Prime Asset Capitals view on Apple and 3 things to consider

MINATO-KU, Japan - July 19, 2016 - PRLog -- Prime Asset Capital has been tracking the performance of Apple for nearly 12 years and chronicling the twists, turns, successes and changes at the company for most of that time. Over the past several months we have taken time to look at the company in several different ways and today we will mention three items Prime asset capital considers important for long-term shareholders of the company. These items are the share repurchase program, Apple's rising R&D expenses and the growth in the company's Services revenue segment.

Prime Asset Capital considers these three items important as Apple faces yet another period of change and eventual transformation. The pace of iPhone units sales growth has slowed and the company faces challenges in all three of its major device lines. Yet for long-term shareholders there's more to Apple than this fiscal year's performance. We will explain more in this article.

Today's coverage of Apple in the financial and popular press frequently mentions speculation about the upcoming iPhone refresh, rumors about changes in the iPhone's form expected in the fall of 2017 and the decline in iPhone unit sales compared to last fiscal year's nearly 37% unit sales growth rate. But there's much more to Apple than the iPhone franchise and while unit sales will always be in flux, the three items we are mentioning today demonstrate a trend that may lead to higher shareholder value over the next several years.

Apple's Share Repurchase Program

.As of the end of the March quarter Apple had exhausted $117 billion of the $175 billion in authorized share repurchases. The remaining $58 billion in authorized repurchases are scheduled to be completed by the end of March 2018. Notwithstanding the debt acquired to fund the massive share repurchase program, Apple's cash position remains the envy of much of corporate America. Net of debt the company's cash and equivalents position stood at nearly $164 billion at the end of the March quarter. For long-term shareholders the reduction in the fully diluted share count boosts the company's reported earnings per share due to the fact there are fewer shares by which reported net income is divided to determine the EPS results. It is Prime Asset capitalsview net income growth is the primary driver of Apple's share price appreciation. In periods of rising net income, the share repurchase program will amplify the impact of rising net income on the earnings per share results. In addition to a beneficial impact on earnings share results, the fewer number of shares may mean a larger dividend per share in the years ahead.

Apple's R&D Expenses

There's rampant speculation Apple is working on a car project of some kind and the company's recent investment of $1 billion in DidiChuxing, a Chinese ride-hailing service, has only heightened the level of speculation. Nonetheless, the company continues to invest heavily in the ongoing development of its major product lines and services. Rising R&D expenses portend the release of upgrades to the company's current product lines as well as continued development of new and existing services.

Apple's Rising Services Revenue

Although in the fiscal year ending in September Apple will report year-over-year declines in unit sales in all three of the company's major device lines, the Services revenue segment is currently delivering double-digit revenue growth year-over-year. This double-digit revenue growth rate over the past few quarters has occurred in part from the release of the Apple Music subscription service. In the December quarter Services revenue surpassed $6 billion and came very close to that threshold of revenue activity in the recent March quarter. Prime Asset Capital view Apple's Services revenue segment as a proxy of sorts for the growth in consumer participation in the company's expansive ecosystem of devices, apps, content and services.

All in all Apple's faces numerous challenges but in Prime Capital assets opinion it is still a good stock to own. We do advise anybody who is looking to purchase Apple, to do solid groundwork and look at all the different factors that can make this company a winner and a earner for years to come.

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