Apple’s Ensemble Act Is Working Again
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Apple’s Ensemble Act Is Working Again

Tech giant’s iPhone dependence has shrunk, as iPad, Mac, Wearables and Services all pick up growth.

By DAN GALLAGHER
Wed, Jul 28, 2021 11:19amGrey Clock 2 min

It’s as good a time as any to talk about Apple Inc. without the iPhone.

No, the iconic smartphone isn’t going anywhere. In fact, Apple just reported Tuesday afternoon that iPhone revenue totaled $39.6 billion for its fiscal third quarter ended June 26, up 50% from the same period last year. That represents the best growth the iPhone has seen in six years for what is typically its weakest seasonal quarter, as many buyers begin waiting to make purchases ahead of new devices that typically debut in the early fall.

Wall Street expects Apple to close its fiscal year in September with record iPhone revenue of nearly $187 billion, which would make its phone segment alone the 10th largest business on the S&P 500. But a funny thing has happened over the past few years: The iPhone has also become a notably smaller part of Apple’s business. At the smartphone’s last sales peak in fiscal 2018, the iPhone represented 62% of the company’s total revenue. For the trailing 12-month period ended in June, that number was 52%.

For that performance, Apple can thank its supporting cast across the board. Sales of iPads, Macs and wearables like the Apple Watch and AirPods have boomed over the past three quarters, while service revenue growth also picked up. Macs and iPads were definitely helped by the work-from-home trend sparked by the pandemic, but Apple also made some timely and notable updates to both lineups—including new in-house chips for several of its Mac models. Combined Mac sales for the last three quarters have totalled $26 billion—up 33% from the same period last year.

That’s a helpful trend for Apple as it heads into what will likely be a much more subdued sales cycle for the iPhone. Last year’s iPhone 12 models, which featured a new design and 5G connectivity for the first time, sparked a major upgrade push. Analysts estimate that Apple sold 186 million iPhone units for the nine-month period ended June, up 26% from the same period last year, according to consensus estimates from Visible Alpha. But Apple typically follows major upgrades with minor ones. Analysts expect iPhone unit sales to be flat in Apple’s 2022 fiscal year following a 22% surge for the current one.

The big question is whether the supporting acts can keep stepping up. The remote-work boost from the pandemic is already fading, as evidenced by a notable slowdown in PC sales during the second quarter, as reported by market-tracking firms IDC and Gartner. Apple is also still contending with the chip shortage. Chief Financial Officer Luca Maestri said on Tuesday’s conference call that the company expects supply constraints to worsen in the September quarter relative to June, mostly affecting the iPhone and iPad.

Still, Mr. Maestri projected the company will deliver “very strong double-digit” revenue growth for its fiscal fourth quarter. With a market value of nearly $2.5 trillion and a stock still at a relatively high multiple of about 28 times forward earnings, Apple can’t afford to have any of its businesses start phoning it in.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: June 27, 2021



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The 7 lasting impacts of COVID for Australian investors

A leading Australian economist says two years on, the long term implications of COVID for the economy have emerged

By Bronwyn Allen
Fri, Mar 29, 2024 3 min

AMP chief economist Dr Shane Oliver says the effects of the pandemic continue to reverberate across the world, with seven key lasting impacts leading to a more fragmented and volatile world for investment returns”.

Perhaps the biggest impact is that the pandemic related stimulus broke the back of the ultra-low inflation seen pre-pandemic,” said Dr Oliver. Together with bigger government and reduced globalisation, this means a more inflation-prone world. So, a return to pre-pandemic ultra-low inflation and interest rates looks unlikely.

Here is a summary of Dr Oliver’s explanation of the seven key lasting impacts of COVID for investors.

1. Bigger government

The pandemic added to support for bigger government by showcasing the power of government to protect households and businesses from shocks, enhancing perceptions of inequality, and adding support to the view that governments should ensure supply chains by bringing production back home. IMF projections for government spending in advanced countries show it settling nearly 2 percent of GDP higher than pre-COVID levels.

Implications for investors: likely to be less productive economies, lower than otherwise living standards and less personal freedom.

2. Tighter labour markets and faster wages growth

After the pandemic, labour markets have tightened reflecting the rebound in demand post-pandemic, lower participation rates in some countries and a degree of labour hoarding as labour shortages made companies reluctant to let workers go. As a result, wages growth increased, possibly breaking the pre-pandemic malaise of weak wages growth.

Implications for investors: Tighter labour markets run the risk that wages growth exceeds levels consistent with two to three percent inflation.

3. Reduced globalisation

A backlash against globalisation became evident last decade in the rise of Trump, Brexit and populist leaders. Also, geopolitical tensions were on the rise with the relative decline of the US and faith in liberal democracies waning ... The pandemic inflamed both with supply side disruptions adding to pressure for the onshoring of production [and] heightened tensions between the west and China we are seeing more protectionism (e.g.,with subsidies and regulation favouring local production) and increased defence spending.

Implications for investors: Reduced globalisation risks leading to reduced potential economic growth for the emerging world and reduced productivity if supply chains are managed on other than economic grounds.

4. Higher prices, inflation and interest rates

Inflation [due to stimulus payments to households and supply chain disruptions] is now starting to come under control but the pandemic has likely ushered in a more inflation-prone world by boosting bigger government, adding to a reversal in globalisation and adding to geopolitical tensions. All of which combine with ageing populations to potentially result in higher rates of inflation.

Implications for investors: Higher inflation than seen pre-pandemic means higher than otherwise interest rates over the medium term, which reduces the upside potential for growth assets like shares and property.

5. Worsening housing affordability

the lockdowns and working from home drove increased demand for houses over units and interest in smaller cities and regional locations. As a result, Australian home prices surged to record levels. Meanwhile, the impact of higher interest rates in the last two years on home prices was swamped by housing shortages as immigration surged in a catch-up. The end result is now record low levels of housing affordability for buyers

Implications for investors: Ever worse housing affordability means ongoing intergenerational inequality and even higher household debt.

6. Working from home

There are huge benefits to physically working together around culture, collaboration, idea generation and learning but there are also benefits to working from home with no commute time, greater focus, less damage to the environment, better life balance and for companies lower costs, more diverse workforces and happier staff. So the ideal is probably a hybrid model.

Implications for investors: Less office space demand as leases expire resulting in higher vacancy rates/lower rents, more people living in cities as vacated office space is converted, and reinvigorated life in suburbs and regions.

7. Faster embrace of technology

Lockdowns dramatically accelerated the move to a digital world. Many have now embraced online retail, working from home and virtual meetings. It may be argued that this fuller embrace of technology will enable the full productivity-enhancing potential of technology to be unleashed. The rapid adoption of AI will likely help.

Implications for investors: a faster embrace of online retailing at the expense of traditional retailing, virtual meeting attendance becoming the norm for many and business travel settling at a lower level.

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