The late arrival of new 5G phones caused Apple customers to postpone buying new devices and on Thursday led the company to report the sharpest quarterly drop in iPhone sales in two years.
Apple fell more than 5 percent at one point in over-the-counter trading, removing $ 100 billion (approximately Rs 7.45,300) from its market value.
Since 2013, Apple has been delivering new iPhone models like clockwork every September. However, delays caused by pandemics have postponed the announcement by a month as some devices haven’t shipped yet.
Though booming Mac product and AirPods sales increased total sales and profits above analysts’ expectations, iPhone sales fell 20.7 percent to $ 26.4 billion (roughly Rs.1.96.759 billion ).
Investors expected lower sales of the best-selling product Cupertino, California, but backing was worse than expected, particularly in China, where more consumers have access to 5G than in the US or Europe.
Apple has largely exceeded sales expectations this year, releasing a range of new products and services that its customers have largely embraced during the pandemic.
Apple announced that revenue and earnings for the fourth fiscal quarter ended September 26 were $ 64.7 billion (approximately Rs.4.82.209 billion) and 73 cents (approximately Rs. 50) per share, compared to analyst estimates by $ 63.7 billion (around 4 rupees) 74,756 crores) and 70 cents (around Rs. 50) per share according to IBES data from Refinitiv.
However, the iPhone 12 announcement was postponed to October 13 a few weeks later than usual, which means that the fourth quarter results do not include iPhone sales on the opening weekend.
In an interview with Reuters, Apple CEO Tim Cook said he was “optimistic” about the iPhone 12 cycle based on the first five days of shipping data.
“5G is a once in a lifetime opportunity. And we couldn’t be more excited to hit the market right then,” said Cook. “At least in the US, the airlines are very aggressive.”
The timing of the release of the iPhone 12 resulted in Greater China sales declining 28.5 percent to $ 7.95 billion (around Rs 59,310). Cook said he expected the new 5G devices will help iPhone sales rebound in China.
“What we see in the first five days at the beginning gives us great confidence that China will return to growth in our first quarter,” Cook told Reuters.
Apple didn’t provide a revenue growth forecast, but CFO Luca Maestri said revenue from services and non-iPhone products would increase by double-digit percentages in the first quarter of the fiscal year, in line with analysts’ expectations. He said iPhone revenue would rise too, implying the rate would be in the single digits. Analysts expect iPhone sales to rise 6.45 percent to $ 59.56 billion (around Rs.444.347 billion) in the first quarter, according to Refinitiv data.
Logan Purk, an analyst at Edward Jones, said, “While iPhone sales will grow this cycle, it will be disappointing compared to increased expectations as we don’t believe the 5G is a compelling reason for a surge of upgrades . “
Apple has offset volatile iPhone sales in recent years with steady growth in its service segment, which includes streaming music and television. Service revenue rose 16.3 percent to $ 14.5 billion (roughly Rs 1.08,170 billion), compared to analyst estimates of $ 14 billion (roughly Rs 1.04,440). Cook told Reuters that Apple One, a package of Apple’s paid services, will be launched on Friday.
Cook told Reuters that Apple has 585 million paying subscribers on its platforms, up from 550 million in the previous quarter and closer to the 600 million subscriber target the company set for the end of the 2020 calendar.
Apple’s shares have risen sharply in the past two years as its revenue streams diversified to reduce reliance on the iPhone. Thursday’s stock crash raises the question of whether Apple is even more dependent on iPhone sales than some investors had hoped.
“Apple needs to be able to sustain the upgrade cycle or the stock price will fluctuate as the current valuation leaves no real room for forgiveness,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
According to Apple, sales in its accessories segment rose 20.8 percent to $ 7.9 billion (around Rs.58.934 billion), according to Refinitiv data, compared to analyst estimates from a 13.5 percent increase to 7, $ 4 billion (around 55,204 rupees). Mac and iPad sales rose to $ 9 billion (approximately Rs.67,140 billion) and $ 6.8 billion. USD (about 50,733 billion rupees) compared to estimates of 7.92 billion USD (about 59,089 billion rupees) and 6.12 billion USD (about 45,659 billion rupees). according to refinitive data.
© Thomson Reuters 2020
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