Apple Stock: What To Expect Of The iPhone In Fiscal Q3

The Apple Maven resumes pre-earnings coverage by discussing the iPhone. Here is what Apple stock investors should expect of this important segment in fiscal third quarter.
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After talking about Wall Street’s expectations and historical share price trends, the Apple Maven continues to preview Apple’s fiscal third quarter earnings day. Today, the iPhone is the topic of discussion.

After Apple faced a tough end of 2020 in smartphone sales, the iPhone staged an incredible comeback. Could momentum and increased demand have spilled into the most recent period, and how will Apple stock react to the performance of the iPhone segment this time?

Figure 1: The iPhone 12 version in purple.

Figure 1: The iPhone 12 version in purple.

(Read more from the Apple Maven: Apple Stock: A Tough First Half Of 2021 In Review)

iPhone sales in context

First, we look at iPhone sales trends over the past few quarters. Notice below how the segment struggled through 2019, dragged in part by a weak Greater China market and before the company finally unveiled its first 5G-capable device.

But the 2020 pandemic and the launch of the iPhone 12 broke the chart. With increased demand driven by the stay-at-home consumer trends, smartphone sales spiked. To be clear, this was not true across the entire industry last year, as Apple clearly led the space in growth in the past two quarters.

Figure 2: iPhone YOY growth since fiscal 2019.

Figure 2: iPhone YOY growth since fiscal 2019.

(Read more from the Apple Maven: When AAPL Traded Like A Meme Stock)

Stronger at the higher end

The Apple Maven believes that the Cupertino company has been doing a good job playing catchup with the likes of Samsung and Huawei, after being late to the 5G party. For this reason, iPhone sales should impress once again in fiscal third quarter – especially against modest 2020 comps.

The higher end of the product lineup should outshine once again, which is good news for ASP (average selling price) and margins. However, the unexpected introduction of the purple iPhone 12 could help to lift sales at the lower end of the spectrum, considering how unpopular the iPhone mini seems to be.

Sequential decline

Although Apple has refrained from providing full guidance since the start of the pandemic, the management team has left clues about total company revenues in the most recent period – of which about half is associated with the iPhone. CFO Luca Maestri has said:

“We believe that the sequential revenue decline from the March quarter to the June quarter will be greater than in prior years. […] Keep in mind that, due to the later launch timing and strong demand, iPhone only achieved supply-demand balance during the March quarter. This will cause a steeper sequential decline than usual.”

Since 2018, the sequential decline in fiscal third quarter revenues has averaged 6%. Given the CFO’s outlook above, a drop of about 18% to $73 billion this time, in great part driven by the iPhone, would not be out of question – which is where Wall Street’s consensus expectations currently stand.

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What do you expect of iPhone sales in Apple’s fiscal third quarter, to be reported in about four weeks?

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)