iPhone Upgrade Program could eventually open up beyond Apple Stores, Tim Cook says

29 Oct 2015 | Author: | No comments yet »

Apple India sales slow as consumers wait for offers.

Sales of the iPhone in South Asia, mainly India, grew 35 per cent in the quarter to September as customers deferred purchases ahead of the launch of Apple’s iPhone 6s.Top analysts questioned whether the company can keep growing iPhone sales in the new year, though CEO Tim Cook projected another strong quarter into December after Tuesdays’ earnings beat. “There are a number of tailwinds that should make it easier to grow iPhones in the December quarter,” Toni Sacconaghi, Sanford Bernstein technology analyst, said Wednesday on CNBC’s “Squawk on the Street.” “But beyond that, those tailwinds go away.

The slower growth – a third of the nearly 93 per cent growth rate registered in the previous quarter – was also due to consumers waiting for offers during the festival season that began in October. “Apple fanboys were waiting for iPhone 6s and were not upgrading their devices. I think there’s a fear in the investment community that December will be fine, and iPhone sales will grow, but thereafter they won’t.” Apple reported iPhone sales of 48.04 million, with a record rate of Android conversion and growing sales in China. Also, customers generally wait for festival discounts, both offline and online,” said Vishal Tripathi, analyst at technology researcher Gartner. “I was really impressed last quarter with our progress in Vietnam and Indonesia and India, among others,” Tim Cook, chief executive officer, told investors on Tuesday. “Also from the currency’s point of view and the weak global economies, we do not overly focus on this.

The stock has lost about 7 percent of its value in the past three months as investors fret that the slowing Chinese economy would derail Apple’s successful run in the country. Apple’s sales in Greater China, including Taiwan and Hong Kong, nearly doubled in the third quarter, accounting for nearly a quarter of the company’s total sales. “If the Chinese consumer is pulling back on spending then it seems to be either at the very high luxury end or maybe on some of the everyday non-essential items,” Atlantic Equities analyst James Cordwell said. “I think the smartphone is increasingly viewed as an essential in China. Now, all eyes will turn to calendar ’16 and the long wait until iPhone 7.” To be sure, it’s a positive sign for Apple’s future that more than half of iPhone buyers in the just-completed quarter were first-time iPhone buyers, Sacconaghi said. The difference in cost between the base models in the US and India is around Rs 20,000, which has forced customers to defer purchases of these smartphones. “It is a bit early to tell, because the phones are out there just for four weeks. So, I don’t see the economy weighing significantly on Apple growth over the next few quarters.” “If I … just look at how many customers are coming in our stores regardless of whether they are buying, how many people are coming online and in addition to looking at our sales trends, I would not know there was any economic issue at all in China,” Cook said on a conference call. “These include the rising middle class and stronger purchasing power in the emerging markets, especially China and India, combined with the company facing little or no competition in the high end of the market,” Doradla wrote in a note.

But gaining such a large market share this year could set up some tough comparisons for next year, Abhey Lamba, Mizuho Securities senior technology analyst, told CNBC. Obviously, when we increase prices around the world, it is normal to see some impact on sales, but so far we are encouraged by the response,” said Luca Maestri, chief financial officer of Apple, in reply to an analyst’s query on the demand scenario for iPhones in countries such as India.

Few analysts changed their price target on Apple’s stock after the results and only Pacific Crest changed its rating, upgrading the stock to “overweight” from “sector weight”, according to Thomson Reuters data. Last year, the market was watching smartphone penetration in the mobile market, Lamba said, while now analysts are eyeing market share, indicating the market is maturing. “We need to see how much of a tick down we get in March,” Lamba said. “There’s a risk that Apple shipped the iPhone late and they shipped in China early. Everything has a price, and at five-and-a-half times EBITA, a pretty small amount of growth ends up paying you decently well.” iPhones wouldn’t be the first time Apple revamped a seemingly mature market. Tuesday’s also revealed a record quarter for Mac sales, as other technology companies like Dell and Microsoft attempt to pivot away from the saturated personal computer market. “Doubt Apple’s ability to execute at your own peril here … With their balance sheet, Apple can do almost anything it wants,” Alex Gauna of JMP Securities told CNBC.”Here is a name that’s outgrowing the global rate of economic expansion by an order of magnitude, and trading at a discount to the mean market multiple by about fifty percent.

So the question investors should be asking themselves is, ‘What are they waiting for here?'” Shares of Apple were up 2 percent Wednesday morning after posting quarterly earnings that topped analyst expectations, reporting earnings of $1.96 per share on sales of $51.5 billion.

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