Apple Inc. (NASDAQ:AAPL)’s next earnings report will likely be driven by iPhone 6 sales, and Wall Street could be underestimating them, according to some analysts. The company’s brand seems to be going strong, convincing a good chunk of Chinese consumers to pony up the dough for the iPhone 6 or 6 Plus.
China checks show strong Apple brand
In a report dated Dec. 15, 2014, analyst Sundeep Bajikar and the rest of the team at Jefferies said their checks suggest Apple enjoys “solid brand recognition” in China. They report that it seems as if consumers from a broad range of income levels are forking over huge sums of cash for the iPhone 6 rather than opting for a less expensive smartphone from a Chinese manufacturer.
One area of weakness they found in their checks, however, is with the software, content and services Apple distributes through its iTunes store. They say sales of the iPhone 6 in China do not seem to be translating into growth in these areas.
Apple needs increased investments in Cloud services
According to the Jefferies team, the most popular Cloud services in China come from companies other than Apple or Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG). They say Chinese smartphone vendors Xiaomi, TCL and Lenovo all seem to be investing in their own Cloud services. The analysts say this is probably because the vendors are worried about losing control of their hardware businesses by partnering with bigger Cloud service providers like Baidu Inc (ADR) (NASDAQ:BIDU) or Tencent Holdings Ltd (HKG:0700).
The analysts compiled data on the most popular Cloud services in China and found that the top messaging app was Tencent’s WeChat, which had 438 million users as of August. Baidu’s Maps and Search were the most popular among Chinese consumers for those categories. The company had a 67% share of the Maps market there and a 73% share of the Search market.
For Cloud storage, Tencent’s Weiyun was on top, with 300 million users as of a year ago, and for video, Youku Tudou was the big winner with 500 million users as of August.