Some analysts are sounding a note of caution
BGC Financials Colin Gillis, for example, says Apple’s results have had “plenty of chinks,” but the decline has not been deep enough to support a “negative thesis.”
The analyst, who increased his fiscal 2017 revenue and profit estimates, said “our issues with Apple’s dependence on the sale of iPhone hardware to drive results are still intact.” He said any enthusiasm for the stock reflects low expectations based on previous and current guidance.
In December’s quarterly report, Apple said the iPhone accounted for 69 per cent of total revenue, the highest level since December 2014, while revenue from other products dropped 7.5 per cent year-over-year.
Total revenue growth was just three per cent compared to the prior year even though the quarter had an additional week, while China revenue dropped 12 per cent annually and iPad sales tumbled 22 per cent for the 12th quarterly decline in a row.
The conflicting take on Apple’s outlook is evidenced by Morgan Stanley Analyst Katy Huberty, who while lowering her 2017 Apple estimate to reflect weaker iPhone 7 demand, predicts a strong 2018. “We believe the market is focusing too much on near-term data points, and not enough on upcoming catalysts,” she wrote in a note to investors.
“We see an iPhone super cycle led by China in FY18 and a reasonable probability of U.S. cash repatriation during the new administration, which could drive significant cash return and acquisitions, especially in media.”
Growth in China, however, may prove difficult after Chinese smartphone maker Huawei gained market share last year at the expense of Samsung and Apple, according to a report from Gartner. It said Huawei sales jumped by 26.7 per cent year over year while the two rivals both saw their sales decline by 4.3 per cent.
“Chinese makers succeeded in winning market share and Huawei now seems to be the main rival to the two giants, even if the gap remains large,” Gartner analyst Annette Zimmermann said.