Apple Inc. (NASDAQ: AAPL) is anticipated to report its worst quarter for the growth of its iPhone device since it was first rolled out in 2007, with market analysts estimating a decline in sales of up to 20 percent. Moreover, AAPL shares have slumped by more than a fifth over the past 12 months.
The iPhone, which is the flagship product of the Cupertino, California-based tech giant, accounts for approximately two-thirds of its sales and a massive portion of Apple’s profits. With this, it will surely be the focus of the commentary regarding the earnings results for the third quarter, as shareholders evaluate the effect of the slowdown in the smartphone industry.
Market analysts are expecting at least 40 million iPhone sales within the given period, representing a 16 percent drop on a year-on-year basis. Meanwhile, there are also some analysts who estimate 38 million iPhone sales, equivalent to a 20 percent decline.
With muted expectations for the next iPhone model, which is scheduled to be released in the month of September, a number of analysts are predicting a new super cycle of upgrades starting in September next year.
Aside from the iPhone device, the sales of the Mac, Apple Watch, and iPad are also broadly anticipated to plunge. During the early part of 2016, the Cupertino, California-based tech corporation attempted to divert the attention of market analysts on Apple’s services business, as digital products including Apple Pay, App Store, and Apple Music are growing at a rapid rate and are showing less fluctuations in comparison to the rest of the company’s line-up. For the given period, Morgan Stanley estimates growth of 18 percent.
The services of the tech titan also play a significant role in terms of customer loyalty. According to UBS, “Although the product cycle is soft, the ecosystem is strong.”
“Most of the debate is about when, not if, iPhone customers will upgrade,” UBS further stated in a note.
During the recent earnings call, the Apple CEO Mr. Tim Cook has given a hint that the company is looking for more acquisitions. In the recent months, the tech giant have allegedly considered acquiring the music service called Tidal and Time Warner.
It is expected that much of the focus will be on the company’s outlook for the September quarter, which normally includes its first weekend of new iPhone sales. Piper Jaffray analysts estimates iPhone sales for the fiscal fourth quarter to reach 44 million, with total revenue guidance within the $43 billion to $45 billion range, as well as gross margins clocking in at 37 to 38 percent.
Regardless of the possibility that the Apple Watch will get an update in the month of September, analysts at Piper Jaffray stated that investors are not anticipating much about this.
According to the Piper Jaffray analysts, “It’s difficult not to view the Watch as an early flop, although we had expected the product to ramp [up] slowly in the beginning.”
As of 7:00 AM GMT -4 on July 26, the AAPL stock is changing hands at $97.34, down by 1.34 percent or 1.32 points.