Apple reports surprise fall in iPhone sales during second quarter

Many analysts are providing their Estimated Earnings analysis for Apple Inc. and for the current quarter 37 analysts have projected that the stock could give an Average Earnings estimate of $2.02/share.

Under the expanded programme Apple plans to return $300bn to shareholders by the end of March 2019. Here are my initial thoughts regarding Apple earnings.

Sales of the iPhone, which account for 69.4 per cent of Apple’s total revenue, were larger than expected in the quarter that ended December 31, helping mitigate concerns about consumers switching to cheaper alternatives or holding on to their current phones longer.

For three years, the iPhone’s exterior design has remained mostly unchanged, cutting into the demand for upgrades. However, that tailed off previous year and the region has remained slow for Apple, even as consumers in America have scooped up the iPhone 7.

And while revenue from services last quarter was a little better at $7.17B, this is mainly due to the large sales bump Apple gets from the holiday season. According to Thomson Reuters I/B/E/S, analysts on average were expecting a figure of around $45.60 billion. This growth is up from Apple’s 3.3% and 2.4% respective growth in revenue and EPS in Apple’s first quarter.

Q2 Mac sales rose to 4.2 million from 4.0 million, matching estimates. However, both product lines saw increases to their average selling price, with Mac ASPs up nearly 10% over last year’s period, leading to a 14% rise in Mac revenues for the period.

iPhone revenue, which accounted for about 63% of Apple’s revenue, increased 1% year over year. iPhone unit sales, however, were down 1% year over year. “Platform loyalty is as high as we’ve seen, both for Android and iOS, so we see much less switching between the two operating systems than ever before”. Ten analysts surveyed by Zacks expected $52.61 billion.

Apple increased its quarterly dividend by 10.5% to $0.63 per share.

Apple Inc. shares posted small losses in after-hours trading Tuesday.

Look for whether Apple has managed to lock customers in to paying for content on their Apple devices, whether that’s more Apple Music subscribers (of which there are now more than 20 million, at $120 per year in the US) paying monthly fees for access to exclusive music (and in the future, TV shows), more people downloading games and apps for their devices, or more people getting insurance for their rather breakable purchases.

If Apple is to return to the same kind of growth it saw in late 2014 and early 2015, it must lure more Chinese consumers away from local smartphone makers such as Oppo, Vivo and Xiaomi. They believe the company will ship about 260 million phones with total revenue of $269.1 billion, which they say is 8.5 per cent above the consensus forecast. The firm also wonders if Apple will increase its buybacks with that $200 billion or so cash trove, or maybe a dividend hike.

No other product in commercial history has even come near to matching the iPhone in terms of total sales, profitability or commercial success. I have no business relationship with any company whose stock is mentioned in this article. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.