Apple Q1 Earnings Report Threw Cold Water On Market Estimates

| Updated
by Sofiko Abeslamidze · 4 min read
Apple Q1 Earnings Report Threw Cold Water On Market Estimates
Photo: Unsplash

The earnings calls of major public companies set ready to shatter the stock market. The next breaking revenue report was made by a prominent iPhone supplier, Apple, which has just reported its financial results for Q1 2019.

Coinspeaker continues reporting on ongoing earning calls of the world’s major tech companies. The stock market is waiting eagerly for Facebook’s stellar service growth while Microsoft amazes investors with excessively high dividend income. The next public company to expose its balance sheet is Apple,  which just announced its financial results for the Q1 2019 fiscal quarter

Apple Lost a Key to Chinese Market

Probably out of the top-notch American companies whose performance is a key address of today’s stock market prognosis, Apple has mostly suffered from the U.S.-China trade stalemate. Being unwillingly engaged in the international conflict rolling out between those two counties, the company that in August has managed to reach the record high market capitalization of $1 trillion, today is cut off from the multi-billion Chinese market.

For Apple, the loss of direct access to such rapidly emerging and booming market as China was almost fatal. The more intense the trading war inflames, the less enthusiastic becomes Apple’s board of directors. Earlier this month the company has already lowered Q4 revenue projections from a previously stated range of $89 billion to $93 billion down to rough $84 billion.

In the meantime, the market indices have been turning red as Apple’s shares have lost 30% of their value compared to the company’s last earnings report made in November 2018. The company CEO Tim Cook cites global trade tensions and weaker-than-expected iPhone sales in China as contributing to the projected revenue shortfall.

Overestimated Products Price Results in Low Sells

However, not everyone agrees that the Chinese problem is a clue to the company’s downgraded performance. It is true that the Chinese market is the company’s third-largest source of revenue, but Cook has admitted that the upgrade cycle to new iPhones in some developed markets that were not affected by any particular trading restrictions has declined as well.

The tendency has a simple explanation — today, when the market is flooded with low-priced but powerful smartphones only true admires of Apple’s products are ready to overspend buying a new version of iPhone-labeled devices.

This might be a reason why a Q1 earnings report is about to lack usual segment metrics. The company announced that this time the report won’t show the figures for unit sales and revenue from the iPhone, iPad and Mac. That means investors won’t have the typical benchmark for growth they’ve come to rely on.

Instead, Apple will provide a pivot earnings report for its products segment, but it’ll take some back-of-the-envelope math to understand the patterns from previous quarters.

What the Earnings Say

The tech giant reported earnings per share of $4.18, and revenues of $84.31 billion for the quarter that ended Dec. 29. Analysts’ estimates were $4.17, and $83.97 billion, respectively. Apple’s flagship iPhone saw its revenue fall 15% from the prior year making $51.98 billion in sales, but analysts were looking for $52.67 billion. However, total revenue from all other products and services grew 19% to $10.9 billion.

All in all, company’s operating income dropped by 11% to hit 23.34 billion, while the net profit wasn’t subject to so heavy decrease falling from 20.1 to 19.96 billion.

Speaking on Apple’s revenue decline Cook said that while it was disappointing to miss its revenue guidance, he was confident about Apple’s outlook. He said the quarter’s results demonstrate that the “underlying strength of our business runs deep and wide.”

In the earnings release statement, he said:

“Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That’s a great testament to the satisfaction and loyalty of our customers, and it’s driving our Services business to new records thanks to our large and fast-growing ecosystem.”

In the midst of China’s breakdown, Apple is not so optimistic about the foreseeable future. It set Q2 2019 guidance in the range of between $55 billion and $59 billion that is lower than the street’s estimates. Nevertheless, despite the revenue and profit slips, Apple’s stock rose in after-market trading. Following the conference call, the stock was up 5.6% to $163.30.

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