Apple Finishes Strong Year with Record Revenue Amid Challenges

Apple (NASDAQ: AAPL) saw significant revenue growth after a rocky start to its fiscal year, reporting record quarterly revenue. Excitement continues to build around its AI-focused iPhone launch, while concerns linger regarding its position in China and potential revenue losses from Alphabet.

With these factors in mind, let’s analyze the company’s fiscal fourth-quarter results to determine if now is the right time to buy Apple stock.

Strong Financial Performance

In its fiscal Q4, Apple’s revenue rose 6% to $94.93 billion, marking the company’s strongest revenue growth of the fiscal year and surpassing analysts’ expectations of $94.58 billion, as reported by LSEG. This growth came after a challenging start, with revenue declines in the earlier quarters.

Adjusted earnings per share increased by 12% to $1.64, exceeding the consensus estimate of $1.60. The services segment, which includes the App Store, Google search revenue, and Apple TV, saw revenue jump 12% to $25 billion. This sector is crucial due to its higher gross margins, with gross profits climbing 17% to $18.5 billion, though it slightly missed the $25.3 billion forecast.

Apple reported 1 billion paid subscriptions across its platforms, noting that recurring revenue is growing faster than transactional revenue. On the product side, sales increased by 4% to $70 billion, contributing to gross profits of $25.4 billion.

Sales figures for individual products were also mixed; iPhone sales rose 6% to $46.2 billion, exceeding expectations of $45.5 billion. iPad sales surged 8% to $7.2 billion, strengthened by new iPad Pro and iPad Air models. However, Mac sales grew modestly by 2% to $7.7 billion, while wearables—including the Apple Watch and AirPods—saw a slight decline of 3% to $9 billion.

Apple also recently launched its new Apple Intelligence feature for iPhones, iPads, and Macs just before the earnings conference call. The early feedback has been positive, with adoption rates reportedly twice as fast compared to last year.

While Greater China revenue has stabilized, it remains a concern. The company stated that the iPhone is still the best-selling smartphone in urban China, according to a Kantar survey, and noted an increase in new customers purchasing Macs and iPads.

At the close of the fiscal year, Apple had approximately $157 billion in cash and marketable securities alongside $107 billion in debt. During the quarter, it also repurchased $25 billion in stock.

Looking ahead, Apple projects December quarter revenue growth in the low to mid-single digits and anticipates double-digit growth in service revenue, akin to its fiscal year 2024 performance.

Image source: Getty Images.

Should Investors Consider Buying Apple Stock Now?

Despite Apple’s strong quarter, several unanswered questions linger. CEO Tim Cook did not address concerns regarding the potential impact of government actions against Alphabet on Apple’s Google revenue, which is estimated at over $20 billion. Clarity on this matter is crucial for investors.

While the situation in China appears stable, there are no clear indications of a return to robust growth. The company heralds Apple Intelligence as a breakthrough innovation, yet it remains uncertain whether it will drive significant iPhone upgrades or impact revenue positively. Current guidance does not suggest expectations for a surge in iPhone sales.

The stock is currently trading with a forward price-to-earnings (P/E) ratio of 30, based on fiscal 2025 estimates. Historically, Apple’s P/E was much lower, averaging around 12 times prior to the COVID-19 pandemic.

AAPL PE Ratio (Forward) data by YCharts

Looking ahead, while Apple remains a strong long-term investment, the current valuation and uncertainties regarding its Google revenue may suggest caution for immediate buyers.

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*Stock Advisor returns as of November 4, 2024.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy.

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