- This is the third installment in our Apple Earnings Preview series. Today we are going to talk about the business that is most likely to impact your bottom line: the iPhone.
- Q1 iPhone performance could be underwhelming. However, investors may have underestimated segment sales for the quarter.
- Apple Maven has you covered appleof (AAPL) – Get Free Report Real-time earnings via live blogs starting after the closing bell on February 2nd.
(Read more about Apple Maven: Apple Stock: iPhone Sales May Surprise in First Quarter of Fiscal Year)
Apple iPhone: Yellow Flag
Investors are on alert from October 2022 onwards. The first quarter of the fiscal year could be a very tough sales period for Apple, especially on his iPhone side.
Almost three months ago, on the fourth-quarter earnings day, CFO Luca Maestri predicted that the company’s revenues would come under currency pressure of nearly 10%. But the worst was yet to come for Apple, especially when it came to his iPhone (his 52% of fiscal 2022 sales, see below).
In early November, just days after the end of its financial year, Apple announced:
“COVID-19 restrictions have temporarily impacted our main iPhone 14 Pro and iPhone 14 Pro Max assembly facility in Zhengzhou, China. The facility is currently operating at a significantly reduced capacity. increase. […] We expect iPhone 14 Pro and iPhone 14 Pro Max shipments to be lower than previously expected. ”
The one-two punch has led a number of Wall Street analysts to cut their earnings estimates for Apple’s first quarter fiscal year through the end of 2022. December.
Notice how Apple’s stock (blue line) underperformed the S&P 500 and Nasdaq index significantly in the last month of 2022.
iPhone: silver lining
However, as readers are probably well aware, stock price performance is usually determined by the difference between reported actual results and previous expectations, rather than as a function of absolute numbers announced by companies. That’s why the iPhone could be positive in this quarter’s earnings.
I definitely don’t expect iPhone sales to be strong. But analysts and investors may be underestimating Apple’s ability to beat consensus on iPhone sales, according to a recent report published by research firm Canalys.
Canalys reports that global smartphone shipments fell 17% this holiday season. At face value, this is bad news for Apple and its peers. However, Apple gained market share year-over-year, reaching the 25% mark.
Let’s do some simple math on the back of the envelope.
- Device shipments fell from about 360 million in Q4 2021 to 300 million in 2022.
- However, Apple’s market share increased from 23% to 25%.
- 25% times 300 million in 2022 vs. 23% times 360 million in 2021 = 9% year-on-year decrease.
Declining sales is never good news, but single-digit declines may be better than many expect. His $250 billion market cap, lost since Apple’s fiscal fourth quarter earnings closing date, is perhaps evidence. In my view, there are too many to justify the headwinds of the holiday season.
But the iPhone units that have shipped don’t tell the whole story. iPhone revenue and segment profit could decline more than his 9% above, as the lost revenue would likely be heavily skewed to the higher-priced, higher-margin Pro and Pro Max models. I have.
On the other hand, the FX headwinds could ease significantly more than Apple management originally expected.
As noted in a recent article, the US dollar peaked just around Apple’s fourth quarter financial results date when the CFO delivered guidance. Since then, the American currency has fallen about 8% against the foreign currency basket.
I recently asked Twitter about Apple’s first quarter financial results, due out on February 2nd. You can still participate and share your thoughts.
(Disclaimer: This is not investment advice. The author may own one or more of the stocks mentioned in this report. Also, if the article contains affiliate links These partnerships do not affect your editorial content. Thank you for supporting Apple Maven.)