Apple is set to report fiscal fourth quarter results on Thursday, October 27. I have written a preview article in the Mac segment so far. Today, I turn my attention to what is probably (once again) the star of the show: the iPhone.
If, on the one hand, I think the results of Mac alone will be insufficient to move Apple (AAPL) – Get the report from Apple Inc. stock in either direction, the opposite is probably true for the iPhone. Below, I discuss how well the segment may have done in the summer term and what to expect in the future.
Read more about Apple Maven: Apple’s fourth quarter earnings: The countdown begins, here are the key numbers
Apple’s iPhone: Probably Strong Numbers
As a quick summary, analysts expect Apple to deliver total company revenue growth of 7% in the fourth fiscal quarter, coupled with EPS of $1.27 that would remain about the same as prior year.
The iPhone accounted for 52% of Apple’s sales in fiscal 2021. With the final quarter of the year starting next week, I expect this share to rise to almost 54% in fiscal 2022, despite the predictions from a few years ago that smartphones will soon enter their life cycle of decline.
The research company Canalys has already given us a little glimpse in smartphone shipments in the Q3 calendar. The bottom line: The industry as a whole is struggling to grow amid a period of high inflation and rising interest rates, with the exception of Apple. See the table below.
In the summer period, smartphone unit sales fell 9% year-over-year, the worst third calendar quarter since 2014, as consumers cut back on discretionary spending. But notice that Apple increased its market share from 15% to 18%.
Quick math on the back of the napkin suggests that Apple managed to increase iPhone shipments by nearly 10% year over year in the September quarter. This is an outstanding number and yet another indication that the company’s device has been a huge hit with tech consumers.
As the old infomercials would say, “but wait, there’s more!”
There have been many reports suggesting lately that the Pro version of Apple’s new iPhone 14 (and probably the old iPhone 13 too) has been selling much better than less expensive models. This probably means that the iPhone’s ASP, or average selling price, will also improve this time around due to a more favorable mix towards the more expensive Pro models.
Put the pieces of the “price x volume = revenue” equation together, and it’s clear that the iPhone is likely to impress in the fiscal fourth quarter. How much is a harder question to ask, but I’m betting on 12% to 15% revenue growth on top of the 47% reported last year.
Read more about Apple Maven: Apple’s fiscal fourth quarter earnings preview: How will the Mac perform?
iPhone: Will it just be Q4 sales?
With that being said, I think the iPhone earnings day discussions will transcend the most recent quarter’s results.
Lately, analysts have been reporting a mix of bad and good news regarding iPhone 14 production. On the one hand, Apple appears to be increasing Pro inventory to meet demand, as mentioned above. However, the new Plus it already seems to be a fiasco.
CEO Tim Cook and CFO Luca Maestri will almost certainly have to answer questions about the first few weeks of iPhone 14 sales during the earnings call. As usual, I expect both to sound bullish on demand and execution, but investors will read between the lines.
Expect that conversation to be as important as the fiscal fourth-quarter numbers printed on the AAPL earnings report.
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(Disclaimer: This is not investment advice. The author may be long on one or more stocks mentioned in this report. Also, the article may contain affiliate links. These associations do not influence editorial content. Thank you for supporting to Apple Maven)