Apple Sell-Off May Create Buying Opportunity
We think the market’s reaction to the Apple Watch’s slow start is overdone, and we’re sticking with our fair value estimate on the back of stellar iPhone demand.
Apple sold 47.5 million iPhones in the June quarter, slightly below expectations but still up a hearty 35% from the year-ago quarter. Unit sales in greater China remained spectacular, up 87% year over year. Yet iPhone average selling prices were surprisingly flat, which we view as a great sign for iPhone product mix as Chinese customers aren't solely buying the older, cheaper models. Apple's revenue from other products was $2.6 billion, which we think implies that the firm earned about $1.5 billion from the Watch, based on sales of 3 million units at a $500 ASP.
For the September quarter, Apple expects revenue of $49 billion-$51 billion. While this range represents 16%-21% year-on-year growth, we also think it implies that the Watch won't provide a meaningful revenue boost to Apple next quarter either. We're not especially surprised by this and anticipate that Watch sales may rise exponentially in the December quarter during the holiday season.
Morningstar Premium Members gain exclusive access to our full Analyst Reports, including fair value estimates, consider buying/selling prices, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.
United States