Since Apple started reporting unit sales for its products, analysts have been glued to the numbers as a direct measure of Apple Inc.’s health. Now Apple is doing away with that reporting, and no one is happy. Tripp Mickle reports:
Apple Inc. AAPL -2.84% reported its fourth consecutive quarter of record revenue and profit, as the combination of higher iPhone prices and strong app-store sales propelled the technology giant to its best year ever.
But the world’s most valuable company offered guidance for the current period that disappointed many investors, and said it would stop reporting unit sales for its products—a measure closely watched by investors—raising questions about the prospects for strong sales of new gadgets it has unveiled in the past two months.
Shares of Apple fell 6.5% to $207.76 in after-hours trading, making it the latest tech company to be punished after announcing results during a period of stock-market turmoil. Tech shares have tanked over the past several weeks amid investor unease with sky-high valuations, as well as slowing revenue growth and rising costs at some companies. Controversies over the power and responsibility of some internet platforms like Facebook Inc. and Google have fueled the concerns.
Meanhile, Apple seems intent on raising prices on its products, despite being in the consumer electronics business, which has traditionally seen the prices of late stage technologies reduced. Mickle continues:
Those results offered affirmation for two main pillars of Apple’s current strategy: promoting its software-and-services business and raising prices on its flagship iPhones to compensate for slower growth in unit sales. Both aim to capitalize on the loyalty of customers who use iPhones for everything from communication and shopping to watching video and reading the news.
Apple last year raised the starting price for its flagship iPhone by about 50% to nearly $1,000. In the latest quarter, revenue from the device, which accounts for most of Apple’s sales and profit, rose 29% to $37.19 billion, despite flat unit sales.
The services business—including app-store sales, Apple Pay use and music-streaming subscriptions—reported record revenue of $9.98 billion, up 17% from a year ago. That is slower than recent quarters but keeps Apple on track to fulfill Chief Executive Tim Cook’s promise that services will be a $50 billion business by 2020.
For the full fiscal year, although the number of iPhones sold world-wide edged up less than 1% to nearly 218 million, higher prices helped Apple deliver record revenue of $265.6 billion, up 14% from its previous high in fiscal 2015.
It is hard to say if Apple’s price increases will be sustainable. With so many phone manufacturers offering so many models, there is likely a limit on the amount Apple can raise prices before cutting into its own profits by reducing volume.
Jeremy Jones, CFA
Latest posts by Jeremy Jones, CFA (see all)
- Is Sheltering in Munis a Safe Bet for Investors Bitten by SALT Caps? - September 13, 2019
- Ginnie Mae (GNMA) Bond Yields - September 12, 2019
- Is Apple Tipping the App Store Scales in its Own Favor? - September 11, 2019