By Jeremy C. Owens, MarketWatch
Apple Inc. is expected to show off its most elaborate and expensive iPhone yet in a couple of months, but those expectations are not helping iPhone sales right now.
Apple /zigman2/quotes/202934861/composite AAPL +0.17% Chief Executive Tim Cook in May noted a “pause” in iPhone sales, blaming reports about a superpremium tenth-anniversary iPhone costing $1,000 or more that have arrived nonstop for months. That did nothing to stop the flood of reports on the new iPhone, which now suggest the pause could last into a new fiscal year.
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Consumers slowing down their purchases of iPhones ahead of a launch is nothing new, especially in the third quarter, which Apple will detail when it reports earnings after the market closes Tuesday. The April-June period has been Apple’s weakest every year since the company seemed to settle on September iPhone launches in 2012.
But Cook was discussing the second quarter , when Apple sold fewer iPhones than the year before and issued guidance more cautious than analysts were forecasting. And the unceasing, anonymously-sourced reports that annoyed Cook now say fans who want the high-end device may not line up outside Apple stores before the current quarter ends.
Financial analysts believe, based on media reports and their own sourcing, that the more expensive model could take longer to make it to consumers in mass quantities due to production challenges with the OLED screen and fingerprint reader. Many have already shifted sales into the next fiscal year in their forecasts, as they expect Apple will not be able to supply the demand for its $1,000 smartphones until after the fiscal year ends with the close of September.
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“We think the flagship device may not see initial shipments until October (vs. mid/late September for historical new iPhone launches), with volume shipments not occurring until the November/December time frame,” RBC Capital Markets analysts wrote.
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That actually could make life easier for Apple when it reports earnings on Tuesday, as Cook now faces reduced expectations for both sales and the fourth-quarter forecast. Investors and analysts see every iPhone that Apple isn’t selling right now as potentially a more-expensive iPhone it will sell in the holiday season, so it would take a huge miss to shift attention from the next shiny new Apple gadget.
“We believe any ‘hiccups’ in June results would be glossed over as investors focus on the upcoming iPhone launch,” wrote PiperJaffray analyst Michael Olson, who has an overweight rating and $158 price target on the stock.
What to expect
Earnings: Analysts on average expect Apple to bring in net income of $8.2 billion, or $1.57 a share, according to FactSet, which would be a gain of about 5% from the same quarter a year ago. Contributors at Estimize — which crowdsources estimates from analysts, fund managers and academics — are more bullish, with an annual estimate of $1.60 a share.
Apple has beaten the FactSet consensus estimate for earnings in all but one of the past 18 quarters.