Two Interesting Takeaways from Apple's (AAPL) 10K

Amit Daryanani, Hardware Analyst at RBC Capital, dove deep into Apple's (NASDAQ: AAPL) 10K filing and highlighted several issues with two in particular that stand out: 1) Apple Watch revenues may have been $1.7B in FY15 through 5 months and 2) Vendor nontrade receivables were much lower than Apple’s revenue guide and has historically been a good predictor of manufacturing commitments.

Vendor nontrade receivables of $13.5B, was up 41% q/q. Non Trade Receivables consists of AAPL selling components to EMS companies that manufacture and assemble finished product. Cowen’s analysis there is a strong correlation between manufacturing commitments and AAPL units sold (ex-iPod) on a one-quarter-out basis vs. (R2>0.95). We believe this increase should be a good approximation of AAPL's intentions for production in Dec-qtr, vs. AAPL's guide of 49% q/q revenue growth.

China accounted for $58.7B of revenue in FY15, up 84% y/y from $31.9B in FY14. China revenues grew $26.9B y/y and accounted for >50% of the incremental revenue growth (AAPL top-line grew $50.9B y/y) in FY15.

Apple Watch Revenues Could Have Been $1.7B in FY15. Other Products (including Apple TV, Apple Watch, Beats iPod, and Apple-branded/third-party accessories) grew to $10.07B in FY15, up from $8.38B in FY14, assuming other revenue sources were flat y/y, Apple Watch revenues could have been $1.7B for the full year (~4.5M units assuming ~$400 ASP), with 5 months of sales. Assuming the 5 months extrapolates to a full year in FY16 and no growth for FY16, Apple Watch could generate $4.1B in revenue next year (~10M+ units).

No change to estimates, the Outperform rating or $150 price target.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $119.50 yesterday.

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