Market News & Analysis
Apple buyers shrug off market retreat
Ken Odeluga November 1, 2019 6:53 AM
iPhone sales keep falling but handsets remain key to a strengthening outlook
Reports that Beijing now doubts that a long-term trade deal can be reached with the U.S. anytime soon have brought the recent risk-seeking drive to a juddering halt. Yet Apple stock has remained aloft all session, returning to near-record levels hit last week. It was also the only gainer in the S&P 500 tech hardware sub-sector half way through Thursday’s U.S. session. In other words, investors are holding Apple, by and large, whilst retreating from most shares.
The $1.1 trillion-dollar group’s much awaited fourth-quarter report was certainly solid, in headline terms, crushing forecasts on the top and bottom line. Apple also paced expected revenues from services, the segment it sees as its chief growth driver. Yet Q4 details left quite a bit to be desired.
- iPhones also showed a hefty shortfall on a year ago. Sales of $33.36bn were 10% below the same 2018 quarter
- Critical Greater China region sales fell 2.4% on the year to $11.13bn
- iPad revenues were ahead of estimates, but Macs missed badly, even accounting for a challenging comparison with Q4 2018
Yet Apple’s iPhone—still its top revenue earner—holds the key to renewed investor confidence. At a simple level, Q4 sales were comfortably above forecasts by about $1bn. Looking deeper, Wall Street is getting in gear with Apple’s dual strategy aimed at juicing a huge iPhone installed base and persuading owners to upgrade more quickly. Signs that this strategy is beginning to work include an overall sales rise and a raised top-line forecast for the key holiday period. The midpoint of new Apple guidance is $87.5bn. The Street’s Q1 view till last night $86.51bn.
Initiatives like an interest free monthly repayment programme over 24 months linked to Apple Card are set to be launched to reduce an upgrade cycle that has grown from about 20 months on average over the last three years to almost two and half years currently, according to UBS. Sales forecasts for new wearable technology products—chiefly, augmented reality glasses—are also compelling. So together with a stellar quarter in services, a more convincing overall top-line outlook is being bought. multiple investment bank upgrades were seen in the wake of Wednesday’s results.
The lack of a discernible base in the decline of iPhone sales should perhaps worry investors more. Continued declines will constrain profit growth. As well, the shares now discount strong a strong 2020 product cycle in a difficult to predict trade outlook, let alone an Apple-specific one. Apple upside risks have improved, but downside drags remain clear and present.
Read an in depth technical chart outlook for Apple by our Chief Technical Strategist for Asia, Kelvin Wong, HERE
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.