Apple Inc. (AAPL) Sales Gains Hinge On China

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Apple Inc. (AAPL) Sales Gains Hinge On China
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Apple Inc. (NASDAQAAPL) will release the results from the December quarter tonight after closing bell, and China is expected to figure prominently in the following analysis of those results. Of course the company doesn’t break down its results according to country, but most analysts agree that China holds Apple’s greatest opportunity for growth. If iPhone sales come up short, some may speculate that Apple continues to struggle in China—particularly if the provided numbers for Asia are weak.

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On average, analysts expect Apple Inc. (NASDAQ:AAPL) to report earnings per share of $14.09, compared with $13.81 in the same quarter a year ago. They expect Apple’s revenue to come in at $57.5 billion—a 5.5% increase over revenue in the same quarter a year ago. In terms of total iPhones sold, analysts are looking for 55 million during the December quarter, compared to 47.8 million in the fourth quarter of 2012.

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Apple launches iPhones in China

As Dan Gallagher of The Wall Street Journal reports, China is expected to make up a good chunk of Apple Inc. (NASDAQ:AAPL)’s December quarter sales, and it has nothing to do with China Mobile, at least not yet. The iPhone was not supported on the carrier’s network until this month, but Apple still made an important change in its China strategy during the holiday quarter.

For the first time, Apple Inc. (NASDAQ:AAPL) released its new iPhones on China Telecom’s and China Unicom’s networks at the same time as it released them on U.S. carriers. Most analysts agree that China Mobile will give Apple’s results a boost during the current quarter, which usually is seasonally slow. Nonetheless, the message is clear.

China is expected to be Apple’s next big market, while growth starts to taper off in the U.S. Verizon Communications Inc (NYSE:VZ) posted a 10% decline in smartphone activations during the fourth quarter, which could be a blow for Apple since over the last two years, the carrier has made up approximately 11% of Apple’s total iPhone shipments.

Expectations running high for Apple

One of the reasons Apple Inc. (NASDAQ:AAPL) got into trouble in terms of its stock price is because expectations for it began to run so high. As Gallagher notes, the company is in danger of facing that same problem again because expectations are again getting high. On average, analysts are projecting double-digit increases in revenue for Apple’s June and September quarters.

Some are adding new products into their estimates, like the rumored iWatch or a bigger iPhone. However, if Apple Inc. (NASDAQ:AAPL) doesn’t deliver on these expectations, then the company could end up in a rough spot yet again—particularly if it doesn’t meet or exceed Wall Street’s increasingly lofty expectations.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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