Apple Earnings: X Things to Watch

The share market is currently seeing Apple reaching an all-time high as the iPhone manufacturer gets ready for its quarterly results and the launch of its newest product, the iPhone X. As a reminder to the readers that Apple wants the iPhone X to be pronounced as “iPhone ten” instead of the incorrect “iPhone ex”, listed below are X things to lookout for in this week’s results.

1. Everyone is looking forward to the iPhone sales, obviously. The September quarter ending typically showcases the year’s largest iPhone launch. This year’s schedule that was split meant that only the usual iPhone 8 and iPhone 8 Plus models were launched before the quarter-end. A few analysts have heard news that the iPhone 8 has not sold as well as it was anticipated. The cause could be that customers were waiting for a November launch or maybe because they were reluctant to buy a wireless charging phone or also maybe because the iPhone X has a delicate glass back that is expensive to replace. Apple’s figures showing the unit sales will help provide an answer. Wall Street is analysed the results and came up with the conclusion that approximately 46m iPhone sold in the span of the quarter, with just 1 percent increase every year, with an amount of $50.7bn total revenues and $1.87 earnings.

2. As far as the iPhone X is concerned, the big question at the moment is the supply and not the demand. The latest OLED screen technology and the camera with 3D depth sensors are both proving to be a hold-up in the supply chain. The time durations for shipping have remained stable at 5-6 weeks since the time the pre-orders for the iPhone were opened last week, which is more than what a few forecasters had expected. It is likely that analysts will question the Apple Chief Executive Tim Cook about how realistically the company will be able to meet this requirement of holiday sales.

3. Talking about holiday sales, the entire focus will be on the December results. Wall Street consensus is expecting 84m iPhones that will generate revenue of $85.8bn.

4. The vital clue to the answering the question about the iPhone sales figure derived from Apple’s revenue viewpoint is finding out this device’s average selling price, which considering the minimum starting price is $999, is on the rise. However, for the present quarter, the ASPs might see a dip due to the steady demand for the iPhone 7 at a lower price, which was launched last year.

5. Another critical issue in making the latest iPhones a hit is China, where Mr Cook has maintained his stand as relentlessly bullish, even though the region has seen sales falling to over 10 percent overall in the last quarter. After seeing a decline in six quarters back to back, Canalys analysts are of the opinion that Apple’s iPhone sales have increased 40 percent in China in the last quarter, growing to 11m from last year’s 8m.

6. Although majority of the focus is on the iPhone, Apple has been actively promoting its services business since the last year or so. This particular aspect has seen a strong performance, with a growth of 22 percent and helped Apple rise more than expectations in the last year.

7. The launch of Apple Watch Series 3 in September generally received positive feedbacks, even though it faced an early hitch over the issue of wireless connections that were dropped. Apple did not increase the sales for Apple Watch and instead grouped it in the category of “other products” along with headphones, iPods and other accessories. Most of analysts have raised their estimates for Apple Watch sales in the past few weeks, with the latest LTE cellular wireless connection seen as a specific approach. Neil Cybart of Above Avalon, who is Apple specialist analyst, considers that the revenue from these “other products” would amount to $3.0bn which would comprise of 2.9m from the Watch unit sales alone.

9. The Mac has not been one of the favourites among the loyal Apple users, the reason being the rising number of dongles needed to plug into the reducing number of USB ports of the Macbook and the actually troublesome keyboard of this compact laptop. This quarter appeared to the second strongest for the Apple Mac as a result of the back-to-school season and thus RBC is expecting Mac Unit sales to rise to approximately 5m.

10. Even with the above nine items, the X factor that establishes the stock price in the direct outcome of Apple’s earnings is generally one thing specifically: will it meet or not meet the predictions of the iPhone unit sales made by Wall Street? In the past seven quarters we have seen that it has missed thrice, met the expectations three times and just once hit straight down the centre. Its performance against the ever-increasing expectations of the investors will be disclosed this week.