Earlier this week Apple Lossless Audio CODEC (ALAC), made public the financial results corresponding to the first quarter of fiscal year 2016 and although it has once again set a record with "quarterly sales of $ 75.900 billion and a quarterly net profit of $ 18.400 billion" compared to "sales of $ 74.600 billion and net profit of 18.000 million dollars (…) obtained in the same quarter of the previous year ”, the figures have left a bittersweet among shareholders as it shows that some aspects are changing and that the time has come for the company to face new challenges.
What do Apple's financial results show?
If until now the only product of the company that presented continuous declines in sales and a permanent loss of market share quarter after quarter was the iPad, now iPhone seems to have peaked and for the first time their sales fall short of expectations. In addition, Alphabet, Google's new parent, has overtaken Apple as the largest capitalization company.
Thus, Apple must begin to rethink certain aspects:
1 the iPhone challenge
The first fiscal quarter to which these results refer corresponds to the Christmas sales period, the largest sales period of the year however, and Despite having sold 74,8 million iPhone units, Apple has failed to meet the targets set, which has been a great disappointment among investors because we do not forget that we are talking about the great flagship of the company. Without a doubt its price, each year higher than the previous one, is a determining factor. As is also the case that "four improvements" in the S generation are not enough to convince and above all, to justify a new financial outlay by customers. This circumstance leads us directly to a new challenge.
2 goal: that users renew their iPhones
Effectively. Many analysts agree that iPhone conversion in developed countries has peaked and that Apple's goal now should be for users with an older iPhone to renew it. Apple CEO Tim Cook himself said: "60% of iPhone owners have the iPhone 5S, iPhone 5C, or lower." This is where the key for iPhone sales to be maintained and increased again, but will it be able to do so at exorbitant prices? Will the rumored iPhone 5se and next iPhone 7 to this cause?
3.Second objective: new products
With the iPhone "disappointing" for the first time, with the iPad steadily losing frame share, and with products like the Apple TV or the Apple Watch which, although well received, does not have the great reception that other products have had, the company has the challenge of create new and innovative products, in other words, create new needs in consumers, or make us see those that we supposedly do not see, in order to relaunch sales.
4.Wall Street reacts
Apple shares have been declining for months and the reaction to these results, although usual, was immediate: Apple shares have fallen again up to 6% from the communication of the results. And this worries investors a lot.
5.Apple is no longer the largest capitalization company
Apple has been reclassified as a "value" stock rather than a "growth" stock, and this is because its big rival, A, now surpasses it as the company with the highest capitalization. The products have already 'matured' since their launch in the sense that their sales growth is beginning to suffer. It was impossible to always maintain such spectacular growth as that demonstrated by Apple in recent years, or was it?
6.Financial situation of envy
"We generated $ 27.500 billion in cash flow from operations during the quarter, and returned $ 9.000 billion to shareholders through share buybacks and dividends," said Luca Maestri, Apple's chief financial officer. Indeed, despite this strange feeling after knowing the financial results of Apple, the company has 216.000 million dollars "in cash" and an enviable financial situation that allows it to continue with its plans.
7 the new goose that lays the golden eggs
The Chinese economy is suffering, at the moment, a slowdown, however, the income generated in that country by Apple has grown by 14% in one year, reaching 18.373 million dollars. China is the new goose that lays the golden eggs for Apple, it sells there more than within its natural borders, and Tim Cook continues to maintain his confidence that the pace will remain at least the same: “beyond short-term volatility We remain very confident in the long-term potential of the Chinese market, and we see great opportunities. We are maintaining our investment.
8.The evolution of the world economy
Neither Apple is oblivious to the world economic situation and more specifically, to the evolution of the dollar that, according to the company, has hurt them to the point that their income could have been up to 15% higher. Obviously, a more expensive dollar is a less competitive dollar.
9.Possible penalties for tax evasion
The European Commission continues its war against possible tax evasion by large multinationals that use "tricks" such as filling Ireland with subsidiaries to invoice through them, since it offers them great tax advantages there. Recently, and according to Blomberg, it has been known that Apple could have to face a payment of 8.000 million euros, in concept of everything that it would not have paid years ago. Investors do not like this, although we imagine that as long as there was no problem, they were not complaining. It also gives a bad image to the company that is difficult to clean.
For this reason, Google has already agreed to pay the taxes corresponding to the last decade in the United Kingdom, which plays very against Apple.
10. The first annual sales drop is looming since 2003
Apple forecasts total revenue for the second fiscal quarter between $ 50.000 billion and $ 53.000 billion, an amount lower than both the market forecast ($ 55.000 billion) and $ 58.000 billion for the same period last year.
Conclusions
Has Apple swung? Possibly yes. Although there are exogenous factors beyond its control that have inevitably affected (the evolution of the dollar, the global crisis, etc.), the truth is that there is much that does depend directly on the company.
Possibly, stopping continuously increasing prices (in the case of the iPhone, some Macs, etc.) and abandoning an excessively accelerated and totally unnecessary product renewal cycle could be the keys that allow Apple to continue growing beyond the simple renewal that its already users make their products.
SOURCE | Stock market