Apple is on pace to post its worst day in more than two years on the back of its fourth-quarter earnings report.
— Nehal Chokshi, tech analyst at Maxim Group, says Apple’s decline in iPhone shipments poses an immense risk to its strong services growth. “The No. 1 thing the story is hinged upon is iPhone installed base growth,” he said. “If that installed basis [is] low single digits to declining how can you support a 15x to 17x multiple? But if you don’t have that iPhone installed base [figures], then how do you know?”
— Dan Ives, managing director at Wedbush, says it was the method in which Apple disclosed its decision to withhold unit numbers, not the action, that put increased pressure on the stock. “They wanted to put [unit growth] into an overall revenue number to get the Street more on the sort of same page. I believe this is part of the vision of the coming years,” he explained. “The way they did it was a gut punch — I mean, to come out of left field 90% of the way through the conference call. I think that’s the issue with the knee-jerk reaction you see in the stock.”
— Cyrus Mewawalla of Global Data says Apple’s ability to increase its average selling price for the iPhone should help offset the increasing decline in shipment numbers. “They’ve been growing now for 8 consecutive quarters and $63 billion of revenue,” he said. “In the short term I think Apple is quite strong. I can’t see any near-term competitor knocking them out, and the key figure in these results confirms that to me the ASP going up 28 percent to $793.”
— Gene Munster, founder of Loup Ventures, says the changing focus on Apple as a service will ultimately prove to be a positive for both the company and investors. “There’s more room to go, because simply the utility of these phones is great for consumers, and they recognize that. What investors are really going to focus on is how service margins are really going to progress,” he explained. “I think the grade that investors will give the Apple services segment will be predominantly driven off its profitability, which is, we think, should be a slowly rising trend.
Bottom Line: Apple’s decision to withhold unit numbers will be a significant catalyst moving forward, but the company’s overall strength should keep any resulting downside limited.