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A recent increase in Apple’s (NASDAQ:AAPL) spending suggests the company is preparing for a record holiday quarter with at least $56.4 billion in revenue, an analyst has predicted. According to Morgan Stanley’s Katy Huberty, Apple has allocated $7.2 billion for capital expenditures in the fiscal year, excluding its retail stores. That translates to over $3 billion left over for the remainder of the year. The company only needs to allocate $1.8 billion of the $3 billion in the current quarter to reach her $56.4 billion revenue estimate, the analyst says.
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Huberty says increases in capital expenditures have historically had a direct correlation to revenue at Apple. “Apple’s revenue and capex ex-retail stores have been 97 percent correlated over the past seven years and the acceleration in capex growth signals a similar acceleration in revenue growth, in our view,” Huberty wrote in a note to investors.
The analyst says investments such as data center expansions are not likely to represent a majority of the company’s capital expenditures. Instead, she believes Apple is in the process of purchasing tools and machinery for new production processes and adding capacity at its suppliers, suggesting it is preparing for new products, according to Apple Insider.
Earlier this week, Wells Fargo Securities’ Maynard Um had sad that Apple’s component prepayments had gone up by $1.15 billion sequentially in the June quarter and also predicted “a solid ramp-up in revenue” in the following two or three quarters.
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