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Cupertino tech giant Apple Inc (NASDAQ:AAPL) is heading for a crucial earnings reports tomorrow. The company doubled down on efforts to make older iPhone users upgrade, and earn more from its existing user base last year as it became clear that revenues from the iPhone were showing no signs of returning to previous growth levels.
Therefore, as we head into the company's earnings report for the first fiscal quarter of 2020, non-App Store Services and iPhone revenue are two things that need to be on everyone's mind. They're also on the mind of investment bank Deutsche, who's out with a fresh report today suggesting that iPhone unit demand will outperform Wall Street expectations. Take a look below for more details.
Deutsche Expects Apple To Beat Wall Street Expectations With iPhone Unit Demand But Fails To See Improvement In Fundamentals
Today's report from Deutsche Bank is of a mixed sentiment. While it does expect Apple to beat Wall Street estimations for iPhone unit shipment, it still goes on to state that this improvement will not translate into a gain exhibited by the company's fundamentals. Apple's iPhone 11 shipment reports have been contradictory, as some have claimed a growth propelled by the iPhone 11 while others have suggested that the company's problems in China resurfaced in December.
Based on these beliefs, Deutsche analyst Jeriel Ong increased the bank's Apple price target by $10 to $290. The Cupertino tech giant closed at $311.80 on Friday and is trading at a share price of $309.57 at the time of writing, down by 2.50% from the aforementioned close. The bank's report comes following Apple's report of record sales on the App Store during the last week of 2019 and New Year's Day. It also follows the outbreak of the coronavirus in China that's started to show its impact on companies with significant operational and other ties to the country.
In December, multiple reports from China have claimed that the iPhone 11 is not performing as well as Apple would have hoped it to in the country. The first of these reports, from investment bank Credit Suisse suggested that Apple's iPhone shipment drop in China carries with it the potential to impact the company's revenue by as much as 15%. Data analyzed by Credit Suisse suggests that overall iPhone shipments dropped by 10.3% in October, with the drop accelerating to 35.4% in November. For the three months between September and December, overall iPhone shipments in China have dropped by 7.4% believes the bank.
However, data from China Academy of Information and Communications shows that in September and October, 10 million iPhones were shipped in the country, with the shipments exhibiting a growth over previous figures. But, this trend was not mirrored in the subsequent months, and given that the Chinese New Year falls in Apple's second fiscal quarter, an uptick in demand from the holiday season might not be fully reflected in the company's previous fiscal quarter.
Data from research firm Canalys shows that Apple's iPhone shipments marked for 5.2% of the overall Chinese market in 2019's third calendar quarter. Apple (NASDAQ:AAPL) shipped 5.1 million smartphones in the quarter, marking for a 2 million year-over-year drop. The company is expected to reverse this trend through stronger retail partnerships and stronger camera features on a lower price point. Apple cut the entry price on the iPhone last year and added an additional camera sensor on the LCD-based iPhone 11. The smartphone is believed to further dilute the company's average selling price for a lineup that saw ASP jump to new records following the launch of the tenth-anniversary iPhone X.
Thoughts? Let us know what you think in the comments section below and stay tuned. We'll keep you updated on the latest.