Apple Earnings Overview 1Q19


Apple (AAPL) is about to publish its results Tuesday afternoon, and the bar could be much lower.

The Californian company based in Cupertino announced in a statement on Jan. 2 that it projected revenues of $ 84 billion for the first quarter of fiscal 2019, a reduction of about 8% from to his previous estimates. It was Apple's first negative announcement since June 2002, motivated by worse-than-expected iPhone upgrades as well as an economic downturn "especially in Greater China," the company said.

The stock fell 9.96% on the first trading day following the announcement.

Given the pre-announcement, the results reporting and Tuesday conference call will be heavily focused on the forecast for the quarter ending in March, rather than the "December post-mortem", Tom Forte, DA Davidson analyst, said in a phone interview with Yahoo Finance.

Specifically, investors are likely to listen carefully to two things: 1) How serious is the situation in China? and 2) What is the strength of the service sector?

All eyes on China

Forte pointed out that China's weakness and weak demand for terminals was already largely due to Apple's stock, which had fallen about 29 percent since the fourth quarter earnings report was released. exercise in November. But that does not mean that the first quarter financial results for these two key themes will still have no value for investors.

"The severity of the weakness in China and the iPhones will, in my opinion, dictate the short-term recovery of the title," said Forte.

Apple's financial results for the first quarter of the fiscal year were released by many other large companies that recently reported that the economic slowdown in China had an impact on their financial performance. Caterpillar (CAT) said on Monday that "the drop in demand in China" has led to a decline in sales in the construction sector, and chip maker Nvidia (NVDA) has reduced its revenue forecast by $ 500 million for the fourth quarter of 2019 due to "deteriorating macroeconomic conditions, especially in China."

In the same vein, Intel (INTC) last week missed Wall Street's expectations for fourth-quarter revenue in 2018, as weakness in China hurt the company's data center chip market. Sales of modems worse than expected chip maker also suggested a weakening of demand for iPhone. Intel – the exclusive provider of modems for the latest Apple models, the XR, XS and XS Max models – said its fourth-quarter modem revenues were $ 200 million lower than expected due to the drop in application in smartphones.

In the fourth quarter, Apple's sales in Greater China accounted for 18% of total sales, while sales in the region grew 16% year-over-year. However, the size of this contribution in Greater China and other parts of the Asia-Pacific region may well decline, particularly as a result of the declining market share of the iPhone and rising consumer prices. sales means. According to IDC, Canalys and Strategy Analytics data, in mid-2018, Chinese technology company Huawei overtook Apple for its market share in global smartphone shipments. Since then, competition has steadily increased.

"Apple's share has fallen to a double-digit market share … and Xiaomi, Oppo and Vivo – the three Chinese suppliers – are in this one-digit range," said Dan Niles, founding partner from AlphaOne Capital Partners. with Yahoo Finance on January 22nd. "It would not surprise me to see one or more of them overtaking Apple in market share in 2019."

Buyers pass the Apple Store logo in a shopping mall in Beijing. (AP Photo / Ng Han Guan)


Niles added that Apple had to face a daunting battle to conquer customers in other emerging markets, particularly in India, where the company would have recently transferred some of its top iPhone production to range. Average iPhone sales prices continued to climb and out of the region's consumer-friendly range, reaching $ 793 in the fourth quarter.

The story continues

"Apple is trying to sell a Ferrari on a market that can only afford one Ford," Niles said. He added that the average selling prices of China's Xiaomi competitor's devices, for example, hovered around $ 150.

"In addition to the units – which (Apple) no longer discloses, anyway, a key question is how ASP is resisting given the obvious need to reduce channel pricing due to dwindling demand and growing pressures. "said UBS analyst Timothy Arcuri on Monday. .

During its fourth quarter earnings conference call in November, Apple announced that it would no longer divide unit sales for iPhone, iPad and Mac, claiming that "the number of units sold over a period of 90 days was not necessarily representative of the underlying strength. " from the company.

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The iPhone has quickly become a hindrance to growth rather than an engine for the company, which is still widely recognized for its hardware. In the fourth quarter, iPhone sales accounted for about 60% of total sales. And in the announcement, Apple noted that, aside from iPhone sales, revenues grew nearly 19% from one year to the next in the first quarter of 2019 .

Faced with a late iPhone demand, Apple pushed its Services segment as a new source of dynamism. In the fourth quarter, however, service revenues contributed only about 16% of total revenues, or $ 9.981 billion. Apple announced in advance that the Services segment's revenue was $ 10.8 billion in the first quarter and reached a new quarterly record in each geographic area.

Apple CEO Tim Cook told CNBC earlier this month that the company would announce "new" additions to its Services segment, including Apple, which is investing heavily in health and well-being, seeking to develop the capabilities of Apple Watch and other wearables.

However, the Services category, which includes iTunes, the App Store, Apple Music, iCloud, Apple Pay and Apple Care, will not be enough to carry the company in the absence of a growing demand for Devices, Forte told Yahoo Finance.

"The revenue from the service is very good, but I would not buy just shares," he said.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Here's what to expect on the other hand in Apple's first quarter results:"data-reactid =" 52 ">Here's what to expect on the other hand in Apple's first quarter results:

  • Adjusted earnings per share of $ 4.17, based on Bloomberg data

  • Gross margins of about 38%, according to Apple

  • Operating expenses of about $ 8.7 billion, according to Apple

  • Other income / expense of about $ 550 million, according to Apple

  • Net cash of about 130 billion, according to Apple

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