AppleAAPLShares fell in premarket trading after the world’s most valuable technology company issued a dovish holiday sales forecast that added to concerns around demand for its new iPhone 15 and slowing product growth. their income in China.
Apple said December quarter sales would hold steady from last year’s total of $117 billion, a forecast that fell short of Wall Street forecasts for a 5% gain, with gross profit margins widening. measured in line with the 45.2% recorded during the three months ending in October. .
That took some shine off a solid but by no means spectacular fourth-quarter earnings report that showed the group’s fourth consecutive sequential revenue decline and big declines in sales of Macs, iPads and Apple Watches.
Group revenue fell 0.7% to $89.5 billion, just ahead of the Street consensus forecast of $8.28 billion, and iPhone sales surprised on the upside with a 2.8% rise and a total of 43,810 million dollars.
Earnings for the quarter rose 13.2% to $1.46 per share, driven mostly by strong services revenue (Apple’s highest-margin business) and a record overall total for its global installed user base.
“Flat year-over-year revenue guidance for the December quarter was lower than the Street’s expected 5% growth, primarily due to weaker Macs, iPads and accessories,” said Wedbush analyst Dan Ives, who carries a rating of ‘ outperform’ with a $240 price target for Apple stock.
“Importantly, underlying iPhone and services growth looks relatively healthy in the Christmas quarter and generally in line with rumored numbers,” he added. “stocks might be a little weak at the open due to December headline/forecast noise, but we would be strong buyers as growth has returned to the iPhone franchise, Cupertino’s margin story rises, and services have now firmly back to double-digit growth.
Related: Apple’s earnings beat forecasts, but sales fall for fourth consecutive quarter due to Mac and China weakness
Another notable area of weakness in Apple’s quarterly report came from China, where sales fell 2.5% from the same period last year to $15.1 billion, amid reports that Beijing has banned the use of iPhones. by government employees and state-backed companies to support the launch of state technology group Huawei’s new Mate 60 phone.
Tax authorities are also reportedly investigating China-based subsidiaries of Foxconn, the world’s largest assembler of Apple iPhones, following founder Terry Gou’s decision to run for president in Taiwan.
However, Apple CEO Tim Cook struck an optimistic tone about the region’s prospects in his conference call with analysts last night, noting that a stronger US dollar shaved almost 6 percentage points off China’s overall sales, which which suggests that growth in constant currency was positive.
“Beyond that, if you look at different categories, the iPhone actually set a record in the September quarter in mainland China,” Cook said. “On top of that, we had the four best-selling phones in urban China over the past year. I just took a trip there and couldn’t be more excited about the interactions I’ve had with customers, employees and others.”
Even with the China-based subsidiaries of Foxconn, the world’s largest assembler of Apple iPhones, now being investigated by tax authorities following founder Terry Gou’s decision to run for president in Taiwan, the challenges in the second-largest economy largest in the world are still sharp.
“We believe Apple still faces China risk on three fronts,” said DA Davidson analyst Tom Forte, who has a neutral rating on Apple shares and lowered his price target by $14 to $166 per share following the earnings. last night.
“The country’s weak macroeconomic conditions are negatively affecting its sales and we see Apple caught in the middle of escalating tension between the US and Chinese governments,” he added. “The company also remains overly reliant on China from a supply chain standpoint.”
Revenue from Apple’s key services business, which includes Apple Pay, iCloud and Apple TV, rose 16.3% to $22.31 billion, well above the forecast of $21.35 billion.
Hardware sales, as expected, were weak: Mac sales fell 33.9% from last year to $7.61 billion, Apple said, and iPad sales fell 10.2% to $6.44 billion. Dollars. Sales of wearable devices, which include the AppleWatch, fell 3.4% to $9.32 billion.
“We believe the most negative of the results was the decline in China, worse than we expected, as we seek greater clarity on Apple’s outlook for the region in the December quarter, given concerns about growing competitive pressures in the region,” CFRA said. Angelo Zino, who gives a “buy” rating on Apple stock.
“That said, the 16% growth of Apple’s higher-margin services business was a bright spot (beating our 10% growth forecast), a pace acceleration of 8% in the June quarter and 5% in the March quarter”.
Apple shares fell 3.1% in premarket trading, indicating a Friday opening price of $172.06 each.
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