Apple Inc. (NASDAQ:AAPL) will release its earnings numbers after the market closes on July 21, exactly two weeks from today. With the firm’s third quarter closed on June 30, Wall Street is taking a closer look at the data in order to forecast the firm’s numbers for the quarter.
Heading into the release shares in Apple have fallen significantly. Much of that has to do with the poor performance of the stock market as a whole since the last time numbers have come through, but there’s a sneaking suspicion that sales of the iPhone have hit a peak. Here’s what Wall Street has to say about the June quarter iPhone sales and everything else that’s going to decide Apple’s future.
iPhone sales are slowing, or are they?
Deutsche Bank began the conversation on the slow down in iPhone sales on Monday. Sherri Scribner, the firm’s analyst in charge of Apple forecasts, said that Apple would grow more slowly than the wider market after the huge sales of the iPhone 6.
That’s not the final saw on the matter of iPhone sales, however. Ananda Baruah at Brean Capital released a report on Tuesday that put a $170 price target on Apple and forecast material upside from the company in the coming earnings report.
Mr. Brean believes that Apple “can generate 10% – 15% unit upside” on iPhone shipments over Wall Street’s consensus view through 2016 and 2017. He’s looking for “material unit upside to guidance” with iPhone shipments of 53m in the three months through June.
Scribner is looking for Apple to show sales of 50 million units of the iPhone for the quarter. Apple forecasts sales of 49m for the three month period. Katy Huberty of Morgan Stanley agrees with the 53m figure, but expects the iPhone 6s to see a halt to growth over the iPhone 6 when it’s released later this year.
Performance in the third quarter isn’t what analysts will really be looking for with iPhone sales in the June report, what they really want to know is how Apple sees demand for the smart phone in the years ahead.
Andy Hargreaves of Pacific Crest is decidedly pessimistic about the sales of the device going forward. “He says that he and his team continue to expect iPhone sales to decline in the coming refresh cycle.” He noted that “the majority of people earning $15,000 a year or more in the world will own an iPhone exiting F2015” making the market for the iPhone smaller and smaller going forward.
Looking for the Apple Watch
Tim Cook has hidden the Apple Watch in the Other category in the Apple sales numbers, and it’s not clear if the firm is going to release any data on the device when it shows its third quarter numbers on July 21. Sales of the device are the subject of rampant speculation on Wall Street, and the lack of guidance from Apple has left the vacuum much much bigger than with iPhone numbers.
Scribner of Deutsche Bank reckons that Apple sold 3.9m units of the Watch in the three month period and says that that will propel the firm to sales of 18m by the end of December.
Slice Intelligence said that Apple sold around 2.8m units of the Watch as of mid-June, meaning that the 3.9m worldwide figure quoted by Scribner matches up. Going past the first quarter of sales, many Watch bulls are dropping their view on the device.
Mr. Hargreaves of Pacific Crest reckons that sales of the device will come in at just 10.5m for the full year 2015. Trip Chowdhry of Global Equities Research has been the most bullish Wall Street speaker on the Watch. In a recent report he wrote that “Apple can now easily sell between 40 million and 42 million Apple Watches in CY2015.”
There’s no promise that Apple will actually release figures for the Apple Watch this time around, so all of those with forecasts on Wall Street may find themselves without a ruler to measure by on July 21.
iPad sales don’t matter
With the Watch to distract, there is likely to be little talk about the struggling iPad business when Apple releases numbers this time around. No voice on Wall Street is calling for a surge in sales of the device, and few are concerned with the drop in sales in recent years.
The firm may release an iPad Pro some time later on in 2015 in order to boost enterprise sales, but until something like that happens there’s little interest on Wall Street for the once important category.
Analysts at Merrill Lynch said that Apple will show sales of 9.9m iPads in the third quarter, a stark drop into single figures for a product that was once called the next iPhone. They’re looking for sales to tick up slightly to 10.1m in the fourth quarter, but, like the rest of Wall Street, aren’t expecting sales of tablets to grow any time soon.
KGI Securities analyst Ming Chi-Kuo said earlier this year that sales of the tablet are likely to drop 30 percent year over year in 2015. He’s looking for Apple to release an iPad Pro in order to make the tablet worth something to those with shares, but it will take some time for that product to arrive and boost sales.
Apple underperforms as earnings come in
Apple shares have been on a downward slope since hitting highs after the release of its first quarter earnings numbers. Those figures were way above what was expected from Apple, but the stock market has been fickle in 2015 and has spurned the firm’s success to some extent.
Since hitting highs on April 27, the firm’s shares have lost more than 4% of their value. In the same period the S&P 500 (INDEXSP:.INX) has lost about 2.39%. Apple has become so big that it can no longer beat the global climate as it once used to, and a renewed slow down in China has hit the models of the firm’s demand.
Wall Street consensus says that Apple will earn about $1.77 per share for the June quarter, with revenue of $48.8bn. Mr. Baruah of Brean Capital is looking for more from the firm, with his forecast set at $1.90-$2 for EPS and revenue of $52-$53bn.
Apple itself says that revenue will come in at around $46 to $48 billion, but the firm didn’t guide for earnings in the June quarter. Citigroup Research thinks that earnings will come in at around $1.79 for the quarter, while Katy Huberty of Morgan Stanley is looking for earnings of $1.82.
What way shares will react to the news is unknown, but it’s clear that Apple has been trading based on a longer-term forecast for sales of the iPhone as well as the performance of what Brian White of Cantor Fitzgerald calls Planet Apple, the firm’s new ecosystem of service which includes Apple Music.