motley Fool own shares in Apple.

Source: Apple.

WASHINGTON, DC — Apple (NASDAQ: AAPL.US) just did something unexpected: it hosted a major product unveiling and there were some major pleasant surprises. Most of the time these days, all pertinent details are leaked well in advance, and industry watchers already know what’s coming. This time around, Apple had a few tricks up its sleeve. We’ve got an awful lot to cover.

Apple gets into the phablet market
To kick things off, the iPhone 6 and iPhone 6 Plus are now official. With the iPhone, there were no surprises. The two rumored models indeed sport 4.7-inch and 5.5-inch displays, in line with expectations. The new iPhones will get higher resolutions in what Apple is calling Retina HD displays.

Contrary to expectations, the iPhones will not get sapphire displays. There was no mention of the material’s use during the iPhone portion of the presentation. As a result, shares of sapphire partner GT Advanced got utterly crushed, down 14% as of this writing.

Source: Apple.

Both models will get next-generation A8 processors and M8 motion co-processors. Apple is also adding a barometer to its smartphone, which will help measure things like relative elevation with air pressure readings. The iPhone 6 models are getting faster LTE with carrier aggregation, Voice-over-LTE support, and 802.11ac Wi-Fi. For the first time, Apple is adding near-field communications (NFC) to the iPhone 6, which will be used in its payments service, but more on that later.

Apple is again choosing to sit out of the megapixel race, keeping the iPhone shooters at 8 megapixels. Instead, it is increasing performance in other ways, such as improving autofocus times and low-light performance.

There are two important differentiating features that will be reserved for the iPhone 6 Plus. First, since the 5.5-inch model has such a large display, Apple has tweaked the interface of many of its first-party apps to include an additional pane, taking advantage of the extra real estate. That also includes a larger keyboard with more keys, and Apple will encourage developers to optimize apps around the larger display. Also, only the 5.5-inch model will get optical image stabilization (which was rumored), while the 4.7-inch model will get digital image stabilization.

Source: Apple.

Apple is using an interesting pricing strategy. The iPhone 6 will start at the standard $199 on contract, but it’s tweaking the storage configurations. Add another $100 for the iPhone 6 Plus. The current iPhone 5s and 5c will move down a pricing notch, in line with Apple’s normal pattern.

Source: Apple. On-contract prices shown.

Eliminating the 32 GB storage option is a clever move. Instead of including 32 GB in the entry-level model, which other OEMs are doing, Apple is standing pat at 16 GB. In doing so, it can enjoy modestly higher margins for the entry-level models, while simultaneously providing a strong upsell incentive to the 64 GB model for an extra $100. That translates into either margin upside or average selling price upside.

Pre-orders for the iPhone 6 start on Friday, and the device launches on September 19. Watch out, Samsung.

Apple Pay is here
At long last, Apple is entering the payments market. This move has been talked about for years, and the Mac maker has finally jumped in. Tim Cook noted that every other company that has tried to reinvent the payments process has failed, in part because these companies have focused on “self-interest” instead of the user experience. The service is called Apple Pay.

Source: Apple.

Apple Pay will use aforementioned NFC chip combined with Touch ID for biometric security. The service will use passbook, and store payment information in a new chip that Apple calls the “Secure Element.” Users can use credit cards that are already on file in iTunes, and add new cards by taking a picture of them.

Card numbers are never stored on the device; instead, Apple will also use a system of dynamic security codes and one-time card numbers. That means original card numbers are not given to the merchant. Payments can also be suspended through Find My iPhone in case the device is lost.

Service chief Eddy Cue took some subtle jabs at Google by placing a lot of emphasis on user privacy. Apple will not know what users buy, where they bought it, or how much it cost. Cue added, “We are not in the business of collecting your data.” Apple is partnering with all the biggest payment networks and card issuers, which covers 83% of domestic credit card purchase volume. On the retailer front, Apple has gotten 22,000 retailers onboard.

Apple Pay will even work with online transactions. One challenge that many businesses face with mobile is that users are averse to inputting all their payment information on such small screens. Apple Pay will simplify this entire process. The service can also be integrated into apps, and is releasing a payment API. The service launches in October, and Apple will expand Apple Pay internationally in the future.

Apple Pay does look like it has the potential to be a revolutionary service, considering its ease-of-use and the long list of partners that the company has inked deals with.

Tim Cook’s first “One more thing…”
For both the iPhone and Apple Pay portions of the presentation, Cook & Co. seemed a bit rushed. That’s because the iPhone 6 and Apple Pay weren’t the feature presentation. Apple Watch was.

For the first time, Tim Cook used the classic “One more thing…” line that his predecessor was known for. That’s rather symbolic because the Apple Watch will be one of the most important products that he will be judged for. Apple is setting out to “redefine what people expect” from smartwatches. He noted that all of Apple’s game-changing products have entailed revolutionary interface changes, and the company hopes to do it again.

Source: Apple.

Existing smartwatch interfaces make extensive use of the touchscreens, but the problem there is that your finger obstructs your view. Apple Watch will use a touchscreen, but adds functions to the familiar dial on the side, which Apple calls the “Digital Crown.” The crown can be used to zoom and scroll, and can be pushed to return to the Home screen. The display is also now pressure sensitive and can distinguish between taps and presses. Unlike the iPhone, Apple Watch is getting sapphire, so GT Advanced isn’t entirely on the sidelines.

Apple’s product lines tend to be very focused, emphasizing depth over breadth. This was a key question as Apple enters a fashion category, since personalization and customization are important values in wearables. There will be 3 distinctive collections, various colors within each, and the device will come in 2 sizes (38 mm and 42 mm). On top of that, the watch faces are highly customizable, and there will be a variety of different straps that can be swapped out. Apple says there are “millions” of unique combinations.

Source: Apple.

As expected, there is a heavy emphasis on health and fitness, using a variety of sensors within the device. Apple has come up with new ways to communicate through its smartwatch, such as sending doodles or your heartbeat, but these offer questionable value.

An iPhone will be required to fully utilize the Apple Watch, tethering to features like GPS and Wi-Fi. Another important differentiating feature is that Apple Watch will support Apple Pay, asrumored, which could also be another reason it relies on the iPhone.

The retail price will start at $349 and Apple Watch ships in early 2015. That makes sense since there have been absolutely no hardware leaks, suggesting it hasn’t entered mass production. Cook said it would be “worth the wait,” which is why pre-announcing the devicewas smart. Prospective smartwatch customers that are waiting aren’t going to buy competing devices.

There’s more where that came from
This was one of the busiest product unveilings that Apple has had in recent years. Tim Cook has now fulfilled his promise that Apple will enter a new product category, and the Apple Watch does look like it will redefine the nascent smartwatch product category. It is very well differentiated from the competition, and will further strengthen Apple’s product halo.

As Apple finally gives in to peer pressure by entering the market for larger phones, pent-up demand within its large customer base will trigger a massive upgrade cycle over the holiday shopping season. Even beyond the larger displays, the company has provided numerous compelling reasons to upgrade, such as Apple Pay.

Keep in mind that this show isn’t over yet. Apple is again expected to host an October event to discuss new iPads. It’s already turning out to be a “very busy fall,” and these products haven’t even launched yet.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of Apple and Google.