Apple beats expectations but faces challenges.
Newly revamped, high-priced iPhone line could be to blame
With its sales of services reaching an all-time high, Apple on Thursday reported quarterly results that surpassed Wall Street’s expectations.
But the world’s most-valuable company gave a sales outlook that potentially falls short of analysts’ forecasts, which suggested that Apple could be seeing some resistance to its newly revamped, and high-priced line of iPhones heading into the holiday shopping season.
On a conference call to discuss Apple’s outlook, and its fourth- quarter results, Chief Executive TimCook said the company was seeing some weakness in demand in several of its international markets.
“We’re seeing pressure in emerging markets such as Turkey, India, Brazil and Russia,” Cook said, before adding that “I would not put China in that category.”
China is Apple’s single-largest international market, accounting for $11.4 billion of the company’s fourth- quarter revenue.
Apple said that for its fiscal fourth quarter, which ended Sept. 29, it earned $2.91 a share, on $62.9 billion in revenue. Those numbers topped analysts’ consensus estimates for a profit of $2.78 a share, on sales of $61.57 billion.
Apple reported that services revenue climbed to $9.98 billion, a record for a single quarter. IPhone sales reached $37.19 billion, up from $28.85 billion, in the year-ago quarter.
While iPhone revenue continued to climb, ac-
tual iPhone sales rose less than 1 percent from a year ago, to 48.89 million devices. In September, Apple released its iPhone XS, which starts at $999, and the iPhone XS Max, with its $1,099 initial price tag. The company was able to get eight days of sales of those iPhones on the books before the quarter ended.
“We believe the Apple growth story is all about higher ASPs (average sell- ing prices) on iPhones and China growth, both of which were rock solid,” said Dan Ives, an analyst with Wedbush Securities.
The company has been banking on higher average prices of its iPhones to counter actual sales numbers, which have grown at slower rates as some customers hold onto their iPhones for longer lengths of time. Some analysts aren’t sold on Apple’s iPhone strategy.”
“The devil is in the details,” said Haris Anwar, senior analyst at Investing.com. “Its customers are not flipping their iPhones as quickly as the company had expected. That’s a matter of great concern as slowing growth in iPhone sales shows that the company’s flagship product has seen its best days.
“Apple’s results came out as the company is now in the middle of its fiscal first quarter, which is always its biggest sales period of any year. However, Apple also estimated that its firstquarter sales would be between $89 billion and $93 billion, while analysts had earlier estimated Apple’s revenue of $93 billion for the period that ends in December.
That outlook sent Apple’s shares down by 6.7 percent, to $207.26 in after-hours trading, Thursday.
While investor reaction to Apple’s sales outlook was negative, many analysts that follow the company were unfazed by the forecast, due to Apple’s history of providing sales outlook that are lower than Wall Street estimates, and then surpassing those forecasts.
“Apple always forecast are on the conservative side,” said Tim Bajarin, president of tech research firm Creative Strategies. “If history is our guide, Apple will most likely have record revenues and unit sales during this holiday quarter.”
That quarter will not only include a full three months of sales of the iPhone XS and iPhone XSMax, but also two months of revenue from the new iPhone XR, which went on sale on Oct. 26 starting at $749.