Apple Longer Update Cycles Slowing Down Sales

The consumers of iPhones do not immediately let go of their outdated iPhones for a less upgraded one

The brokerage firm, BTIG, disclosed some concerning aspects of the tech giant, Apple Inc. after which the stock underwent a slight fall. The firm believes that the smartphone customers are not ready to surrender their handsets after small intervals of usage.

On Wednesday, the brokerage firm slashed down its iPhone sales estimation for the fiscal years 2016 and 2017 due to the “longer upgrade cycles.” This initiative also had collateral impact on the earnings projections for the current and the succeeding year and the brokerage lower its earning estimation while simultaneously bringing the stock’s price target down from $141 to $130. The price target still is almost 19% beyond the current trading of $109.22.

It is an open secret that the tech giant, for the first time in history, is expecting a sales decline in the current fiscal year. The company has been quite vocal about it but it’s not the only concern –the tech giant’s impending structural change is what has led analysts to lower down their estimations. The structure change is the main deterrent in the pace of upgrades.

In a note to clients, BTIG’s Walter Piecyk cited that for almost all smartphones the upgrade rates dropped in the fourth quarter and are following the same suit in the March quarter. In order to form an opinion on the upgrade rates, Mr. Piecyk compiled the data of the four big carriers including Sprint, T-Mobile US, Verizon Communications, and AT&T.

The analyst believes that such decline might be triggered by likely slowdown at the head of Samsung’s Galaxy S7 launch in March and the progression of sales of the iPhone in Apple stores which is likely to have been ignored by the operators and not factored into their upgrade rates. However, Mr. Piecyk further added, that even then it is definite that the length of the phone replacement cycle in the U.S. is broadening.

For Apple, particularly, consumers have put the onus of slowing sales and lengthening period of upgrades on the “S” cycles. The “S” cycles generally do not have anything more to offer in terms of upgrades and the optimization or the features upgrade come after the cycle changes numbers. In comparison to previous cycles, this year decline had been alarmingly steeper, according to Mr. Piecyk.

The analyst reduced almost 10 million units from both of its iPhone sales estimations for 2016 and 2017. He further projected that in the current fiscal year the techy titan is likely to sell around 210 million of iPhone units while he predicted just a 5% increase in the fiscal 2017 and project the sales of iPhones unit to be around 220 million.

With respect to earnings per share, the brokerage firm’s analyst has predicted EPS of $8.87 for the current fiscal year, 2016, and an EPS of $9.57 for the year 2017. The projections have been respectively brought down by 54 cents and 53 cents. Additionally, according to the analysts’ estimates, carried out by FactSet, the tech titan projected EPS for 2016 and 2017 lays at $8.91 and $9.67 respectively.

Although the data rendered by the phone carriers hints that the upgrade cycle is met with the slight extension however it will still take several quarters and the launch of the next iPhone in order to coherently determine whether the consumers prompting let go of their outdated handsets or not.  

Apple To Work Towards Attracting More 'Switchers' From Rival Companies

The smartphone making company is now looking to attract more and more Android users to increase its user base.

Apple Inc has been enjoying a good position on the stock index since the higher than expected quarterly result that were recently announced by the firm in which it discussed how it is planning to give back cash dividends valued up to $200 billion to the shareholders. Since that announcement, the company has been going up on the stock by almost touching the all-time high value of the shares.

One thing that has been taken into consideration by the analysts is that the iPhone 6 Plus makers are carrying around the market value of around $735 billion which has made them into the biggest company in the world. Furthermore, it has helped them in being one of the most important parts of the S&P 500 due to the significant trade activities of the firm.

There are some factors that analysts believe are going to help Apple In becoming even more popular than it already is and by stealing users of Android that it has been doing for such a long time. If the most recent earnings call is taken into consideration, it will be seen that the CEO of the smartphone making company was seen to refer to its customers who were ‘switchers’ from the Android system and were now using the iOS system that his company provides.

Analysts also believe that Apple (AAPL) stock has been relying on its old and loyal customers to use upgraded and pricey versions of the smartphone that it creates and manufactures but to increase its user base and spread it out to more Android users has become a challenge for the firm. Therefore, analysts are of the opinion that by targeting Android users, the company can work its way into growing its user base. Tim Cook, the CEO of the Mac producing company, was also seen discussing how he is expecting more and more people to be switching to iPhone 6 from their Androids as compared to the previous numbers who switched to other models of the iPhones.

If a recent report released by Kantar Worldpanel is taken into consideration, it will be seen that the around one-third of the total user base of the iPhones in the European countries was previously using Androids and were considered as recent switchers. One of the reasons why more and more Android users were seen using the phones made by Apple is of the large screen that is now being provided in the latest iPhone 6 and iPhone 6 Plus that has attracted a lot of attention from users who wish to carry phones with big screens.

Apple Inc Earnings For 2QFY15

The iPhone makers reported an exceptional quarter earnings from the significant sales in China.

Apple Inc (AAPL) has been doing wonders in the tech world with the extraordinary sales of the iPhone that it reported in its quarterly report presented on April 27, 2015. The tech company was seen to have recorded an exceptionally high revenue increment in the quarter which was due to the strong sales of the new iPhone that was carried out in the previous fall. The kind of sales that the firm has been experiencing is one of its kinds.

In the much awaited quarter report, Apple Inc declared that it sold a massive $61.2 million items of the smartphone in a period of three months which the analysts believe is a number to be reckoned with. These sales have arisen by a huge 40% as compared to the previous year’s same quarter. One of the main reasons for such a rise in the sales was due the successful penetration that the company managed to do in China which was marked as one of the biggest achievements of the iPhone makers.

The revenue for Apple Inc came around $59 billion for the three months quarter with the earnings per share rising up to $2.33, as per a report by WSJ. According to the average selling price, in which the iPhone were sold and bought at, the price tag of $659 showed an increment of $60 if compared to the price the smartphones were previously sold at. In an interview, Tim Cook, who is the CEO of the Silicon Valley based company, told the WSJ that this time around, the company has experienced an unusual growth of customers switching from other phones to Apple phones which has been marked as another jewel in the firm’s crown.

The gross margin that was received by Apple in the quarterly results came around with a rise of 40.8% which was higher than the expected margin of 38.5%. Previously, the software company had decided to return around $130 billion to shareholders in the form of dividend but an increase was recorded in that department as well, as by March 2017, the firm has planned to return $200 billion to its shareholders.

The company has also managed to raise the cash revenue to $193.5 billion which totaled around only $178 billion by the end of the previous quarter.