Mark Gurman: Apple faces a tough compare

From Gurman's "Apple Begins to Show Rare Vulnerability Ahead of Economic Slowdown" posted Sunday on the Bloomberg:

The [June quarter] results themselves are expected to show a major deceleration in sales growth. Analysts predict that revenue will climb by about 2% from a year earlier, the slowest pace since 2020. Compare that with the 36% jump that Apple saw in the third quarter of 2021.

Revenue is expected to come in around $82.7 billion. The iPhone will account for a little under half of that, analysts predict, with services generating nearly $20 billion.

Apple’s challenges go beyond the latest economic concerns:

    • First, the company already said you can shave $4 billion to $8 billion off the top of last quarter because of supply problems stemming from Chinese lockdowns and the chip shortage.
    • Second, it’s a tough comparison. The third quarter of 2021 included a lot of pandemic-induced spending by people outfitting their home offices. That led to a nice jump in Mac and iPad sales.
    • Third, though the latest MacBook Air was announced during the third quarter, it wasn’t released until the fourth quarter. Many customers held off buying a MacBook Air—Apple’s most popular Mac—while they waited for the new model to arrive.
    • And, yes, there’s the economy. Given all the uncertainty, more people are probably holding on to their cash right now instead of spending on new Apple products. If they do splurge on technology, they may wait for the latest iPhone, AirPods Pro, Apple Watch and iPad to arrive this fall.

If the economy does take a dive, it’s only going to get harder. These factors have already led Morgan Stanley, Wells Fargo and other banks to cut their stock price targets for Apple by about $10 a share.

My take: If the economy takes a dive, Apple will fare better than its competitors.

11 Comments

  1. Robert Paul Leitao said:
    Wait a minute… Apple is likely to continue growing revenue, even at single-digit rates YOY, following a fiscal year in which revenue rose over 33% while currently facing strong forex headwinds, an economy enduring QT (quantitative tightening) and slowing global economic growth. This is somehow a “vulnerability”? Seriously? Oh yeah. This is the slowest rate of growth since all the way back in 2020! Of course we have to open the ancient history books to find that reference, right? I just had to comment. It’s a positive response to otherwise being speechless reading this coverage. Those analyst price targets referenced? Yeah. They are well above the current share price and trading range by about 15%.

    12
    July 24, 2022
  2. Tommo_UK said:
    The best tells I’ve found for a 6-9 month prediction of what’s to come are:

    The street price of cocaine. If it’s falling the the middle class are cutting back on their partying which has a dramatic impact on the economy as tail wags dog. It means panic is rising too.

    Similarly, any rise in prostitution.. The more jobs vanish, the more the oldest profession benefits.

    A friendly off the record chat with your local precinct can yield a goldmine of information .

    Lastly and less salacious (and, least accurate as repossessions can take awhile) car loan defaults. Sub prime lending failure often predicts a crash. Why do you think student loans have been written off and removed from weighing down the balance sheet?

    The first two are leading indicators (if you know who to ask), the latter more of a confirmatory signal.

    Fortunately for iPhone sales, hookers need iPhones to tout for business online, as do drug dealers. And when it comes to their car or their phone most people would rather lose their old Le Baron than their cellphone number, airtime contract and access to Facebook, Insta, and Apple 3.0 so morals dilemmas aside Apple wins.

    Worth noting, and as I’d warned about throughout last year to some mockery, we’re in a fucking far with the Russians and regulatory hell has descended – just as expected – but AAPL is surviving pretty well so far. .

    Did you hear me? For the first time in almost 80 years there is all out war in Central Europe, Ukraine is one of the world’s largest grain producers and inflation is rocketing as its supplies are constrained by Russia in spite of the new “treaty.”

    What part of this is going over anyones head while they moan about AAPL retracing 25% while the world is literally on fire and Putin threatens to nuke the the U.K.?

    This isn’t Kansas any more.

    10
    July 24, 2022
  3. Christopher McManus said:
    His reporting is remarkably shallow and he has a halting—way—of—-writing.

    Will love the day when his 2-3 Apple sources are outed

    3
    July 24, 2022
  4. Gregg Thurman said:
    The author writes drivel.

    As to Tommo’s downside contentions: yes we are at war with Russia, but we, unlike Russia have an economy to support that war far longer than Russia does. That and the war, so far, is contained in the Ukraine.

    Only a mad man would unleash the nuclear option, and I don’t see that happening unless/until the war expands outside the Ukraine At that point Putin won’t be facing the people of the Ukraine (supplied by the west), he will be facing NATO with much better trained and equipped Armies, and a much, much longer border to defend.

    Even then, there is opposition to Putin’s rule within Russia (just as there was in NAZI Germany against Hitler). An all out war against NATO would, IMO, result in regime change by those not willing to test the survivability of a nuclear exchange.

    3
    July 24, 2022
    • David Emery said:
      Joke from early June, a conversation between Russians
      Her: What’s this “Special Military Operation” in Ukraine our President is talking about?
      Him: It’s a proxy war between us and NATO.
      Her: How’s it going?
      Him: Not well, we’ve lost 1500 tanks and 25,000 soldiers.
      Her: How about NATO?
      Him: They haven’t shown up yet.

      And it appears Ukraine is starting a significant offensive in the southwest near Kherson, while Russia continues to grind out small gains for huge losses in Donbas. (See the daily ISW/understandingwar dot.org updates.)

      4
      July 24, 2022
      • David Emery said:
        To add to this a bit (at the risk of going way off-topic here). ISW today reinforced the idea of some sort of Ukrainian offensive in the southwest. Objectives for that aren’t clear (which is OK, Ukraine is much better at Operational Security than Russia has been.) And ISW highlights the impact HIMARS and other longer range artillery systems are having on Russian logistics and massed artillery fires. Things could get interesting in Ukraine in the next couple of weeks. HOWEVER, if Ukraine is successful on the ground, Russia is likely to be less inclined to live up to its grain shipment commitments. I hope US will follow Russian Foreign Minister Lavrov’s tour around Africa with a counter to Russian lies and half-truths.

        1
        July 24, 2022
    • Tommo_UK said:
      War in Europe is war in Europe. Look what happens whenever it breaks out. NOT escalating would be almost the sole exception rather than the rule so sitting comfortably a few thousand miles and an ocean assuming Putin understands MAD and isn’t just mad is rather like smoking hopium when the world’s food supplies currently depend on Ukraine ?the ceasefire to allow Odessa – that’s a port in Ukraine the Russians are trying to seize – is already over which means higher foood prices. Lower supplies and higher inflation.

      Just tale a look at the old map of the USSR and overall it one of Europe and Russia now and if you can’t see the *potential* for a rapid escalation you are as blind as America was in 1939 until reality dawned in 1941.

      Apple is global. Food supply chains are global. War is global. Inflation is global. Apple will obviously thrive better than others in the event off a recession but I don’t blame any analyst from screaming bloody murder at this point. Sources maybe questionable, rationale isn’t.

      This is the riskiest geopolitical situation since the 1970s

      3
      July 24, 2022
      • Jerry Doyle said:
        @Tommo_UK: “…. This is the riskiest geopolitical situation since the 1970s.”

        And then we have Pelosi heading to Taiwan with her Congressional Delegation of national recognition. China is hoppin’ mad & threatening to go ballistics.

        1
        July 24, 2022

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