Apple Inc. (AAPL) Earnings Preview – Key Factors: Analysis

With Apple Inc. (NASDAQ:AAPL) set to report its first-quarter 2017 earnings after the bell today (Tuesday 31), we wanted to provide  you with analysis courtesy of Investing.com Senior Analyst, Clement Thibault:

Today’s earnings could signal trouble ahead…. 

“With the stock trading at around $121, we believe AAPL is fully priced. 

Today’s earnings report will be of special significance since it is the first report to include a full quarter of Apple’s newest flagship device, the iPhone 7.”
Apple AAPL
“If the newest, round-numbered model can’t improve Apple’s sales figures we’ll have to wait until the iPhone 8 is released. Though that date remains unknown right now, if the company’s release timetable follows historical precedent it won’t happen until September 2018. We could be seeing two rough years ahead for Apple.

iPhone….

While the iPhone remains immensely popular globally, lagging advances in technology at the premium end of the mobile device segment has led to fewer upgrades, which in turn has fostered slowing sales. AAPL’s strong ecosystem and loyal customer base are its strengths, but without worthy upgrades that continue to stoke consumer desire, even Apple’s most enthusiastic fans will think twice about purchasing its latest device.”

Services…

“While iPhone sales slow, the company’s Services group—namely App Store revenue, AAPL’s insurance program for Apple devices, Apple pay, and accessory licensing—continue to provide a nice boost to Apple’s numbers.”

“Apple is estimated to own about 43.5% of the mobile market share in the U.S. which would mean there are more than enough customers the company could appeal to via ecosystem related services.”

iPads and Macs….
“Consumers seem to be less enchanted with the big iPad screen, and sales contracted dramatically over the past two years, from 68 million iPads sold in 2014 to only 45 million sold in 2016, an alarming 33% decrease. While Mac sales have fallen victim to the general downward trend in computer sales.”

President Trump…

“AAPL’s rich, 39% profit margin is made possible, in part, because of low labor costs, since it manufactures in China. Should AAPL be forced to relocate manufacturing operations to the U.S., or pay a border tax on its products, Apple’s profits will certainly tumble. Additionally, last year AAPL sponsored 1,500 H1B visas; any changes to that program, which Trump roundly excoriated during his campaign, will likely impact its ability to recruit talent abroad.”

China….

“Once AAPL’s most promising geographical growth opportunity, the Chinese market has actually transitioned into its biggest geographical sales deficit, with -17% loss in fiscal 2016.”

And finally….<

“Over the past two weeks, Timothy Cook, AAPL’s CEO, sold 90 thousand shares of the company for approximately $11-million dollars. Portfolio rebalancing or profit taking? It’s not clear.”