Apple continues to rely on iPhone inflation for revenue growth as unit sales quarterly year-on-year growth was flat for the 12th consecutive quarter. The almost 30 percent increase in iPhone revenue is due to price increases.
Unit sales growth for the iPad and computers were negative year-on-year.
Assuming, for example, iPhone prices rose at the rate of inflation of 3 percent (and, of course, assuming away quality upgrades), the company revenues would have increased by only 5.7 percent instead of 20 percent.
Relying on price increases is not sustainable and may be why the stock is taking a beatdown after the close.
I have a friend who works in retail smartphone who swears the Google smartphone is a superior product to the iPhone at the fraction of the price, If consumers become a smidgen more cost conscious, Apple’s “annuity” revenue stream comes under pressure.
Moreover, Apple shrank their shares outstanding by about 6 1/2 percent over the past year. The market will eventually prioritize electrical engineering over financial engineering.
How long will the market stick with the stock? Your guess is as good as ours.
Don’t get us wrong, Apple is a great company with great products.
We loved it pre-2016 and have missed the last 30 percent.
We suspect if unit sales do not increase this holiday season, the stock could be in trouble. Just our calculated guess.
Apple is also so huge, the company has to wake up every January 1st and generate annual revenues larger than the size of Portugal or Peru’s GDP, that is more than 77 percent of the world economies monitored by the International Monetary Fund. That’s a big, big nut, folks!
Tim Cook is running out of time.
Update: November 1 @ 6.25 pm eastern
Do you wonder why?