Apple (NASDAQ:AAPL) is due to report quarterly results at the end of the month but this time, it will leave out iPhone unit sales. If Apple reports growth due mostly to services, will investors lock in profits ahead of the report?
Revenue growth from Apple’s services may not accelerate for at least a few quarters. The push towards subscriptions will not pay of right away, while app sales will continue at the historical pace.
Issue
Not knowing the unit iPhone sales in the quarter is a setback for investors. In the same quarterly period, Samsung launched the latest Galaxy S10 with strong success. Long lines and crowds could be seen on the launch day in China, signaling higher unit sales compared to the previous generation Galaxy device.
Opportunity
HSBC estimates that ~25% of the 900 million iPhone users are on iPhone 6 or older. If half of them upgrade to the latest device, Apple could beat its own downside expectations for device sales. The risk is that users on the older device cannot afford the iPhone XS, XR and either hold off upgrading or switch to Android.
Takeaway
Wait for Apple’s quarterly earnings results for clues of a stabilization in device sales. The easy money was already made and the stock could fall if unit sales worsened in the quarter.
