Apple's Fiscal 1Q16 Earnings: Is Growth on the Horizon?
Morgan Stanley lowered its iPhone unit estimates
On December 14, 2015, Morgan Stanley (MS) lowered its fiscal 2016 iPhone units by 12%. It lowered the EPS (earnings per share) by 6%. It was driven by weak smartphone supply chain data points. The estimate for Apple’s iPhone shipments in the December quarter reduced to 75 million units from 79 million units. The March 2016 quarter estimates were lowered to 52 million units from 61 million units.
Last month, Credit Suisse’s Asia team reported that Apple (AAPL) reduced its component order by 10% due to lower iPhone 6S demand. This will also impact the revenue of Apple’s suppliers like Skyworks (SWKS) and Qorvo (QRVO).
However, Apple’s CEO, Tim Cook, stated last year that he has “never seen one” accurate estimate for Apple’s supply chain.
iPhone accounts for more than 60% of the total revenue
The iPhone product line is important to Apple because it accounts for ~63% of the total revenue. Since November 2015, Apple’s share price fell by 20%. During the same period, shares of Apple suppliers Qorvo and Skyworks fell by 19.8% and 23.9%, respectively.
On January 7, 2016, Apple shares fell below $100 for the first time in 15 months. It generated returns of -3.3% in calendar 2015. It was the first time since 2008 that Apple generated negative returns to investors. As a result, iPhone sales figures in fiscal 1Q16 will be important for all stakeholders.
Apple accounts for 11.3% of the Power Shares QQQ Trust (QQQ) and 3.6% of the iShares S&P 500 Index (IVV).
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