Regarding the iPhone, the topic of the month is likely to be Apple’s 5G-ready device, which is expected to be unveiled within the next couple of weeks. But when it comes to fiscal fourth quarter results, what will really matter are the iPhone 11 and iPhone SE.
Today, as part of our countdown to earnings day, I look at how well this very important business segment might have performed in the most recent three-month period.
An uphill battle
I find it unlikely that smartphone sales in fiscal fourth quarter will deviate too much from the previous period, considering how little the COVID-19 crisis and global recession have evolved in this short period of time. Therefore, I think it helps to use fiscal third quarter as a yardstick to set fiscal fourth quarter expectations.
Last time, Apple did not quite disappoint on iPhone sales. However, the segment was the worst-performing of them all (see chart below). It seems clear that the smartphone was not a key beneficiary of the stay-at-home economy, as one would reasonably expect, compared to products like the iPad and Mac.
Research shops keep calling for a sharp, double-digit drop in smartphone sales in 2020, although the estimates have gotten a bit better over the past few months. Should these forecasts prove accurate, Apple might have a tough time producing revenue growth in the quarter that precedes the launch of the iPhone 12 – consider how consumers may wait to buy the new model in the holiday reason.
Will iPhone SE save the day?
Some support to smartphone sales may come from the iPhone SE, launched earlier in 2020. Demand for this more inexpensive model is unlikely to be cannibalized by the higher-end iPhone 12. Remember that, last quarter, CEO Tim Cook said that the iPhone SE led to higher switcher rate compared to the previous year, a trend that could very well carry into fiscal fourth quarter.
The Apple Maven’s expectations
All things considered, I do not expect the iPhone to be the star of the show in the most recent quarter. Contributing to a weaker-than-average quarter will likely be (1) wallet share towards stay-at-home devices like the iPad and Mac and (2) anticipation for the iPhone 12 cannibalizing iPhone 11 sales.
The silver lining may be the iPhone SE and the power of Apple’s brand possibly stealing some market share away from competitors.
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