Apple’s own guidance for the second quarter is that its sales would be down year-on-year and it is widely expected to announce this when its reports its second quarter performance soon.
All through the year, there has been in the negative headlines. For example, a drop in iPhone sales in China forced the company on January 2 to forecast a drop in sale by $7 billion compared to its previous projection.
And since then, the company has taken a number of decisions that are rare for its standards. It includes cancellation of a previously announced product, not launching any new hardware product in a invite-only event at its campus while also omitting critical details of those that it did announce. It also settled a long drawn legal battle Qualcomm and made an undisclosed payment to the chip manufacturing company which according to analysts is in billions.
And despite all of these, there has been little impact on Apple stocks. It is in fact going up.
Currently Apple stocks are up 43 per cent since the announcement of the disappointing first quarter results where the company reported drop in revenues. The price target of Apple stocks was raised by a number of Wall Street analysts covering it last week.
The investors are slowly accepting the fact that the phenomenal growth in iPhones is reaching a plateau and are likely to decline year-on-year even though Apple has not been reporting shipment numbers for its iPhones since last year. According to estimates of Morgan Stanley, the company would end up selling 42 million iPhones this quarter compared to 52 million sold by it in the same quarter a year ago.
“There’s nothing good you can say about fact that they stopped reporting unit sales,” D.A. Davidson analyst Tom Forte said. “Looking at our model and our projections for iPhone sales, as it pertains to the March quarter, we’re not looking for anything magical on iPhone or on China,” Forte said.
Despite the declining iPhone sale and shipments, the rise in Apple stocks is being attributed to investor acceptance of Apple’s contention that it is no longer company that makes iPhones only, even though that product still accounts for more than 60% of the total revenues of the company. Apple and its investors now consider the company to be one that is more focus on offering a range of online services that allows for repeated customer billing. This makes the company to be on the same plane as the likes of Amazon, Google, or Facebook – considered to be a pure tech company.
The event that it held in March at its campus in March this year was used by the company to send that exact message where the power of creativity was given significant focus and it was devoid of any launch of any new hardware . nor pricing or release dates for most of what it talked about.
While calling that event “strange”, Forte said that it helped investors start to “think about life after iPhone.”
“Investors have bought hook-line-and-sinker into the notion that services revenue is going to be a fast growing number for Apple,” he said.
“In our view, investors still don’t fully appreciate the strength of Apple’s platform with iOS users more engaged with mobile services and spending 10x Android users on mobile apps,” Morgan Stanley analyst Katy Huberty wrote in an April note.
(Adapted from CNBC.com)