Reports Tuesday 1 May after closing
Revenue forecast: $ 60.95B, EPS: $ 2.68
Ahead of Apple & # 39; s (NASDAQ 🙂 Q2 2018 profit report on May 1, the market seems to have come to a consensus on one thing: the computer and media device housing, which produces the iconic iPhone, is struggling with growing.
Analysts at some of the largest Wall Street research firms are lowering their iPhone sales and are predicting more downside for the company’s stock price. These bearish sentiments have weighed heavily on Apple’s stock, pushing it down almost 10% since the mid-week peak reached 52 weeks, blurring the future prospects of the technology giant.
AAPL 2015-2018
Smartphone Super Growth Cycle Ending?
The biggest threat to the longevity of Apple’s “Super Growth Cycle” is the worldwide trend in smart phone sales, showing that consumers are no longer enthusiastic about recent upgrades to devices from all manufacturers, reflecting the recent trend of the flipping of their smartphones every cycle is delayed. Instead, they now choose to hold older, existing devices for longer.
Worldwide sales of smartphones fell for the first time at a record level in 2017, according to a recent report from the International Monetary Fund with 1.5 billion units sold last year. Apple sells most of the new iPhones to those who want more advanced models, making the sale of the company very sensitive to how often iPhone owners are willing to dump their older phones in favor of acquiring the newer models.
If this trend continues, this will have a major impact on smartphone producers who rely heavily on this product segment to stimulate the growth of their total business. Apple & # 39; s iPhone sales generated about 70% of the company’s revenue in the. Last year, iPhone sales represented more than $ 141 billion in revenue for 62% of total revenue.
If we accept that the growth of smartphones has reached a cyclical peak and no innovation from Apple will encourage consumers to buy more of their gadgets, why should you invest in Apple shares today?
In the short term we think this argument is logical. Apple shares will not perform better if the company finds it difficult to continue with its explosive iPhone sales growth. But if your investment horizon is five years or longer, we see every weakness in Apple’s stock as an opportunity to buy. This is why.
Countering iPhone sales weakness
Apple’s recent strategic steps indicate that the company is acting quickly to counter the potential weakness in its iPhone segment. The services activities, which include income from such things as the App Store, AppleCare guarantees, iCloud and Apple Music, are now the company’s second largest revenue generator. Last year it generated about $ 30 billion in the past fiscal year. Apple has the potential to surprise the market on this front again.
If Apple achieves more sales from other divisions, persuading consumers to buy their products as a way to seamlessly integrate solutions, the bearish spell on inventory is soon over. For long-term investors, there is another reason to be excited despite the negativity surrounding Apple’s stock.
The company plans to further increase the capital return plan, which is already the largest in company history. Apple’s cash rose to $ 285 billion, contributing to the pile of offshore money the company plans to repatriate under the new US tax legislation.
For more information about the plans to buy shares that could be disclosed during Tuesday’s earnings call. According to some estimates, Apple could boost its share buyback to $ 400 billion of the $ 300 billion current authorization. That would mean that more than a third of the company will be bought back in the coming years, sending an extremely bullish signal to long-term investors who aim to achieve a decent return through dividends and capital growth
