High expectations aren’t always helpful to Apple. Low expectations just might be.
When Apple posts results for its fiscal second quarter Tuesday, it will be a first in some different ways. Revenue and iPhone unit sales are both expected to be down on a year-over-year basis.
Apple hasn’t reported a drop in quarterly revenue in 13 years. The iPhone hasn’t posted a negative sales quarter since the smartphone was launched in 2007.
This shouldn’t be shocking.
Apple itself forecast the revenue drop in its last quarterly report in January. And while conflicting reports have surfaced lately about more production cuts, the performance bar is now so low that it is tough to see Apple not clearing it. Analysts are projecting 50 million iPhone units sold in the March quarter—an 18% drop year over year. Revenue is expected to fall 10% to $52.1 billion, while per-share earnings are expected to slide 14% to $2.
Why the bleak numbers? Apple is largely a victim of its own success. The iPhone 6 delivered such record-busting growth last year that its successor could hardly be expected to keep up. Fewer people are rushing to buy the iPhone 6S this year. The newly launched iPhone SE may boost performance in the June quarter, but won’t pull Apple out of the slump on its own. Analysts expect iPhone unit sales to still be down 7% for that period.
The bigger question is what comes next.
We don’t even have a leaked photo yet of the iPhone 7, or whatever Apple decides to name its next gizmo. It needs to be good enough to bring Apple back to growth. Analysts are already modeling a 6% gain in iPhone sales for fiscal 2017, led by the new device.
The unseen phone is relevant to investors now. Apple’s stock peaked about a year ago, when fears of an iPhone slowdown surfaced. Since then, the company has shed about $180 billion in market value. This puts the stock at a lowly multiple of only about 8.5 times forward earnings, excluding net cash. The iPhone slump is now more than priced in.
http://www.wsj.com/articles/apple-has-upside-as-investors-worry-1461510598
In my opinion, Apple needs to launch the iPhone 7 soon. This will increase the demand again for their products whereas the demand is currently diminishing for the iPhone 6. The drop in demand is hurting their sales and hopefully they can get back on track soon.
ReplyDeleteI agree with Nate, I think that the newest iPhone should be released as soon as possible. I also think Apple should focus on improving the watch, since it did well in its sales, especially since there are many problems like how it is slow, has poor battery life and does not perform well if not accompanied by an iPhone.
ReplyDeleteI agree with Nate. The new product should increase Apples sales. Apple must also keep up with the technology curve. Competitors like Samsung have recently taken away from Apples market share.
ReplyDeleteThis is always a very interesting debate. I firmly believe that the new product will boost apple sales but it always comes down to the battle between apple and and android phones. Samsung has been making huge strides with the new and improved galaxy series phones. This has without a doubt been taking business away from apple sales. While apple products have the upper hand in user friendly operating systems, android competitors are catching up in a hurry. Apple needs to improve in other areas other than simplistic operations since phones like samsung galaxies have so many more technologically advanced capabilities than people even realize.
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