Apple...10-K Review: Higher off-balance sheet commitments indicating a strong ramp
In RBC's analysis of AAPL's 10-K, firm came out with the following key highlights:
1) Off balance sheet manufacturing and purchase commitments were up sharply at an all-time high of $37.6B, +31.3% Y/Y and 60.5% q/q (iPhone 6 cycle, it was up 31.7% y/y), potentially indicating strong ramp for iPhone X;
2) Warranty accruals was up 12% q/q but down -8% y/y - logical given delay in iPhone X delay;
3) Vendor non-trade receivables were up 31% y/y, reflecting component purchases by AAPL for EMS partners and overall inventory on AAPL's balance sheet was $4.9B, up 128% y/y - firm thinks reflecting memory price and purchase dynamics;
4) Operating Margins were slightly down in the US, reflecting carrier discounts on new iPhones; &
5) There was 60bps FX impact on gross margin this qtr. Net/Net: They maintain their positive stance on AAPL as they see multiple tailwinds that should enable double-digit EPS growth not just in FY18 but also in FY19 as AAPL benefits from 1) ASP tailwinds from iPhone X and higher memory; 2) GMs benefit from services and better mix; and 3) potential tax reform; Outperform, $190 tgt.