Apple released its results on Thursday, and the quarter was reasonably well, but the stock is trading like the best do. Revenue was up 11%, thanks in part to increased sales of Macs and iPads to confined customers. But investors are betting that the benefits of the pandemic will last, while paying little attention to threats. These assumptions are overly optimistic.
Apple is benefiting from the confinement, but the slice that Microsoft or Amazon.com are getting is even greater. The obligation to telework means higher revenues for the cloud businesses of both companies. Amazon’s online retailing grew tremendously. Microsoft’s revenue increased 13% in the second quarter, while Amazon claims that its revenue increased 40%.
Apple sells services such as apps and subscriptions, and its revenue increased 15%, but nearly two-thirds come from sales of equipment, and 44% represents the sale of iPhones, which rose less than 2% year-on-year. Customers will end up changing mobile phones, but that is not enough to drive growth. And the good growth in sales of iPads and Macs for the quarter will probably not continue, because there will be no reason to change the devices as soon.
The services business remains: these divisions will grow, but they will be normal increases, and not to the point of justifying the multiple of 26 times the income of the next 12 months that investors give, which is double the average multiple at which was listed between 2015 and 2018, according to Refinitiv.
Meanwhile, the risk from the antitrust fronts is increasing. The European Commission launched an antitrust investigation into the company in June. In the United States, the Antimonopoly Subcommittee of the House of Representatives called to declare Apple chief Tim Cook, along with the heads of three other large companies. Although the pandemic has lifted everything to the tech sector, the high tide has unfairly lifted Apple.