Friday, December 9, 2022

Can Apple’s 24X7 services store-front make up for falling iPhone sales?

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By Subrat Patnaik

(Reuters) – Many of Apple Inc’s physical stores re-opened and re-closed in recent months because of spikes in cases of the novel coronavirus.

But two of the iPhone maker’s most important storefronts were open the whole time: The App Store and Apple’s content businesses such as music and streaming video.

When Apple reports earnings Thursday, investors will be keen to see if its services segment raked in enough to help offset expected declines in most hardware sales and uncertainty about the timing of this fall’s iPhone lineup, historically the company’s biggest sales driver.

Analysts expect pandemic disruptions to pull down total revenue about 3% year-over-year to $52.1 billion and Apple’s bellwether iPhone business by nearly 14% in the third quarter, according to IBES data from Refinitiv as of July 28.

The two expected growth spots are services revenue – expected to be up 15% to $13.18 billion – and revenue from the companies wearables segment, expected to rise 8.6% to $6 billion, according to Refinitiv data on July 28.

Investors have viewed Apple as a comparative safe haven during the pandemic, pushing up shares 65% since mid-March when much of the world was urged to stay home to help slow the spread of the novel coronavirus.

When Apple last reported its fiscal second quarter in April, the company did not give a forecast. Analysts do not expect it to give a forecast when it reports this week but will be listening for clues about whether iPhone production for this fall is on track after reports of production delays because of the pandemic.

Analysts are also likely to watch for clues about whether the budget iPhone SE, priced at $399 and released in April, is helping Apple gain or retain customers.

Twenty-nine analysts rate Apple “buy” or “strong buy” and seven say “hold” and three have “sell” or lower ratings.

(Reporting by Subrat Patnaik in Bengaluru and Stephen Nellis in San Francisco)


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