Apple says that iPhone unit sales don't matter anymore -- but do its investors agree?

On its Nov. 2 earnings call, Apple CFO Luca Maestri told investors "there hasn't been a strong correlation in recent years between unit sales and our financial performance. In addition, our revenue base has diversified." Apple has sought to shift focus to its services revenue in recent quarters, and away from its volume of iPhone sales. 

Some Apple (AAPL) observers agree that ditching the metric is better in the long term: In a blog post, Loup Ventures' Gene Munster wrote that "Apple has earned the right to ask investors to determine its value based on the two most important metrics -- earnings and revenue growth," he said.

However, that doesn't mean it'll all be steady sailing ahead. On Monday, Apple's stock tumbled 5% alongside a spate of reports and analysis suggesting that iPhone demand may be weaker than expected, though it edged higher in Tuesday trading. And the universe of Apple suppliers are telling much of the story: Lumentum (LITE) for example, which supplies 3D chips for Apple iPhone's facial recognition system, said its quarterly sales would come in $20 million less than expected.

So in the absence of a long-used metric for measuring Apple's performance, can Apple investors expect a bumpier road in the short term -- or at least muddier waters? It's possible. As investors read the tea leaves on what weaker iPhone demand means for Apple, we may see a give-and-take between hardware-minded investors and those who no longer view Apple as a hardware company.

"We're a supporter of getting rid of the units because we think Apple is an ecosystem company -- the more important metrics are unique users, average lifetime of users, and churn levels," said Needham's Laura Martin. "We think new unit sales are understating the lifespan of these devices."

Similarly, Zev Fima, research analyst for Jim Cramer's Action Alerts Plus portfolio, which owns Apple, said that "I just do not put that much into how many phones the company sells in any 90-day period; I care much more about the installed base as my long-term positivity relies on management's ability to execute on Services growth, something I think they remain on track with."

Apple was likely well aware that iPhone unit sales could take a negative turn this season, and made the calculation that next quarter would be a good time to do away with the metric. "Generally speaking, when a company stops reporting a data point it's often because that data point isn't favorable," said DA Davidson's Tom Forte. "But the company's ability to sell higher-priced items has been more meaningful than the number of units, so for that reason, I'm willing to give them the benefit of the doubt."

Without iPhone unit sales, another figure that will be harder to discern is the sales of lower-end phones such as the $749 iPhone XR, intended to help saturate the iPhone in new demographics including younger users and emerging markets. That hasn't exactly panned out yet, with current research pointing to soft demand for the lower-priced option. Apple executives said they may offer "qualitative commentary" on iPhone sales where appropriate, but they won't break out sales of phones, such as the iPhone XR, that some see as important to broadening the device's appeal. 

"Total revenue growth will tell the story, but...it may be harder to discern the relative success of some of their products without having [unit sales] data," Forte added. 

At least in the short term, much of that information will flow from Apple's suppliers.

"The problem is that the [hardware] ecosystem looks at Apple units as a proxy for what their revenue is going to be. For all the companies that rely on Apple, there's no Apple guidance," Martin said. 

Apple is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AAPL? Learn more now.

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