Proactive Investors - Run By Investors For Investors

Apple results: iPhone X sales, China performance and battery bungle in focus

The company is widely expected to post record profits for the December quarter
Apple reports its quarterly earnings after the market closes on Thursday

Apple Inc (NASDAQ: APPL) reports its quarterly earnings after the market closes on Thursday with a key focus on sales of its iPhone X.

The company is widely expected to post record profits for the December quarter- its first set of results to include sales of its 10th anniversary iPhone.

But ahead of the results, Apple has been plagued by rumours that it plans to cut production of the iPhone X due to sluggish sales of the device, which carries a hefty starting price of US$999.

READ: Apple to halve production of iPhone X in first quarter after slower-than-expected sales

BMO Capital Markets on Wednesday downgraded the stock, saying it estimates just 30% of phones sold for more than US$900 since only 12% of global smartphone sales were for devices priced over US$600.

 "There has been much in the press about order cuts for iPhone X, and we believe a weaker mix in Q1 [the December quarter] will push estimates lower for March and beyond," BMO analyst Tim Long said.

Analysts forecast net income of at least US$19bn, beating its previous quarterly record of US$18bn in 2015.

READ: Apple to report record quarterly profits despite concerns about iPhone X sales

China performance eyed

Investors will also eye how well Apple performed in China, where is has had to contend with fierce competition.

In the previous quarter, revenue rebounded in China following several periods of decline but consumers in the nation are reportedly unimpressed with Apple’s latest iPhone.

Closer to its home market, Apple increased its US market share last year to 44% to sell a record 22.4mln smartphones in the fourth quarter thanks to demand for the iPhone X, according to market researcher Counterpoint.

iPhone X to lift average selling prices

The iPhone X’s high price is expected to lift average selling prices, boosting revenues in the current quarter, even if unit sales are weak.

Morgan Stanley predicts average selling prices will rise to US$815 in the March quarter from US$752 a year ago.

As for overall unit sales of iPhones, analysts predict a figure between 80mln and 82mln, with the higher end representing an increase of about 5% compared to a year ago.

Total revenues are forecast to rise by more than 105 to about US$87bn.

iPhone battery scandal could lead to higher costs

Meanwhile, US lawmakers are investigating whether Apple misled investors by failing to tell them about a software update that deliberately slowed down older iPhones.

Apple has been accused of deceiving customers by reducing processor speeds in outdated handsets.

The company has owned up to slowing down older handsets but has said the move was designed to stop devices from abruptly shutting down.

Apple could face costs related to possible class action lawsuits or a fine if the investigation by the Justice Department and the Securities and Exchange Commission finds it acted inappropriately.

US tax reform

It has already had to fork out a record US$28bn tax bill to repatriate foreign cash following the US tax reform.

READ: Apple to pay US$38bn in US taxes to repatriate foreign cash under Trump's new law

Apple will likely provide guidance on its new tax rate in its results. Morgan Stanley said a 15.9% tax rate could add another US$1.13 to this year’s earnings per share.

View full AAPL profile View Profile

Apple Timeline

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use