Ahead of earnings, GBH Insights' Daniel Ives sees 42 million iPhones sold, and no big surprises — but predicts the real story is what Apple forecasts for 2019 demand. \ In a note published Monday and seen by AppleInsider, Ives predicts that Apple will announced that it sold 42 million iPhones in the third quarter, and predicted "no major surprises" in regards to sales numbers or gross margins. Ives sees Apple's forecasts about the 2019 iPhone demand, as well services numbers, the "main event" of Apple's earnings announcement on Tuesday. Reiterating a note of his from May, Ives continues to see the "window of opportunity" to upgrade over the next 12 to 18 months at 350 million, with Apple needing to capture the majority of those in order to ensure a successful cycle, which will in turn prop up services demand. For that cycle, Ives is with the consensus of most analysts, who see Apple introducing three iPhones this fall- two 5.8 inch to 6.5 inch OLED Plus models, plus a less expensive LCD iPhone. Ives sees their releases as staggered between three and six months. "In terms of the quarter, we believe there could be some upside on the all-important services/software front along with ASPs potentially another bright spot and top-line catalyst," Ives wrote in the note. "In a nutshell, the Street is all focused on the demand trajectory for the September quarter and most importantly into 2019 with the trifecta of next generation iPhones on the horizon and the Street modeling iPhone shipments of roughly 220 million units, which could ultimately prove to be conservative in our opinion given the underlying demand drivers." The analyst maintains a $200 price target and the rating of "highly attractive" for Apple's stock. Heading into Apple's earnings announcement, recent surveys of analyst projections published last week see Apple announcing that it sold around 42 million iPhones in the third quarter, and will announce EPS growth of about 37 percent. Gene Munster, for one, predicted 42 million iPhones sold and said that the iPhone is "becoming a stable business." Various analysts, as they often due in the third quarter, have labeled the quarter boring or insignificant, as it is the last quarter before the arrival of new iPhones.<doc-sep>iPhone trends, Services growth and China commentary are among the things to keep an eye on as Apple's latest earnings report arrives. Though its shares have run up a bit over the past few months, Apple's (AAPL) - Get Report forward earnings multiples are still fairly low, as are near-term investor expectations. That could work in the company's favor as it posts its June quarter earnings report after the close on Tuesday, July 31, and hosts an earnings call at 5 p.m. Eastern. On average, analysts polled by FactSet expect revenue of $52.3 billion (up 15% annually) and GAAP EPS of $2.16 during Apple's seasonally weakest quarter. TheStreet will be live-blogging Apple's report and call on Tuesday after the close. Please check our home page then for more details. For the September quarter, which usually sees new iPhones begin shipping towards its end, the consensus is for revenue of $59.47 billion (up 13%) and EPS of $2.65. Apple provides quarterly sales guidance in its reports. Here are a few things for investors to keep an eye on as the festivities commence. 1. iPhone Sales and Pricing Trends Following a March quarter during which iPhone unit sales rose by only 1.5 million annually to 52.2 million, the consensus is for June quarter iPhone units to rise by 1 million to 42 million. And amid a slew of reports pointing to subdued orders by Apple for next-gen iPhones, the September quarter consensus is for iPhone units to be flat at 47 million. It wouldn't be shocking to see iPhone volumes top those low expectations. Recent data from firms such as Kantar Worldpanel and Wave7 Research suggest the iPhone has been gaining some share in developed markets. In addition, commentary from Samsung and mobile chip suppliers such as Broadcom (AVGO) - Get Report and Skyworks (SWKS) - Get Report indicates Samsung's high-end phone sales are under pressure. And last week, Taiwan Semiconductor (TSM) - Get Report , which has pretty strong iPhone chip exposure, said on its Q2 earnings call that it's slightly more positive now about second-half smartphone demand than it was in April. Meanwhile, iPhone X sales should continue lifting Apple's iPhone average selling price (ASP). In the March quarter, Apple's iPhone ASP rose by $73 annually to $728. For the June quarter, typically a softer one for ASPs, the consensus is for ASP to rise by $87 to $693. The iPhone, it should be remembered, still accounts for over 60% of Apple's annual revenue. 