iPhone Sales Were a Downer for Some, But Upside to $500 Brings Cheer
Last week Apple (NASDAQ:AAPL) announced fiscal Q4 2011 earnings, which disappointed investors as Apple could only sell 17 million iPhones compared to more than 20 million iPhones that it sold in the previous quarter. Although the company posted 54% year over year increase in profits and 39% increase in revenues, investors shrugged off this positive, with the stock going down by more than 5%.
The iPhone is such an important business for Apple and accounts for more than 50% of our $500 price estimate for Apple stock that any negative news is bound to hurt Apple’s stock.
See our complete analysis for Apple stock here
- China In Focus As Apple Reports Q2 Results
- Down 10% This Year, Will Gen AI Tools Help Apple Stock Recover?
- Down 5% Over The Last Month, Will Strong iPhone Sales Help Apple Offset Mac Headwinds In Q1?
- After Over A 40% Rally In 2023, Will Antitrust And iPhone Issues Hurt Apple Stock?
- Up 45% Since The Beginning Of 2023, Where Is Apple Stock Headed?
- Up 34% This Year, Will Apple Stock Rally Further Following Q4 Results?
iPhone slowdown reflected in Verizon and AT&T results as well
Apple defended the iPhone’s slowdown during the quarter to rumors of the iPhone 4S before its announcement earlier this month. Even Verizon (NYSE:VZ) and AT&T (NYSE:T) had a comparatively weaker quarter due to the same reason. AT&T and Verizon sold only 2.7 million and 2 million iPhones respectively in the last quarter, compared to 3.6 million and 2.3 million respectively that these companies sold in Q2 2011.
Plenty to look forward to in the next quarter
Although the last quarter’s results have not been up to the market’s expectations, there is plenty to look forward to in the next quarter. Apple released iPhone 4S a few days back, and we are quite optimistic about its prospects. Our bullishness is reflected in the 25% premium of our price estimate for Apple stock over market price.
During the earnings call, Apple’s CEO Tim Cook was quite optimistic about iPhone 4S prospects, with Apple having already sold 4 million units during the first three days of its launch (see Adjusting Apple’s Estimates to $500 Post Earnings).
AT&T’s CEO echoed this optimism and was even more bullish on iPhone 3GS prospects, which Apple made it free with contract: [1]
We have another device that I think is going to dramatically change those people that are on smartphones and quick messaging devices, the 3GS, which is free with a 2-year contract. We’ve seen a tremendous, tremendous demand for that device even though it’s a generation old. And actually, we’re getting more new subscribers coming on the 3GS on the average than other devices. So we also have an inventory sold out on that device.
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- AT&T Q3 2011 earnings conference call transcript, SeekingAlpha, October 20th, 2011 [↩]