Apple Earnings Preview: Will iPhone Sales Finally Return To Growth?

The once-unstoppable iPhone has lost some of its mojo, but the technically impressive iPhone 7 Plus could be the booster shot Apple needs.

Apple Earnings Preview: Will iPhone Sales Finally Return To Growth?
[Photo: Flickr user Paul Hudson]

“Is Apple still a growth stock?” Many analysts have been asking this question lately. What they’re really asking is whether Apple is still an innovative and surprising company. Surprises, after all, are what move money around in the stock market. For the rest of us, it’s simply a question of whether our next iPhone will be something new, different, cool.

Not too long after Tim Cook became CEO in 2011, Apple had a big hit with the new iPhone 6, which had a significantly larger screen than earlier iPhones. Smartphone users loved it, and since then new iPhones have largely been variations on the iPhone 6 design theme.

But these days, consumers have lost some of their excitement. Apple has seen multiple quarters of slowing iPhone sales growth. And the iPhone still makes up about two thirds of the company’s revenue.

That’s why all eyes will be on iPhone sales tomorrow when Apple reports earnings for its fiscal first quarter. The sales result for the 2016 holiday season will tell us a lot about how the iPhone—and Apple—are viewed by consumers. Fortunately for the company, there’s a fair chance that Apple will indeed have sold more iPhones than it did during the same period last year. After all, this year’s iPhone, while still a chip off the old block, is a pretty—and technically impressive—device. The “plus” version of the phone has a new dual-lens camera, which dramatically improves the quality of zoomed and low-light photos.

Also, there are indications that that phone, which is more expensive and presumably has a greater profit margin, sold as well or better than the smaller iPhone 7. If that turns out to be true, Apple is indeed likely to beat its revenue take for the 2015 holiday quarter (Apple’s Q1 2016).

Apple has forecast revenue of between $76 billion to $78 billion for the quarter. This, says Above Avalon analyst Neil Cybart, implies that iPhone unit sales will hit somewhere between -2% and 2% compared to the 74.8 million phones it sold last year. Cybart believes Apple will end up selling more than the previous year.

A consensus of 34 analysts gathered by Yahoo Finance says Apple will pull in revenue of $77.8 billion, compared to $75.87 in last year’s quarter. Apple typically sells far more phones in the holiday quarter than in other quarters. The company, of course, will face challenges in the near future as the newness of the iPhone 7 wears off and the world awaits the arrival of the much-hyped iPhone 8.

We’ll have a report after Apple announces its earnings after the close of the markets Tuesday afternoon.