Four Factors To Watch As Apple Reports Q4 Results
Apple (NASDAQ:AAPL) is expected to publish its fiscal fourth quarter results on November 1, reporting on what is likely to have been a transitional quarter for the iPhone business, which saw the launch of the new iPhone XS towards the end of the quarter. Apple has guided for revenues of $60 billion to $62 billion for the quarter, implying an increase of between 14% and 18% compared to last year, with gross margins projected at 38% to 38.5%. Below is a quick run-down of what we will be watching when the company publishes earnings on Thursday.
Impact Of iPhone XS And XS Max
Apple’s flagship product line should see year-over-year revenue growth, driven by models such as iPhone X and iPhone 8, which are likely to have seen some promotional activity by carriers, and to a lesser extent the new iPhone XS and XS Max devices, which were on sale for less than 10 days over the last quarter. We will be closely watching the company’s ASP metric, in particular, considering Apple’s latest devices are priced ranging from $1,000 to $1,450.
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Services Business Updates
Apple’s Services business has remained the company’s fastest-growing segment in recent years, with revenues rising by almost 31% year-over-year during the fiscal third quarter. Key drivers of the business have been higher sales from the app store, an improved distribution footprint for Apple Care services and a rising number of subscriptions made on its platform (300 million subscriptions as of Q3). We will be looking for updates on the growth of this business.
Will China Sales Slow Down?
Apple’s business in China will also be a key factor to watch. While Apple’s revenues from Greater China grew by 19% year-over-year during Q3 FY’18, there is a possibility that things could be more mixed over the fourth quarter. For instance, Goldman Sachs has indicated that consumer demand in China could be rapidly slowing down, with smartphone sales over the last quarter likely to have dipped 15% year-over-year. That said, Apple could partly offset this weakness with the launch of the new iPhones, which are likely to find favor with customers given the availability of larger screens and a new gold color option.
Holiday Guidance In Focus To Gauge iPhone XR Impact
The holiday quarter is seasonally the strongest quarter for Apple, and this year is likely to be more important for the company considering that it is set to launch the new iPhone XR, which is possibly the most important iPhone launch since the iPhone 6 in 2014. The new device could prove popular with customers looking for a fresh-looking Apple device, without having to spend $1,000+ on the higher-end models in the X line. Margins on the device could also be attractive, considering that the device uses cheaper LCD screens and also removes the more expensive 3D touch technology that has been a staple of previous iPhones. We will be closely watching Apple’s holiday guidance to gather how the new iPhones are likely to impact the company’s performance.