Apple Expected to Post First Revenue Decline Since 2019

Analysts expect Apple It will report its earnings on Thursday, and it will be reporting its first year-overyear revenue decline since the March quarter 2019. There are several contributing factors.

When its primary assembly plant in China was closed, the company couldn’t produce enough iPhones of high-end design. shut down During Covid lockdowns, it lasted for weeks. Many customers in many areas noticed that Apple didn’t deliver on its promises as early as November. Christmas delivery A new iPhone.

Apple offered a rare gift Warning to Investors This month, explaining that production problems could result in lower shipping than expected “previously anticipated.” This data point caused many analysts to reduce their estimates of the stock.

“We believe the peak impact of the disruptions was felt in early to mid November as wait times hit an extreme level (link) as the wait time in the US for the 14 Pro and 14 Pro Max reached 34 days while wait time in China at the high-end hit 36 days,” David Vogt, UBS analyst, wrote January.

Refinitiv analysts polled expect Apple to report just above $121 billion in December quarter revenue, which would be a slight drop from the $123.9 billion reported a year ago.

The problems aren’t just Apple-related. As consumers and businesses process the pandemic sales and cut costs, the smartphone and PC markets are in decline.

According to IDC the smartphone market experienced a 18% decline in shipment volume in the fourth quarter. worst decline ever recorded Market research firm. The market for PCs fell 28% The fourth quarterAccording to the company, this is a record. However, many investors believe Apple is outperforming its competition even in contract markets.

“While the state of consumer demand remains a near-term concern, we believe the underlying drivers of Apple’s model – a growing installed base and spend per user – remain intact, and that the strength/stability of Apple’s ecosystem remains undervalued,” Erik Woodring, Morgan Stanley analyst, wrote earlier this month.

Here are the consensus estimates from Refinitiv:

• Revenue: $121.19 Billion
• Earnings per share: $1.94 Per Share
• iPhone revenues: $68.29 Billion
• iPad revenue: $7.76 Billion
• Mac revenue: $9.63 Billion
• Other products revenues: $15.26 Billion
• Services revenue: $20.67 trillion

Apple has not provided guidance since 2020 due to uncertainty caused by the pandemic. However, Apple does usually provide data points to help analysts get a sense for how it is doing.

Investors are interested in finding out if the supply of iPhone 14 Pro models has increased in the March quarter, or if the shortage will continue to drive demand.

According to consensus estimates, analysts expect sales of just $98 billion for the March quarter. This is a slight increase year-over-year.

“While we believe it’s well understood that Apple’s March quarter revenue should decline at a less-than-seasonal rate due to the pushout of iPhone demand from the December quarter to the March quarter,” Morgan Stanley’s Woodring wrote a note last Wednesday. “the consumer electronics spending backdrop remains challenging, with tablets, PCs and more discretionary products (i.e. wearables) all facing continued demand headwinds.”

Apple could warn investors that if the confidence of consumers erodes due to rising interest rates and shrinking savings, the March quarter may be slow.

“While we don’t expect the resumption of detailed guidance typical of Apple earnings prior to Covid, we expect the commentary to be cautious regarding Product demand across the board,” Vogt of UBS wrote.

Investors looking for a silver lining in a cloudy management commentary might be interested to consider Apple’s services business. This is a profitable and steady growth area that has been around for many years. However, there were several data points that showed Apple’s fourth quarter performance, including its own. App Store payoutsThe data suggests a slowdown in AppStore growth. Analysts disagree on how severe it is.

While the App Store is the most important component of Apple’s services, it is only one aspect of the business. The other parts of the business include online subscriptions, warranties, and search licensing fees. Apple shares may rise if Apple TV+ and Apple Music generate a greater percentage of Apple’s revenue. Tom Forte, a Davidson analyst, wrote January.

Refinitiv estimates that services will grow by 5.9% in December quarter to $20.67 trillion.

Analysts will also monitor the dollar’s strength to determine if Apple continues to suffer, as so many of its sales are from overseas. The dollar was weaker than the British pound and Canadian dollars, as well as the Japanese yen, during the December quarter. Apple management stated previously that the strong dollar would cause a 10 percent drop in sales growth.