Apple's Eye-Popping Q4 Results Leave Nothing to Criticize

In this segment of the Motley Fool Money radio show, host Chris Hill, Million Dollar Portfolio's Jason Moser and Matt Argersinger, and Total Income's Ron Gross weigh in on the world's biggest public company, which got notably bigger after a fiscal fourth-quarter report that blew past expectations on virtually every front and featured double-digit percentage gains in every segment of its business except the iPhone. And, yes, Apple (NASDAQ: AAPL) expects to do better during the holiday sales season. So what's next and where are the opportunities?

A full transcript follows the video.

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This video was recorded on Nov. 3, 2017.

Chris Hill: We begin with the biggest public company getting even bigger. Apple is closing in on a market cap of $900 billion after a blowout fourth quarter. Revenue and profits coming in higher than expected, and guidance that their next quarter could be even bigger, Ron?

Ron Gross: You make this easy for me, Chris. [laughs] Where do you want to begin? Profits up 24%, 46.7 million iPhones sold, Mac revenue up 25%. When I have to say Mac revenue up 25% ... China increased for the first time since 2016, up 12%. India up 39%. The Watch -- remember the Watch? -- up 50%. The 8 and 8 Plus became Apple's two top-selling products at launch. I don't think people were expecting that. The iPhone 10 or X, depending on how you read or think about it, is coming out this week, Friday. There's a lot of expectations around them, especially for management, who offered strong guidance and think the future looks bright.

Hill: And you look at the coverage Friday morning, Jason. Tim Cook out there joining one of the lines of the people lining up for the brand-new phone.

Jason Moser: What, do you mean he couldn't get an inside track to get an early model?

Hill: [laughs] You'd think he'd be able to get one.

Moser: It's always funny to me to see how granularly people look at these phone releases. "Will the 8 sell more than the X? What's the X going to do now that the 8's out there?" At the end of the day, the iPhone sells a lot, whether it's the 8, 5, X, whatever. So, to me, I think it's really interesting to consider the prospects for this company now that they have so many different models out there. We know that Apple has a very strong presence here domestically. Globally speaking has always been the challenge there. Now, as they introduce more models of phones and can introduce more price points, I think that opens them up to a bigger market potentially. We always talk about how hardware is a race to the bottom, and Apple is not immune to that, either. Their margins are coming down, but that's OK --

Hill: They're also selling a phone for $1,000.

Moser: Precisely. And not only that, they are doing a great job of growing that Services side of the business. And I think, in looking at that opportunity, globally speaking, to get more iPhones into more people's hands, I think that really gives them a chance to boost that Services revenue a lot, which is higher margin, really attractive stuff.

Gross: Up 34% this quarter.

Moser: Hard to pinpoint anything to criticize with this quarter.

Matt Argersinger: What's impressive is, Apple, despite our concerns for years, the iPhone and Apple as a brand is still aspirational. People want it. And to Jason's point, the demand internationally and China growing, it shows you that people want those products. And pricing power, Apple should probably hold on to that pricing power for longer than we think.

Gross: This is one that, in hindsight, looks easy. I know it's not. But, at $100 a share, when we were saying this looks like a value investment and people should really be buying it, and here we are at $170 and it doesn't look like things are slowing down, and the stock is only 18X earnings in a market that's 24X ... there's no no-brainers out there, but this was a good one.

Hill: Anyone think a company other than Apple hits the $1 trillion market cap?

Moser: Eventually? Yes. First? No.

Argersinger: At this point, I'm still stubborn on this, I think the last $100 billion is going to be tough for Apple.

Gross: [laughs] It's always the last $100 billion.

Argersinger: I think Amazon can still sprint ahead and catch them.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Chris Hill owns shares of Amazon. Jason Moser owns shares of Apple. Matthew Argersinger owns shares of Amazon and Apple and has the following options: short December 2017 $900 puts on Amazon. Ron Gross owns shares of Amazon and Apple. The Motley Fool owns shares of and recommends Amazon and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.