Apple iPhone sales stoke worry ahead of earnings report

Potentially weak iPhone sales are a matter of top concern on Wall Street this week as Apple prepares to report quarterly earnings on Tuesday afternoon.

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Apple’s flagship smartphone is the tech giant’s biggest revenue driver and was responsible for more than 60% of the company’s sales in fiscal 2017. However, several of Apple’s top smartphone parts suppliers and chipmakers, including Taiwan Semiconductor Manufacturing, Teradyne, and Corning, have recently blamed weak financial performances and outlooks on weak demand for smartphones.

Those warnings have triggered concern among analysts that iPhone shipments may fall short of expectations in the second quarter and beyond. Wall Street’s consensus expectations for iPhone revenue dropped from $39.7 billion on April 17 to $39.2 billion as of Monday, according to Thomson Reuters. While consensus estimates predict Apple will report 54 million iPhone sales, several analysts are predicting less.

Consumers have had a lukewarm response to Apple’s premium iPhone X, which starts at $999 for the base model and sells alongside the more traditional iPhone 8, which starts at $699. Sales of iPhones fell 1% to 77.3 million in the first quarter of 2018, though the higher price point helped produce a company record $88.3 billion in revenue.

Wall Street is in “full panic mode” about iPhone sales data ahead of Tuesday’s earnings report, according to Daniel Ives, head of technology research at GBH Insights. Ives expects iPhone shipments of between 52 million and 53 million in the second quarter – below the consensus estimate – with more pronounced weakness to come in the third quarter.

“While the Street has been anticipating a ‘trough June quarter,’ the bad news continues to pour in from Asian suppliers and checks with softer demand and $1,000 sticker shock price points on iPhone X translating into another guidance cut expected next week on the horizon,” Ives wrote in a research note.

Bernstein research analyst Toni Sacconaghi expects Apple to report sales of 51 million iPhones in the second quarter and lowered his projections for the third quarter to 38.8 million units from 41 million units, citing the weak supply chain data. Sacconaghi also cut his full-year earnings per share estimate to $10.71 from $10.93.

Morgan Stanley analyst Katy Hubert predicted that Apple’s report would match consensus estimates, but said the company would likely revise its third-quarter guidance because of weaker iPhone demand.

Overall, Wall Street expects Apple’s quarterly revenue to rise about 15% to $60.97 billion, up from $52.9 billion in the same period one year ago. Earnings per share are expected to reach $2.69, up from $2.10 year-over-year.