Shares of Apple AAPL surged nearly 7% Wednesday one day after the company reported a 15% downturn in quarterly iPhone revenue. Apple did top earnings estimates and its stock is still down roughly 30% from its 52-week high, which might explain the positivity.
But let’s see what investors should expect from Apple in the rest of 2019 and beyond amid a slowing Chinese economy and an increasingly saturated iPhone market.
Quick Q1 Overview
Apple’s quarterly revenues dipped 4.5% from the year-ago period to reach $84.310 billion and its adjusted Q1 earnings climbed 7.5%, both of which topped our Zacks Consensus Estimates. However, the company’s overall net income slipped slightly and its quarterly estimates had already fallen in a big way after CEO Tim Cook lowered the firm’s quarterly revenue guidance in early January.
On top of its holiday-quarter sales decline, Apple’s iPhone revenues plummeted 15% from $61.104 billion in Q1 2018 to $51.982 billion. This marked a massive downturn from Q4’s 29% iPhone revenue growth. Meanwhile, Apple’s sales in Greater China tumbled 27% from $17.956 billion to $13.169 billion. Apple’s revenues in the region, which includes Hong Kong and Taiwan and accounts for roughly 20% of total AAPL sales, climbed 16% in Q4 and 11% in the prior-year quarter.
Apple obviously faced macroeconomic factors that were out its control, which also impacted everyone from Intel INTC to Alibaba BABA. It is unclear how China’s economy will perform down the road, especially as the trade war between the U.S. continues. This likely means Apple will find it even harder to grow its market share against Huawei, Xiaomi, and other more affordable smartphone options in the world’s second-largest economy.
On top of that, Apple, as it did in its just-reported quarter, will have to compare its iPhone revenues against quarters that already featured its newer, high priced smartphones. For instance, Q4 2018 iPhone revenues climbed nearly 30% despite flat unit growth. Let’s also not forget that Apple seemed to signal last quarter that iPhone unit growth will likely remain flat or fall for years to come when it said it would stop breaking down unit sales.
Of course, Apple was a strong company long before the iPhone, but the smartphone did turn it into the behemoth it is today. Apple could roll out another game-changing product in the future. And let’s not forget that Apple’s services revenue did pop 19% in Q1 to reach $10.9 billion
Apple might also soon enough start to challenge Netflix NFLX, Amazon AMZN, and Disney DIS with its own streaming TV offering. Recent reports even said that Apple is ready to expand its gaming division, similar to Microsoft MSFT. Furthermore, Cook is confident that its Apple Watch-style health offerings will play a vital role going forward.
2019 and 2020 Estimates
At the moment, our Zacks Conesus Estimate calls for Apple’s second-quarter revenues to slip 2.48% to reach $59.62 billion. But this could change as more analysts update their estimates after Apple said Tuesday that it expects to report revenue between $55 billion and $59 billion in Q2 2019. Meanwhile, Apple’s adjusted Q2 earnings are projected to slip 2.20%.
Apple’s full-year fiscal 2019 revenues are also projected to dip 2.44%. Looking ahead to fiscal 2020, our estimate calls for the tech power’s revenues to pop 2.76% above our current 2019 estimate.
Apple stock closed regular trading Wednesday up 6.83% at $165.25 a share. This still marked a roughly 30% downturn from its 52-week high of $233.47 per share and might set up a buying opportunity for those high on a firm that does pay a dividend and returns value to shareholders through stock buybacks. But it does seem that Apple is poised to face a slowdown in 2019 as it tries to navigate a potential crossroads.
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