On Wednesday, Apple (AAPL) traded lower after it had reported mixed earnings. The main issue with the report was that iPhone sales came in much lower than anticipated. China sales weakened, causing a major problem for the company.
Mixed Earnings
Apple reported that it had earned $2.10 per share for the second quarter. This was way above the expectation that it would only obtain $2.02 per share. The earnings per share number was an easy beat, the problem lies with the less than stellar revenue number. Revenue for the quarter came in at $52.9 billion just under the expectation that it would report $53.02 billion.
While not a big miss on the revenue side, the stock got hit hard regardless. Wall Street estimates are important and a miss typically causes the stock to trade lower. What also didn’t help the miss on revenue would be next quarter’s guidance. For the next quarter, Apple is guiding lower.
It expects to post revenue between $43.5 billion to $45.5 billion. That is a huge amount of revenue, but there is a problem. The problem is that analysts forecasted revenue for the next quarter to come in higher than that. The forecasted revenue by analysts is at $45.6 billion.
Drop Off
One of the main issues during the quarter was the lower than expected iPhone sales. Apple stated that it had shipped 50.8 million phones during the quarter. That is far below than the expectation that it would ship 52 million. The amount of iPhone shipments were probably lower because of one major reason.
That would be the fact that not many consumers are probably interested in upgrading considering that the new iPhone 8 is expected to launch in the Fall. Another reason would be that the smartphone market is starting to become highly saturated.
For now, it is quite difficult to determine if the drop off in iPhone sales is the refresh cycle or a higher concern. In either scenario, the stock didn’t take the lower iPhone sales quite well. There may be a chance for the iPhone cycle to make a comeback. That is an analyst by the name of Gene Munster is expecting up to 300 million iPhone upgrades in the fall. That is the same time when the iPhone 8 is expected to ship.
China Sales Drop
Sales of the iPhone 7 and iPhone 7 Plus in the U.S. remain strong. The problem lies across the globe in China. It was stated that China sales fell 14% year over year. Even worse sales of the iPhone in China fell 12% from the prior quarter.
There were two issues that caused sales in China to fall. The first issue involves increased competition in the region. The iPhone 7 is a popular phone, but it is far more expensive compared to other models.
Just a few of the brands that are competing well against Apple are: Vivo, Huawei, and OPPO. The second issue deals with currency devaluation. During the quarter the yuan devalued by 5%. This lower devaluation of the yuan caused a drop in revenue.
What Binary Options Traders Should Watch For
There are a few things that traders should watch.
The first of which is if the forecast for the following quarter holds true. If that is the case, then the pressure will be on Apple to deliver higher revenue.
The second item would be iPhones. The key is to see if iPhone sales continue to drop. The sale of iPhones might rebound if the new iPhone 8 is launched in September. There are some key features being implemented that might cause users to want to upgrade.
The final item that traders should keep an eye on would be iPhone sales in China. With sales slumping in that region, it does not bode well for the next earnings report. Apple has to get this number up to fend off competition. Competitors are doing well to fend off the tech giant for the time being.
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