On Thursday, Apple reported its first annual decline in revenue for fifteen years.
Its quarterly results beat Wall Street's expectations — but this is now the third consecutive quarter that iPhone sales have declined year-on-year, and the company's stock dropped 3% in after-hours trading (from around $118 to $114).
Now, the early verdict from analysts on Apple's quarter is in — and it's pretty tepid. Over the last six months, Apple analysts have gone from being largely bullish on Apple to merely somewhat bullish and in a few cases, neutral. This is new territory for AAPL, long-regarded as the stock you buy and hold forever.
Apple's growing services business is cited as a positive, as is the expected iPhone "super cycle," where Apple is expected to return to growth with a blockbuster new smartphone in 2017 to celebrate the tenth anniversary of the device.
But downsides in analysts' research notes include the growing amount of time in mature markets between smartphone purchases, and a "slower pace of innovation."
For years, Apple was an industry darling, growing iPhone sales like clockwork for years and making record profits. But Western markets are pretty comprehensively penetrated, the Chinese market is slowing and emerging markets like India aren't mature enough to be a real target for Apple's premium devices.
Apple is the biggest company in the world, and some analysts and investors are now wondering whether it has any room left to grow. The lion's share of its revenue comes from the iPhone, a device launched a decade ago, while sales of the Apple Watch — the company's latest hardware product line —are in freefall.
In a notable exchange on a call with analysts on Thursday, Apple CEO Tim Cook was put on the defensive after being bluntly asked: Does Apple have a grand strategy for the next 3-5 years? I know you're not going to tell us, but do you have one?"
He responded: "We have the strongest pipeline that we've ever had and we're really confident about the things in it but as usual we're not going to talk about what's in it."
We've rounded up a selection of analysts' reactions to Apple's quarterly earnings, and you can read them below. But first, here are all the key numbers, via my colleague Kif Leswing:
Q4 EPS (GAAP): $1.67 per share, down 14.79% year-over-year (y/y), versus expectations of $1.65
Q4 revenue: $46.9 billion, down 8.93% y/y, versus expectations of $46.9 billion
Gross margin: 38%, down 4.76% y/y, versus expectations of 37.9%
iPhone unit sales: 45.5 million, down 5.3% y/y, versus expectations of 45 million
iPhone ASP: $618, down 7.7% y/y, versus expectations of $625
iPad unit sales: 9.2 million, down 6.8% y/y, versus expectations of 9.1 million
Mac unit sales: 4.8 million, down 15.7% y/y, versus expectations of 5.1 million
December quarter revenue guidance: Between $76 billion and $78 billion. At its midpoint, that guidance suggests 1.44% growth next quarter over last year.
Macquarie Research: BULLISH
Rating: Outperform
Price target: $132
Comment: "Going into the quarter AND for long term, we continue to believe that the software and services at Apple are the most underappreciated aspect of the Apple story, particularly the App Store. With overall iPhone hardware sales relatively healthy, we expect investors to focus more and more on the trajectory of the services business. In fact, we expect management itself to highlight services and the App Store growth to investors."
Citi: BULLISH
Rating: Buy
Price target: $130
Comment: "Apple reported September quarter results with sales slightly below consensus and EPS one penny above street expectations. December quarter guidance brackets consensus. Stock trading down -2% afterhours as Apple’s gross margin outlook of 38%-38.5% is slightly below consensus at 38.8% which we believe is due to higher component costs (memory prices have increased)."
Goldman Sachs: BULLISH
Rating: Buy
Price target: $124
Comment: "Key risks include product cycle execution, end demand, and a slower pace of innovation."
See the rest of the story at Business Insider