Keep Apple’s revenue fall in perspective says Hargreaves Lansdown

27th April 2016


Apple shares fell by 7% in after-hours trading as it reported its first revenue decline in 13 years, and the first-ever decline in unit sales of the iPhone.

Apple reported revenues of $50.6bn for the first three months of the year, down 13% from the year before (down 9% in constant currency), with earnings per share falling by 18% to $1.90. Both figures were well below analysts’ expectations.

Apple sold nearly 51.2 million iPhones in the period, down 10 million from the year before. The decline in unit sales was widely anticipated, and reflected very tough comparatives due to the record launch of the iPhone 6 a year before. However, the average selling price for each iPhone sold fell well below expectations, down 7% to $642; as more consumers opted for older, lower priced handsets such as the iPhone 5s.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown says: “Apple hasn’t looked back since the iPhone was launched in 2007, but its tremendous growth record has finally been brought to an end. In the first quarter the tech giant was hit by economic weakness in key markets, Asia in particular, and the absence of a new iPhone launch to drive sales.

“The end of such a prodigious period of uninterrupted growth will inevitably lead investors to question whether this is a turning point for Apple. However one weak quarter of performance does need to be kept in perspective. Developed markets are reaching saturation point for smartphones, but there is still growth potential in emerging economies, particularly in China, where Tim Cook expects the expanding middle class to be a key driver of sales.

“Apple is also harnessing the power of its ecosystem, to tilt the focus of its business away from iPhones and towards the services it provides, like the App Store and the iCloud. These services provide Apple with nice recurring income streams, which will help to offset the lumpy nature of handset sales, and now account for over 10% of revenues.”

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