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  • KPB & Co Research


  • Apple recorded Q2-2020 sales growth of 11%.
  • Grow driven by sales in Europe and the Americas.
  • Growth in Apple's service business was the biggest contributor to growth.
  • Q2 GDP growth in the USA came out at -32.6%.

Apple Bucking The Trend

Data released from Apple Inc. shows that the technology company grew revenues by about 11% (to US$59.7Bn ) in the 3-months ending in June-2020 (3rd Quarter) relative to the same three months a year ago. Earnings per share came out at US$2.58 which was up 18% over the same period. The growth experienced by Apple came primarily from a stellar 24% growth in Europe (contributed 4.2% to growth) followed by 3.8% growth in the Americas region (contributed 3.6%) - represents the largest share of total revenues. Revenues from the greater China region grew by 1.9%, while Japan and the rest of Asia grew by approximately 22% and 17% respectively.​

In the 3rd quarter, Apple's growth came from selling more services (contributed 3.2%) which grew 14.5% followed by iPads (contributed 2.9%) which grew 31.0%, and Macs (contributed 2.3%) which grew 21.6%. The iPhone, which is the company's leading product, only grew a meagre 1.7% while "Wearables Home and Accessories" despite growing 16.7% was too small to make a dent in the company's overall growth rate. The company also ended the quarter with a 39.8% gross margin which is around the historical average. Apple generated operating cash flow of US$16.3Bn and had US$193.6Bn in cash and investment securities, and US$112.7Bn in debt on the balance sheet. In a bid to make the company's stock more affordable for small investors, the company did a 4 for 1 stock split, which will make the stock price trade at around US$100 per share.

Is Strength A Sign of A Monopoly?

Apple presents stellar results just days after it and other big techs were called upon to testify before Congress about issues of antitrust and anti-competitive behaviour. The focus of the probe into Apple's business was on Apple's behaviour in the operation of its App Store, and payment services.  As outlined earlier, Apple's double-digit growth rate came mainly from its services business, most of which are delivered through company-owned Apps on the App store, and the fees charged third party Apps for the use of Apple pay to facilitate the purchase of services. Netflix and Spotify are among the service providers that compete with Apple's own products on the App store, as well as several other smaller players that have complained about persistent monopolistic behaviour in the past.  In addition, the double-digit growth in Apple's consolidated revenues came just after the Bureau of Economic Analysis published data that showed that the US economy declined by 33% in the same period as that represented by Apple's Q3 results.  Apple's flagship product - the iPhone - was developed primarily through innovation and creative marketing, and it can hardly be said that the success of this product is due to anti-competitive behaviour. On the other hand, as the growth of the iPhone slowed, the company is desperately seeking to grow the services business. The service business is where most of the conflicts have developed, as Apple has to now release services that will invariably compete with the services of third party vendors. 


The road ahead is filled with uncertainty​ due mainly to the fact that a reliable vaccine for the Coronavirus is not yet available, and will likely not be available until sometime in 2021. Lockdown measures that were once lifted are being re-imposed as a second wave of the Coronavirus threatens to erode much of the gains that many countries have made thus far. In this regard, having a monopoly can be good or bad depending on which side of the fence you are on. If you are an investor,  investing in a monopoly with a strong balance sheet can give you peace of mind, as you are less likely to get entangled in a bankrupt company as you look to weather the storm. On the other hand, if you are a consumer you'd be concerned. As a consumer, the cost of much needed products or services will likely stretch your purse thin as these monopolies attempt to protect their margins in the face of weak demand.

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