Are 75 mln iPhone sales enough for Apple?
As Apple Inc. (NASDAQ: AAPL) earnings approach, nothing matches the importance of iPhone sales, particularly in China. The consensus among analysts is that Apple sold 75 mln iPhones in the quarter. Anything short of that will be disastrous for its share price, which has been under pressure for months.
Sales in the fourth quarter depended heavily on holiday sales, sales in China and consumer appetites for an aging iPhone family. While aging depends on an odd definition for Apple, a few quarters of sales of a new generation of the smartphone move some customers to the point where they either have iPhones already or a desire to wait for the iPhone 7, which probably will be released in the second half of this year. Apple’s new ad campaign has a tag line for its newest smartphone, the iPhone 6s, that reads, “The only thing that’s changed is everything.” Apple did not make that claim when the iPhone 6s was new. So, the company is pushing features that are many months old.
Hanging over both iPhone and iPad sales is the spectre of the success of Alphabet Inc.’s Google Android OS, which is used in almost all non-Apple tablets and smartphones sold in the world — leaving aside progress made by Microsoft and its new mobile versions of Windows. Samsung, once Apple’s worthy competitor, counts on new Android phones to get share back from Apple. The effort just might work.
In Apple’s most recently reported quarter, its revenue from Greater China was $12.5 bln, up 99% from the same quarter the year before. That was against Apple’s global sales of $51.5 bln. Tim Cook, Apple’s CEO, has made the point that China sales must rapidly become a much larger portion of his company’s revenues or overall growth will stumble.
Apple has always faced the challenge of consumers who want the newest iPhone and may wait until it is shipped. How many people will hold their “old” iPhone 6 models and wait for the iPhone 7? No one knows, but it is a threat to sales.
Apple’s stock has slightly recovered from a brutal sell-off that has driven its shares down 30% in the past six months. Over the past five days, the stock is down 3%.
The consensus estimates from Thomson Reuters Apple’s fiscal first-quarter financial results call for $3.23 in earnings per share (EPS) on revenue of $76.59 bln. In the same period of the previous year, Apple posted EPS of $3.06 and $74.60 bln in revenue.
This remains the world’s biggest and boldest technology company. Apple revolutionised personal technology with the introduction of the Macintosh in 1984. Today, Apple leads the world in innovation with iPhone, iPad, Mac, Apple Watch and Apple TV. Apple’s four software platforms — iOS, OS X, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services, including the App Store, Apple Music, Apple Pay and iCloud.
The company recently announced that customers around the world made the 2015 holiday season the biggest ever for the Apple App Store, setting new records during the weeks of Christmas and New Year’s. In the two weeks ending January 3, customers spent over $1.1 bln on apps and in-app purchases, setting back-to-back weekly records for traffic and purchases. January 1, 2016, marked the biggest day in App Store history, with customers spending over $144 mln. It broke the previous single-day record set just a week earlier on Christmas Day.
However, there are increasing concerns that Apple will post its first annual decline of iPhone shipments, as we draw closer the earnings report after the close. This would be the first time that iPhone shipments declined since its inception in 2007, and after multiple Apple suppliers have warned of shrinking demand. Although, no supplier has pointed to Apple as the cause of slowing demand. So far in 2016, Apple has outperformed the markets, with the stock down only 5.5% year to date. While over the past 52 weeks, the stock is down 10.5%.
Shares of Apple were trading up 0.5% at $100.00 on Tuesday, with a consensus analyst price target of $247.67 and a 52-week trading range of $92.00 to $134.54.