Published: Mon, November 05, 2018
Industry | By Terrell Bush

Apple's Tempest In A Teapot Earnings Report

Apple's Tempest In A Teapot Earnings Report

Shares of the world's most valuable public company fell 7.1 percent on Friday after revealing stagnant iPhone sales and forecasting revenue for the holiday quarter that fell short of Wall Street expectations at the midpoint. But the growth in the number of iPhone units that the company sold was flat, with the revenue growth largely coming due to increase in the average selling price of the iPhone and momentum with Apple services.

Apple sold 46.9m iPhones in the quarter, generating sales of $37.2bn, but eyebrows have been raised by escalating price tags which are stretching the wallets of even the most devoted Apple fans.

Apple's cautious forecast could accelerate investor fears that have in turn erased stock market gains for much of the year. The results were good, with Apple raking in record revenue - up 18 per cent quarter-on-quarter, and 20 per cent year-on-year.

However, Apple finance chief Luca Maestri claimed the number of units it sold was "less relevant today than it was in the past" because it now sold a wider range of products at different prices.

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Apple's sales guidance for the critical holiday season also spooked investors. Apple had introduced the iPhone XR, made of aluminum, along with two other models, the XS and XS Max, in September this year. The nearly $10 billion revenue is another record figure for the category and is expected to increase more as Apple pours in more efforts in offerings such as digital content and payments.

The change is in line with how Apple already treats other hardware sales - such as those of the Apple Watch and HomePod - which it groups together rather than revealing sales in individual categories. What makes the scenario worse for Apple is, this is the fourth consecutive quarter when the Cupertino giant has witnessed either negligible growth or absolutely no growth in the quarterly sales of iPhone. The iPhone still looms large over Apple's fortunes, accounting for more than 60 percent of revenues.

The company was criticized for its decision to no longer disclose iPhone related sales figures, implying that the company now believes that iPhone sales have peaked. The company says the quarterly numbers and prices didn't necessarily tell investors how strong its business has been.

"Apple will have trouble maintaining its recent valuation bump if the market clearly sees declines in shipments", said analyst Richard Windsor on his Radio Free Mobile blog.

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