Investors, consumers on iPhone 6 watch
Apple Inc.’s fourth-quarter guidance may have come in lower than expected, but since this is being attributed to the transition into new iPhones and other product launches, nobody seems to mind.
The technology giant’s September quarterly revenue outlook range was US$37-billion to US$40-billion, below consensus of US$40.5-billion. But all eyes on are the company’s highly anticipated iPhone 6 launch, as several analysts believe the smartphone will surprise investors on the upside.
Apple is expected to launch 5.5-inch and 4.7-inch screen size versions on Sept. 19, followed by new product categories later in the year.
“We believe the iPhone 6 and new products could lead to upside particularly in the December quarter,” RBC Capital Markets analyst Amit Daryanani told clients, raising his price target on Apple shares to US$110 from US$100.
The stock was up US$2.42, or 2.55%, to US$94.17 in Nasdaq trading Wednesday morning.
Apple reported iPhone sales of 35.2 million with an average sale price of US$563 in fiscal Q3. The 6% quarter-over-quarter price decline suggests its product mix has shifted slightly away from the 5s product line, and the company stated that the 5c was the fastestgrowing iPhone.
Recent surveys by Canaccord Genuity indicate growing consumer awareness and increased willingness to pay more for new larger-screen iPhones. As a result, analyst T. Michael Walkley anticipates a very strong iPhone 6 upgrade cycle.
“We believe consumers slowed the pace of iPhone upgrade purchases during the iPhone 5 and 5s product cycles, and we believe the extended replacement rates combined with new larger-screen iPhones position Apple with its large installed base for record iPhone 6 sales,” he said.
Mr. Walkley also expects Apple will charge a premium for these larger-screen iPhones, producing stable gross margin trends, but with a higher gross margin dollar contribution due to an increasing revenue mix from higher ASP iPhones.
While Apple’s overall iPhone shipments disappointed slightly, as total iPhone sales grew 9%, it saw strong growth of 55% in BRIC countries. IPad sales were also stronger in emerging markets, with Chinese growth in the 50% range and Middle East growth in the 60% range.
Apple’s results were also marked by impressive Mac sales and slower declines in iTunes revenue.
Based on developer earnings to date of US$20-billion from the app store, along with other data points, J.P. Morgan analyst Rod Hall estimates that iTunes digital content revenues declined by just 10% to 15% in the first half of calendar 2014.
Mr. Hall also highlighted the fact that the sub-$1,000 laptop segment represents US$63-billion in annual revenues and Apple still has virtually no market share there.
Mac sales in Q3 came in at an impressive US $5.54-billion and management noted that the strength was driven by portables and “very strong growth” for the Macbook Air.