Apple reports sales decline: here’s why this analyst is not concerned

buy apple stock despite quarterly sales decline

Apple Inc (NASDAQ: AAPL) gave back its intraday gain in extended hours after reporting its first quarterly year-on-year decline in sales since 2019.

Apple stock down on disappointing iPhone sales

iPhone brought in $65.78 billion in sales this holiday quarter – down 8.17% versus last year and missing Street expectations by a whopping $2.51 billion, as per the earnings press release.

Still, Wedbush Securities’ Dan Ives is convinced that sales have not been lost; weakness now will actually translate into strength in the next couple of quarters.

I think it comes down to 8-10 million iPhones shifted out of this quarter because of shortages. That’s going to benefit March and June quarters, going into [which], you have 225 million iPhones that haven’t upgraded in four years.

He also noted that demand for the higher priced iPhone 14 Pro continues to be strong.

Ives continues to believe in Apple stock

Also on the downside was Mac revenue that following a record quarter tumbled 28.66% in Q1 to $7.74 billion, falling short of $9.63 billion that analysts had forecast.

But Ives fixated more on services revenue that went up a little more than expected 6.4%. On CNBC’s “Closing Bell: Overtime”, he said:

I think [the quarter] was better than feared. They beat on services, that’s super important for the narrative on growth. Fundamentally, it’s a rock of Gibraltar stock. The reaction from the Street once its digested will be positive; similar to MSFT, it’ll open 24-48 hours later in the green despite the knee-jerk here.

Ives continues to recommend buying Apple stock and sees upside in it to $175.

Notable figures in Apple’s Q1 earnings report

  • Net income slipped from $34.6 billion to $30 billion
  • Per-share earnings also declined from $2.10 to $1.88
  • Revenue slid just over 5.0% YoY to $117.15 billion
  • Consensus was $1.94 a share on $121.1 billion revenue
  • Gross margin remained roughly unchanged at 42.96%
  • iPad revenue went up nearly 30% – better than expected
  • Other Products revenue tanked a more than expected 8.3%

What was behind the weakness this quarter?

CEO Tim Cook attributed the weakness to macroeconomic challenges, production headwinds in China (source), and strength of the U.S. dollar.  

Excluding currency headwinds, Apple would have remained in the growth territory on the sales front. Discussing production delays, CEO Cook told CNBC:

In terms of production, it’s back to where we need it to be. So, that problem is behind us now.

So far, Apple Inc has managed to avoid joining its tech peers in announcing layoffs. The multinational, however, is being prudent with hiring, which means parts of it are not recruiting for now, the chief executive confirmed.

Earlier this month, CEO Cook voluntarily slashed his own pay by an enormous 40% to cut costs. Apple stock is still up 15% year-to-date.

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Source: https://invezz.com/news/2023/02/02/buy-apple-stock-despite-quarterly-sales-decline/