Top 4 Biggest Movers in the First Quarter 2015

Apple just recorded their most profitable quarter. Of any company. Ever.

The company posted a net profit of $18 billion for the first quarter 2015, easily beating the previous record of $16.2 billion set by Gazprom, the largest extractor of natural gas in the world. Astonishingly Apple actually owns 5 out of the top 10 spots on that list!

first quarter superstars

Apple crushed their wildest expectations. The insane profit they made in the latest quarter comes off a base of an eye-watering $74.6 billion in revenue. In terms of device sales that works out to:

74.5 million iPhones

21 million iPads

5.5 million Macs

Sales of iPhones have surged in particular, likely drive by the popular iPhone 6 and 6 plus. In the words of Apple CEO Tim Cook himself, “34,000 iPhones sold per hour, 24 hours a day, every day of the quarter.”

q2

The iPhone is killing it for Apple. The proof is not only in the number of units shifted but also in the rising proportion of revenue coming from the mobile device’s sales, a massive 68%.

Sales in China made a huge difference this quarter. Apple tells us that revenue from the People’s Republic of China was $16 billion, a HUGE 70% more than year-ago levels.

All this despite the strong U.S. dollar which has otherwise cannibalized the overseas profits of other companies.

McDonalds

On the other side of things, one other huge corporations hasn’t fared half as well. McDonald’s Corporation’s net income fell by a third, to $811 million, when compared to year-ago levels.

The fast food leader is sick. Almost every metric is down. Sales are down. Revenues are down. Profits are down. Poor performance in Japan is partly to blame, with growth in the Asian market down by 32% and the company has had to shutter 350 more restaurants than initially planned for 2015.

q3

Netflix

Meanwhile Internet TV giant Netflix is on a tear this quarter. The stock is worth over $550 today having started the year at $350, a near 60% increase! Its latest numbers were better than expected, especially on new member acquisitions. The company crushed its targets on new members, adding 4.9 million new subscribers in the first quarter of 2015 and blowing past their target of 4.1 million.

netflix

However, while their subscriber numbers and stock price is soaring, their earnings have missed the mark. The streaming video company’s net income for the first quarter of 2015 was just $23.7 million, about half what they earned in the same time period last year!

Amazon

The e-commerce company reported a $57 million net loss for Q1 2015.

Amazon is massive though. It operates on a scale that is quite hard to wrap your head around. The company had nearly $23 billion in revenue in the first three months of 2015.

$23 billion!

That’s as much as the entire Gross Domestic Product of El Salvador.

Amazon also recently came out and told investors that Amazon Web Services, its cloud computing service, is now a $5 billion business and growing fast. That part of the e-commerce firm earned profits of $265 million in Q1 which means they are on track to earn a billion dollars in profit from their cloud computing segment alone!

Amazon’s stock is doing well year-to-date. The price shot up to the $450s very recently, having started out the year in the low 300s, even dipping down to $280 a share in January.

Even though the company posted a net loss this quarter, it isn’t scaring investors away. After all, the firm has a market capitalization of $200 billion. Amazon’s plan is world domination, and it is setting itself up to become the main valve through which all aspects of e-commerce and logistics will flow. They are willing to take the loss in order to see out their long-term vision.

Amazon has aims to launch Amazon Logistics, a self-propelled company that will compete with companies such as UPS and FedEx. By taking on the transportation themselves the company forecasts it can save up to $3 billion a year! This alone would easily wipe out the $57 million net loss this quarter.

U.S. Dollar Going Strong

There’s been a lot of talk about currency and many companies are blaming their bad Q1 results on the strong U.S. dollar; a dollar that is wiping out profits from overseas. After all, a dollar earned outside of the U.S. is now worth less back home. That’s hard to deal with. Amazon, Netflix and McDonald’s have all reported that their earnings would be much higher were it not for unfavourable currency conditions.

q4

Netflix reported in their quarterly report that they incurred a $33.7 million foreign exchange loss, which contributed heavily towards the overall losses they saw in the international arm of their streaming service.

Netflix should be able to weather the storm however. As market leaders they are well placed to ride the trend of Internet TV and their strategy of delivering fantastic original programming is resonating well with their subscribers.  Even with the currency difficulties the company’s growth is increasing which bodes well.

McDonald’s has said that currency pressures may account for losses in earnings up to $0.40 a share!

The unfavourable exchange rate cannot hide the persistent decline of the fast food giant. Fast-casual chains like Chipotle have the edge on them while McDonald’s insists on serving a floated menu, with over 140 items!

McDonald’s has the unenviable task of reinventing themselves and navigating changing consumer tastes while also having to coordinate with franchisees across the world. A tough ask!

Meanwhile Apple is sitting pretty on a mountain of cash. They have over $170 billion just sitting around, burning a hole in their pockets.

For reference, that’s the size of the Gross Domestic Product of Vietnam.

The iPhone maker has plans to use a good chunk of their cash reserves in this manner. Apple has plans to enact a significant capital return program, a way to return money to shareholders through an increased dividend payout.

As for Apple’s future?

I wonder if the iPhone will make it to double digits…

q5

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