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What to expect when Apple reports profit this week

Apple has returned to favor on Wall Street, but its latest financial results are expected to reveal a continuing slump in the iPhone, which shocked investors early in the year.

Shares in the consumer technology giant have added approximately $ 300 billion from their lows after the previous January earnings warning, at one point last week getting to 1 percent of the 1tn $ brand the first company exceeded last summer. this image dominates again when Apple announces its latest quarterly data on Tuesday.

Wall Street expects iPhone revenue to grow 17 percent compared to the previous year, even worse than 14 percent in the previous quarter. The company is expected to leave the company with a 5% drop in total revenue to $ 57.4 billion, corresponding to a drop in the previous three months, and a sharp contrast to the 16% growth in the previous fiscal year, when the iPhone X cycle made Apple the first company worth more than $ 1tn.

The change in Wall Street's mood in recent weeks reflects growing confidence that the January iPhone shock represented Apple's one-time adjustment to the most prominent business, rather than a steady deterioration.

Analysts have also shifted more attention from the telephony business to other parts of Apple's operations that have the best chance to return the company to growth. According to Goldman Sachs, the smartphone, which has defined Apple's business for more than a decade, will only be 54% of revenue in the last quarter, compared to over 60% in recent years.

The stabilization symptoms for iPhone follow a small price cut in some international markets, helping to offset some of the negative effects of last year's pricing actions with the latest mobile phones. The successful launch of the iPhone X in 2017 enabled Apple to increase the average selling price of its smartphones by more than $ 100, to $ 766 over the next 12 months. But the attempt to repeat this trick last year dropped because consumers put new models in sight and Apple fell into a sharp drop in consumer spending in China.

After major losses in 2018, Apple's market share in China recovered during the first quarter of 2019, said Neil Cybart at Avelon. Apple's financial management of the quarter, revenue of $ 55 billion – $ 59 billion, may not be reflected in the fourth quarter recovery, adding that it will have a positive surprise on Tuesday.

The decline in iPhone sales over the past six months is expected to affect the guidance that Apple reports in the third quarter of its fiscal year until the end of June. Most analysts expect revenue of $ 50 billion – $ 52 billion, compared to $ 53 billion in the same period a year ago. Profit margins on the iPhone could also slip in the current quarter after Apple's legal war with Qualcomm was settled. clients of Goldman Sachs.

New conditions may include Apple, which pays higher pay for equipment, delivered analysts, and identified the impact as "difficult to estimate." Meanwhile, with less immediate concerns about the iPhone, investors have focused more on other parts of Apple's business with another wave of growth. The company recently introduced a number of new subscription services, although most of them, including premium video services, have not yet implemented. According to Morgan Stanley analysts, last quarter's revenue increased 16 percent to $ 11.4 billion. who were among those who urged investors to look behind the iPhone. This would account for about 20% of Apple's revenue and a substantially higher profit share due to a higher margin. Apple Watch and devices such as HomePod are growing even faster with sales that Morgan Stanley is likely to reach $ 5 billion.

In another catalyst for the company's rising share price, most analysts expected Apple to announce this week that it is strengthening its share buyback program and dividend payments. The company announced that since 2012, when it began returning capital to shareholders, a total of $ 310 billion. , and by the end of last year spent $ 247 billion. – Copyright The Financial Times Limited 2019.

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