Apple’s next forecast to likely show sales are still falling

Bloomberg

Anyone looking for an upbeat forecast from Apple Inc is likely to be disappointed when the company’s results were expected on Tuesday.
The company is set to report its first holiday quarter sales decline since the iPhone launched, and analysts are predicting revenue will keep shrinking in the current quarter.
In early January, Chief Executive Officer Tim Cook forecast holiday quarter revenue of $84 billion, well below an initial forecast of between $89 billion and $93 billion. He blamed the miss on lower-than-expected iPhone sales, particularly due to an economic slowdown in China.
Cook and Chief Financial Officer Luca Maestri were expected to take questions about Apple’s recent struggles during a conference call later on Tuesday.
China, the world’s second-largest economy, recently revealed the slowest expansion since 2009, and is locked in a bruising trade war with the US Apple gets about a fifth of its sales from Greater China, and iPhones are assembled there.
Chipmaker Nvidia Corp added to concern about the China technology market on Monday when it cut its outlook for sales in the quarter ending in January. Deteriorating economic conditions, particularly in China, hurt demand for Nvidia’s gaming processors, while data-center revenue also missed expectations.
For Apple, the slowdown is expected to continue with fiscal second-quarter revenue of $59 billion, according to analyst estimate data compiled by Bloomberg. That would be a year-over-year decline of about 4 percent.
Many on Wall Street are over-estimating iPhone sales in the fiscal second quarter, according to UBS analyst Timothy Arcuri.
A key question is how average selling prices hold up, given Apple’s need to respond to “flagging demand,” Arcuri wrote in a research note.
Apple recently stopped disclosing iPhone, iPad, and Mac unit sales, but that hasn’t stopped analysts from trying to figure out those numbers. Four analysts are projecting, on average, 64.8 million iPhones sold in the holiday quarter for a selling price of about $806 per unit.
The latest iPhones, the XS and XS Max, cost up to $300 more than the 2017 iPhone X, despite offering few major feature upgrades. Some analysts also said the $749 iPhone XR was too expensive compared with mid-range phones from competitors like Huawei Technologies Co, Xiaomi Corp, and Vivo in China. Apple has tried to tackle this by offering generous subsidies if customers trade in older iPhones for new models.
While Apple shares recouped losses from a rout that followed its forecast cut, the stock is still down roughly a third from a record high in October, erasing about $375 billion in market value.
There’s a “low bar” heading into Tuesday’s results because “positive sentiment on Apple has waned” due to reported iPhone production cuts, Katy Huberty of Morgan Stanley said. One positive area has been Apple’s Services business. Cook said in early January that this division generated a record $10.8 billion in revenue during in the holiday quarter. Still, Huberty said that represents a deceleration in growth when taking into account a recent reclassification of some sales numbers by Apple.