Apple’s new translucency: What analysts are saying

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“Starting with the December quarter, we will no longer be providing unit sales data for iPhone, iPad and Mac.” —Apple CFO Luca Maestri

 

Excerpts from the notes we’ve seen. More as they come in.

Walter Piecyk, BTIG: Apple Reduces Disclosure; Typically Not A Good Sign. Apple might not think it’s helpful to report unit data for its products, but we do. More data is better than less data. There is rarely an exception to this. Reduced visibility typically results in a lower valuation multiple because it increases the risk to investors of predicting future growth and valuation multiples are a function of growth and risk… Some might argue that reporting fewer metrics offers fewer opportunities to displease investors. We disagree. Speculation on what is occurring in Apple’s business segments will fill the void created by the absence of information. The uncertainty that speculation breeds is rarely positive for stocks. Buy. $235.

Gene Munster, Loup Ventures: Apple’s Message: Think ‘Apple as a Service.’ Shares were down 5% after hours but fell further to ~7% on news that the company is adopting a new reporting methodology and will no longer break out hardware unit sales for iPhone, iPad, and Mac… Ultimately, this is a good thing for Apple investors. The new reporting method will force the Street to think about Apple’s business as a stable and growing service, which should yield a higher earnings multiple in the long run.

Aaron Rakers, Wells Fargo: Solid Results Overshadowed By Pulled Unit Disclosures + Macro Angst. While incremental product vs. services GM%-related disclosure are welcomed, we think investors will be frustrated with Apple’s decision to no longer provide reported unit shipments for iPhone, iPad, and Mac – i.e., eliminating visibility into unit growth and blended ASP ($/unit trends). We think this decision reflects the company’s efforts to increasingly drive a services / recurring revenue narrative in the Apple story. Market Perform. $210. 

Robert Cihra, Guggenheim: AAPL May Want its Growth-via-ASP Strategy to be Less Obvious. Surprisingly, Apple says it will stop reporting UNIT numbers going forward, which hit the stock after hours, and we think investors will dislike it as it could foreshadow trying to hide unit declines. But our take is that smartphone market units have already gone ex-growth (e.g., iPhone unit growth has already averaged -2%Y/Y the past 12 quarters), and Apple’s move may rather be because it does not want to keep making it so obvious to CUSTOMERS that its strategy has shifted to what we’ve been calling “growth via ASP” (e.g., not just iPhones, but also in iPads, Mac, Watch). Buy. $245. 

Michael Olson, Piper Jaffray: Solid Sept Qtr, But Outlook & Less Disclosure Disappoint. With slightly weaker guidance for the Dec. quarter and the company’s indication that it will provide less product level disclosure (no units or ASP), some investors will assume iPhone units are trending poorly. With increasing disclosure coming for services (gross margin), we believe Apple is simply trying to change the focus towards the overall installed base and services revenue per user. Overweight. $250. 

Maurice Klaehne, Counterpoint Research: Lessons from Today’s Apple Earnings Call. Even Apple knows that it’s unsustainable to keep raising their ASP like this YoY. The next big move for the company will be to refocus their offerings to their ecosystem and services and away from its devices. An indicator for this is their announcement that iPad, Mac and iPhone sales unit numbers will not be broken out in the future. The company will now focus on better weaving a story not build on shipments but one of revenues, ecosystem, services, and customer satisfaction.

Samik Chatterjee, J.P. Morgan: Growth Fundamentals Intact, Despite Softer Revenue Guide on FX Headwind and Conservatism Related to Macro Risks. Looking forward, while we can understand the investor disappointment relative to the headline F1Q19 revenue guidance of $89-$93 bn (mid-point of $91 bn) vs. consensus of $92.6 bn and JPMe of $93.1 bn, we believe the shortfall is largely explained by a combination of: 1) FX headwind of $2 bn, which we believe is much higher than contemplated either by consensus or JPM (e.g. less than $1 bn); and 2) Degree of conservatism embedded in management’s guidance as evidenced in the firm’s track record of hitting or surpassing the high-end of its quarterly revenue guide in three of the last four quarters. Overweight. Lowers price target to $270 from $272. 

Wamsi Mohan, Merrill Lynch: Guidance suggests lower iPhone units for F1Q.  F1Q19 guide for rev of $89-93bn ($91bn mid-pt) compares to our $90.9bn prior est. and implied EPS of $4.63 (mid-pt of range $4.46-$4.79) was just slightly lower than our prior $4.64 est and lower than Street est. of $4.92. The Street was expecting a F4Q rev/EPS guide of $92.9bn/$4.92. On the call, we look for color on the following: 1) inventory growth of iPhones in the channel, 2) iPhone ASP in Dec qtr, 3) whether Services rev growth can sustain, 4) strength of other devices such as Apple Watch and HomePod, and 5) gross margin bridge of flat q/q. Buy. $235.