Apple 3Q Results

Published on 23 Jul, 2015

Apple Business Research

Euphoria built around the new iPhone’s sales and an expected push from the Apple Watch did little to bolster Apple’s share price, which saw a sharp decline in reaction to the results, despite a promising 3Q performance on almost all accounts.

While the company sold 47.5 mn iPhones during the quarter (ahead of the 47.2 mn estimate) the ‘whisper’ numbers were closer to 50 mn. The only blemish in their scorecard was a 4Q revenue guidance of $49-51 bn, marginally below the Street estimate of $51.05 bn.

We believe their 3Q results don’t adequately capture the momentum seen after the launch of the iPhone 6, the iPhone 6 Plus, as well as the Apple Watch.

With just 27% of the current iPhone user base having switched over to the new iPhone 6 or 6 Plus, there’s potentially a huge market opportunity that exists for Apple to get existing iPhone and Android users to migrate to the newer models. That, coupled with the increasing momentum from Apple Watch shipments and steady revenue from Apple Music as well as a slew of new product launches due next fall gives Apple some sunny days to look forward to.

It’s likely that China will be a key market to accelerate Apple’s growth. Their market grew over 100% in 3Q and we believe should likely sustain this growth in the near-term. Our recent trips to Aranca’s newly opened delivery center in Shanghai also corroborate this view. We witnessed significant footfalls in Apple stores and a visible interest in the iPhone 6 as well as the Apple Watch. With Apple’s stock having gained over 40% y/y and 20% YTD, long-term investors could view this knee-jerk reaction to the results as a possible buying opportunity.