2. Services Growth Apple's Services revenue rose 31% in the March quarter to $9.19 billion, and was a major reason why Apple beat quarterly sales and EPS expectations. App Store transaction growth, Apple Music sign-ups and higher search ad revenue-sharing payments from Alphabet/Google (GOOGL) - Get Report -- provided in exchange for making Google the default search engine on iOS, macOS and the Safari browser -- are believed to be the biggest drivers. Apple Pay transactions and iCloud Storage subscriptions appear to be playing lesser roles. For the June quarter, the consensus is for Services revenue to rise 27% to $9.21 billion. Back in early 2017, Tim Cook declared Apple aims to double its Services revenue by 2020. Apple and Alphabet are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AAPL or GOOGL? Learn more now. 3. Other Products Growth Apple's Other Products segment, which covers the Apple Watch, headphones (Beats and AirPods), Apple TV set-tops, iPods, accessories and most recently HomePods, saw revenue rise 38% in the March quarter to $3.95 billion. The HomePod's February debut helped, but so did strong Apple Watch and AirPods sales. The June quarter consensus is for Other Products revenue to rise 34% to $3.68 billion. HomePod sales likely slipped, but Apple Watch and (especially) AirPods demand still looks pretty healthy. Read Apple Banking on Software and Services as Next Cash Cow as iPhone Sales Slow. 4. The Impact of Buybacks and Currency Swings On the heels of tax reform, which the company is using to repatriate about $207 billion worth of cash post-tax, Apple announced in April that it's launching a new $100 billion stock buyback authorization, and that it would finish using an older $210 billion authorization (it had $10 billion left on it) in the June quarter. All of that suggests there was a healthy amount of EPS-boosting buyback activity took place last quarter. But while buybacks are lifting EPS, the dollar's strengthening since mid-April probably weighed a bit on Apple's top and bottom lines. Unlike many other tech giants, Apple doesn't break out precisely how much currency trends lifted or hurt its revenue. 5. China Numbers and Commentary Apple's Greater China sales (they cover mainland China, Hong Kong and Taiwan) have begun rebounding in recent quarters, after having dropped in fiscal 2016 and 2017. In the March quarter, Greater China revenue rose 21% to $13 billion (21% of Apple's total revenue); Cook indicated iPhones, Macs, wearables and services all played roles. Could trade tensions throw a wrench into the rebound? For now, there are reasons to be cautiously optimistic about avoiding serious damage. Mobile phones aren't on any of the Trump Administrations tariff lists for Chinese-made goods, and thus far, Beijing has avoided calling for boycotts of Apple or other major U.S. consumer brands. Still, any earnings call commentary from Cook or CFO Luca Maestri about the top or bottom-line impact of trade issues is worth closely listening to.<doc-sep>Apple (NASDAQ: AAPL) has long been a winning stock for investors, though lately, many have been anticipating the eventual slowing growth of the company's flagship iPhone. That hasn't stopped Apple from becoming the world's most valuable company in terms of market cap. The company is scheduled to release the results of its fiscal third quarter after market close on Tuesday, July 31. Let's review Apple's most recent results and a few things to look for when the company reports earnings. The iPhone 8 positioned on a charging pad. Image source: Apple. All eyes on iPhone For its fiscal second quarter that ended on March 31, Apple reported revenue of $61.1 billion, up 16% year over year. Net income of $13.8 billion jumped 25% compared to the prior-year quarter, resulting in diluted earnings per share of $2.73. These handily beat analysts' consensus estimates for $60.9 billion and diluted earnings per share of $2.64. Revenue from the iPhone continued to make up the bulk of Apple's business, accounting for 62% of the company's sales in the second quarter. Apple sold 52.2 million of the devices last quarter, a 3% increase compared to the prior-year quarter. With the higher prices commanded by the newest models -- particularly the iPhone X -- the average selling price increased to $728 during the quarter, an 11% increase year over year. For the fiscal third quarter, Apple expects revenue between $51.5 billion and $53.5 billion, which would represent year-over-year growth in a range of 13.4% to 17.8%. While we don't put much stock in Wall Street's short-term mindset, it can help to provide context. For their part, analysts' consensus estimates are expecting revenue of $52.34 billion, an increase of 15.3% compared to the prior-year quarter, and earnings per share of $2.18, up 30.5% compared to the year-ago period. Other high-growth areas Apple has taken a number of steps to reduce its dependence on the iPhone. Early in 2017, Apple CEO Tim Cook proclaimed that the company was looking to double its services revenue by 2020. Since then, the run rate has increased from $25.5 billion to $33.4 billion, so investors will be watching to see that Apple still is on track to achieve its goal. Story continues Another area that's been gaining increasing traction is the company's other products segment, which includes Apple Watch, AirPods, iPod Touch, Apple TV, Beats products, and the HomePod. This category has been booming, producing revenue of $3.95 billion last quarter, a year-over-year increase