Daily Management Review

Apple announce weak forecast for its 4th quarter


07/22/2015


In spite of tapping into the Chinese smartphone market, where it performed “spectacularly”, Apple’s performance did not meet analysts’ expectations and it saw share price drop by 7%.



With Apple publishing its fourth-quarter results, trading in its shares took a southern turn as results did not meet expected forecasts. Fourth quarter revenues were far short of analysts’ estimates and many analysts attributes the results to missed iPhone sales targets.
 
Once the news of its results were out, Apple shared dropped to $121 from their previous closing of $130.75. The fourth quarter results have not matched estimates in spite of their sales performance in China, which has more than doubled from last year.
 
In an interview, Luca Maestri, Apple’s CFO, was very with the way sales targets were being met in China. She said Apple’s sales figures in China were "spectacular". In order to capitalize on these forward momentum, Apple plans on opening 40 stores in China in a year’s time.
 
Without going into specifics, Maestri was optimistic that the Apple Watch would beat market expectations. Sales of Apple watches, he said, have been comparatively more than iPads or iPhones over a similar period of time.
 
Apple has revealed that during the third quarter 47.5 million iPhones were sold, which is 35% higher than the previous year figure. Some analysts had expected even higher sales figures of around 49 million.
 
Having viewed the data provided by Apple, Colin Gillis, an analysts for BGC, said the results were indicative of two vulnerabilities: the first being that Apple was very dependent on the sales of its iPhones and the second, the growing Chinese market was very important to the strength of its sales.
 
"Where are you going to find growth in the world?" he asked. "You've done an amazing job sucking all the smartphone profits into your balance sheet, but smartphone sales are slowing. What's going to happen when the industry matures, just like PCs did?"
 
Apple’s iPhone 6 and 6 Plus, had shattered iPhone sales records on their individual debut. They are already 10 months old. In order to sustain a forward momentum, it will need to quickly release another product.
 
Apple had a bad day, not only did it have to announce its flagging fourth quarter results, on the software side too, it saw its iTunes Store, App Store and its Apple Music suffer from disrupted service.
Apple’s Net Income rose to $10.68 billion, from their previous standing of $7.75 billion. Viewered differently the prices of its shares rose from $1.28 to $1.85.
References:
http://www.reuters.com/article/2015/07/22/us-apple-results-idUSKCN0PV2AT20150722







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