When Apple released the iPhone 7 in September, not many analysts expected it to be a blockbuster. The handset was considered ‘boring’ because of its three-year-old design. But a research firm says strong iPhone 7 sales would help Apple post its best ever holiday quarter revenue. The Cupertino company’s best quarter so far has been the 2015 holiday quarter, when it recorded $76 billion in revenues and $18.4 billion in profits.
iPhone 7 to drive Apple’s revenue growth this quarter
Brean Capital analyst Ananda Baruah said in a research note to investors that Apple’s December quarter revenues would exceed $76 billion on the strength of the iPhone 7, increased Mac sales, and services. While Mac revenues are expected to increase YoY, the iPad sales will continue to decline. Brean Capital said the drop in iPad sales would be offset by the Apple Watch Series 1 and Series 2.
The research firm estimates that Apple would sell 77 million to 78 million iPhones during the quarter. The tech giant had sold 74.8 million iPhones during the same quarter a year ago. Further helping the revenues and gross margins would be the higher sales of the iPhone 7 Plus. The 5.5-inch iPhone was even more popular than Apple expected, thanks to its dual-camera system.
Brean Capital cuts March quarter sales estimates
Baruah expects the gross margins to be higher than the guidance, coming in at 39%. Brean Capital is expecting earnings per share of $3.11. The research firm has a Buy rating on the stock with $135 price target. However, December quarter growth would be at the cost of March quarter sales. Brean Capital was previously expecting Apple to sell 56 million iPhones in March quarter. But now it has slashed the estimate to 53-54 million units due to weakness in China.
Ananda Baruah points out that the 2017 iPhone is highly anticipated. But it is unclear how many iPhone 8 models the company would release. It’s possible that there is just one iPhone 8 model initially, which could “mute overall iPhone shipments,” said the analyst. Recent rumors indicate that Apple would launch iPhone 7S and 7S Plus alongside a high-end variant iPhone 8, which is code named “Ferrari.”
Apple to see lukewarm iPhone sales growth in CY2018
The iPhone 8 is said to feature an edge-to-edge OLED display, no physical home button, and long-distance wireless charging. The home functionality and fingerprint sensor will be embedded in the OLED display. It’s difficult to predict how well the iPhone 8 would sell, considering Apple is testing about a dozen different prototypes.
The research firm added that iPhone sales in December 2018 quarter won’t be significantly higher than in December 2017 quarter. Baruah cited several factors such as higher ASPs in the US following the rollback of carrier subsidies, rising competition in China, and higher ASPs in India for lukewarm growth in 2018. According to Brean Capital, Apple would sell 78 million iPhone units in December 2017 quarter and 80 million units in December 2018 quarter.
