Don’t expect anything too exciting from Apple’s third quarter earnings tomorrow.
This is Apple’s slowest part of the year. The summer slump means no new hardware, which means no explosive sales growth. But that’s alright, because the best is yet to come.
Tim Cook and co. have promised that truly epic things are coming in the fall, and Wall Street is actually excited about Apple again.
Apple’s stock has been doing really well since last quarter. It’s up about 26% since Apple’s Q2 earnings were announced.
Why? A combination of factors.
Apple split its stock 7-to-1, which dramatically lowered the buy-in price and suddenly made it an attractive option for those who may have thought it was too pricey before. Splitting 7-to-1 was the most dramatic thing Apple has ever done with its stock, and it seemed to spark some life into what many traders were starting to call a boring, blue-chip stock for grandmas.
Apple managed to surprise everyone by selling a whopping 43.7 million iPhones last quarter
According to Business Insider, “46 Apple analysts rate the stock a buy, 13 call it a hold, and only 4 thinks it’s a sell.” Even the notoriously “bearish” Citigroup switched its position on AAPL and called it a “buy.”
Another reason the stock took off like a rocket after last the earnings call is the iPhone. Apple’s smartphone is its biggest source of profits by far, and sales have definitely been slowing over the past few years. But Apple managed to surprise everyone by selling a whopping 43.7 million iPhones last quarter, a number much larger than the 37ish million units expected. That’s fantastic for its flagship model being mid-cycle with rumors of the iPhone 6 spreading like wildfire.
But it isn’t all gravy in iPhoneland. The 5c hasn’t been doing so hot. Apple doesn’t break down how many specific iPhone models it sells, but recent research lists the 5c just one spot above the ancient 4s in terms of sales.
Tim Cook is adamant that he does most of his work on his iPad, but Apple’s tablet sales were down 16% year-over-year last quarter. iPad sales were likely down again this past quarter. Apple has been making new carrier deals for the iPhone, like China Mobile and NTT DoCoMo in Japan, which could save it from a year-over-year decline in sales.
Big moves from Apple this past quarter include its acquisition of Beats and partnership with IBM to own the world of enterprise. As Apple gets larger and Cook makes it his own, expect to see more strategic partnerships like those. It’s clear that Apple doesn’t want to keep betting solely on the iPhone for its profits, and a more diversified kind of company is starting to take shape.
Fortune polled two dozen analysts, and the consensus is that Apple will report revenues of $38.4 billion. The company’s own estimates are a tad more conservative with revenue between $36-38 billion. Apple’s estimates for the fourth quarter will be a huge indication of just how much a blockbuster season it will be.
We haven’t had one major product release from Apple yet in 2014
It’s important to realize that Wall Street doesn’t trade stocks based on what happened in the immediate past, but on what it expects to happen in the future.
We haven’t had one major product release from Apple yet in 2014, but in the meantime the company has been busy hyping what executives are calling the best pipeline they’ve ever seen from Apple for the fall. Bigger iPhones, new Macs, new iPads, and the iWatch are all supposedly on deck. It’s looking to be the busiest and biggest Christmas quarter for Apple in a long time. Tomorrow’s numbers are just the calm before the storm.
(Like usual, Cult of Mac will be liveblogging Apple’s earnings call with investors tomorrow afternoon, so stay tuned for more coverage.)