iPhone demand in question despite record sales

By TechnologyFOXBusiness

Apple 4Q earnings beat revenue estimates at $88.3B

FBN’s Ashley Webster reacts to Apple’s fourth-quarter earnings.

Apple (NASDAQ:AAPL) on Thursday reignited concerns over waning demand for the iPhone, even as the Silicon Valley behemoth revealed its best-ever quarterly smartphone revenue.

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Analysts have raised questions over consumer demand for new iPhones and whether Apple has become too reliant on its venerable device. The iPhone, which comprises about two-thirds of Apple’s overall sales, buoyed the company in the latest quarter. But Apple offered a disappointing forecast for the current quarter, even after Wall Street dampened its expectations amid reports that the new iPhone X has struggled to win over customers.

During the three-month period ending Dec. 30, the number of iPhones sold dipped 1% to 77.3 million devices. Analysts had called for quarterly iPhone sales of 80 million units. Apple projected overall revenue of $60 billion to $62 billion for the current quarter, missing an already lowered estimate of $65.7 billion.

Apple shares reversed their losses in after-hours trading, rising 3.5% to $173.70.

The Cupertino, California-based company benefited in its fiscal first quarter from the November launch of its newest smartphone. At a starting price of $1,000, the iPhone X helped push smartphone sales 13% higher to $61.58 billion. Total revenue also climbed 13%, hitting $88.29 billion and meeting Wall Street’s estimate.

Profits jumped 12% to $20.07 billion. Earnings rose to $3.89 on a per-share basis, three cents better than the consensus estimate.

Earlier this week, the Wall Street Journal reported that Apple is cutting production of the iPhone X in half during the first three months of 2018. Apple initially planned to make 40 million devices. It now plans to make 20 million iPhone Xs, reflecting weaker demand than expected.

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CFRA analyst Angelo Zino maintained a bullish view on Apple in the wake of iPhone X cuts, saying higher-priced devices will boost the company’s revenue in the long run. Apple is also seen benefiting from tax reform. The company recently disclosed plans to pay a $38 billion tax bill to repatriate cash from overseas.

“Although we are reducing our shipment outlook for the iPhone X in the coming quarters, we believe tax reform/repatriated usage of cash will drive upside to [Apple’s] earnings potential,” Zino wrote in a note to clients this week.

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