Between the glowing reports of recent massive successes and predictions of impending doom and gloom, it’s hard to get a feel for what is actually going on with Apple, and how their First Quarter Earnings will be perceived. One consensus seems to be that Apple’s past quarter will be the biggest in company thanks to strong iPhone X sales, as well as solid Mac, iPad, and Watch sales and Apple’s growing Services business and sales in China.
There is also a new report from Kantar that shows the iPhone X as one of the top three smartphones in all markets that it monitors. This is hugely impressive, and should result in a a big earnings report on Thursday. Kantar even goes as far as saying that these rankings vindicate Apple’s pricing strategy with the device, which is a bold statement.
On the other hand, there have been several outlets predicting a huge dip in sales guidance for the next quarter coming at Thursday’s quarterly call. Most of this seems to point back to reports from Ming-Chi Quo and Nikkei that Apple has cut component orders for the iPhone X due to slowing sales and demand. While many sites have run sensational parrot pieces for clicks, The Wall Street Journal actually weighed in on this today, as well.
The WSJ certainly adds additional credibility to the stories of slowing iPhone X demand. These combined negative stories have resulted in a noticeable dip in Apple’s stock price. This has caused Rene Ritchie of iMore to wonder aloud on a couple of recent podcasts whether some analysts are shorting Apple Stock and using the rumors and reports as a way of spreading bad news and creating a self fulfilling prophesy. It’s certainly an interesting theory, but I have my doubts that the WSJ would allow themselves to be wrapped up in such a thing.
Despite some of the sensational negative headlines floating around, there are a still a few in the media taking a more cautious, wait and see approach. Barrons cited a CNBC interview of Toni Sacconaghi of Bernstein urging for calm in the face of potential less than ideal news.
On a segment on CNBC a short while ago, with host Scott Wapner, Sacconaghi said it’s “hard to say” how much of the current quarter is factored into the stock at this point. But in today’s report, he makes the case investors should relax about the erosion of iPhone estimates.
Sacconaghi, who warned last week the quarter will probably come in weaker than expected when Apple offers its forecast this Thursday, after the closing bell, today formally cuts his numbers for iPhone. He now sees 53 million units for the quarter, below what he deems consensus for 62 million units.
And for the full fiscal year ending in September, he slashes his estimate to 220 million units from 247 million units previously estimated. The means almost no growth from last fiscal year — just 1.3% relative to 2017’s 216.76 million units.
Hence, the question of his report: “Can the stock work if iPhone units don’t growth in 2018?”
Sacconaghi thinks the stock can, indeed, work, given the company may have net income in 2019 of “well over $14.”
His estimate for this year is cut to $11.80 from $11.87.
Another interesting article casting some doubt on the use of supply chain rumors to directly extrapolate demand comes from Yoni Heisler of BGR.com. He wisely points put the fact that this exact prediction seems to come up at the same time every year, regardless of the actual demand for the iPhone. While this is certainly no guarantee that demand for the iPhone X will continue to be as high, and that guidance for the next quarter will be remain the same, but there is certainly a trend worth considering here.
My advise on all this is to be patient and wait and see what Apple says on Thursday. Don’t jump to conclusions or read more into the numbers than what they actually say. If you have Apple stock, step back, breathe deeply, and don’t do anything rash. Take a look back and look at the trend chart for Apple’s stock over the last ten years. Despite the small dips that will inevitably come, don’t lose sight of the bigger picture.
Apple’s earnings report will be released around 1:30 PM PST, and will cover from October 1, 2017 to December 30, 2017.