of 38%. Within that group is an even higher growth segment -- wearables, which is made up of Apple Watch, Beats, and AirPods. Sales of these highfliers increased nearly 50% year over year. And those buybacks Investors will recall that last quarter, Apple announced a hefty $100 billion share repurchase, revealing that the previous $210 billion allocation would be completed during the fiscal third quarter. Since early 2013, Apple's buybacks have resulted in a steadily falling share count, which is down more than 25% over the past five years. Apple CFO Luca Maestri said the company intended to execute the buyback "efficiently and at a fast pace," so investors will be keeping an eye out for additional updates on the share repurchases. AAPL Shares Outstanding Chart Data by YCharts. More to come? Investors also will be looking to see if Apple's guidance is enthusiastic for the coming quarter, as it may provide insight into the company's expectations for future iPhone debuts. Apple is widely expected to announce a variety of new iPhones coming in September, which would be consistent with the company's historical product release schedule. Of particular interest are rumors that Apple will offer multiple versions of the flagship device, including a larger version of the iPhone X. Apple only released one version of its top-of-the-line iPhone previously, and there could be a sizable market for a larger-screen model. Apple started off its fiscal year with two record-breaking quarters and there's reason to believe that the company's strong performance will continue into its third-quarter earnings report. More From The Motley Fool Danny Vena owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.<doc-sep>
Apple Inc.’s iPhone unit sales are generally the main focus of the smartphone giant’s earnings reports, but this quarter might be different. Since Apple AAPL, -0.04% is due to release its next iPhone lineup in the next few months, investors may be less concerned with how many iPhones people are buying now and rather more interested in whether underlying trends remain strong at Apple. Here are the key numbers to watch when Apple reports results Tuesday afternoon. Live coverage: Apple earnings will be all about the forecast September outlook The most important data point in the June-quarter report will likely concern the September quarter. With the next iPhone on investors’ minds, the biggest hint Apple might provide on its conference call about the forthcoming device could come in its forecast for the current quarter. Apple typically launches new iPhones in the fall, but its phones don’t always go on sale during the September quarter. Thus, if Apple delivers a somewhat higher-than-expected outlook for the September period, that could suggest the company expects at least some of its new phones to come out during the period. Currently, analysts surveyed by FactSet project $59.5 billion in revenue for the September quarter. Don’t miss: Here’s how much Apple could make from streaming It’s worth noting that the forecast Apple issued a year ago ended up pleasing investors, who saw it as a sign that the company didn’t expect delays with its then-upcoming iPhone line. In the end, Apple’s iPhone 8 and 8 Plus came out in time to count in the September quarter, but its flagship iPhone X didn’t launch until November. For investors tempted to look farther ahead, Bernstein analyst Toni Sacconaghi wrote last week that Apple’s September quarter outlook has historically “ *not* been a helpful predictor of the strength of the forthcoming cycle,” while the company’s gross-margin forecast for the period “has only been helpful when Apple has guided meaningfully lower.” Services revenue An increasingly important part of Apple’s business is its fast-growing services segment, which includes Apple Music, iCloud, and the App Store. For the June quarter, analysts tracked by FactSet project $9.2 billion in services revenue, up from $7.3 billion a year ago. That would amount to a 26% growth rate. “While services grew an eye-popping 31% in the March quarter, we acknowledge that pace is unlikely to be sustainable,” wrote CFRA analyst Angelo Zino. He projects that services revenue will grow 28% in the quarter. Cascend Securities analyst Eric Ross wrote Tuesday that Apple Music could account for almost $800 million in June-quarter revenue, though he expects that the service has lower margins than those offered by Spotify Technology SA SPOT, +0.69% or Pandora Media Inc. US:P (Pandora is also on Tuesday’s earnings docket.) Apple doesn’t break out services revenue by subsection, but it will be worth watching for commentary on Apple Music as well as the App Store. Average selling prices With the next iPhone cycle so close, iPhone sales are less of a focus these days than they normally are. Pay attention to a related metric, however, for a sign of how much consumers are generally willing to pay for phones. Apple’s average selling price is a decent indicator of the mix behind higher- and lower-priced iPhones, as well as whether consumers are experiencing fatigue due to Apple’s high prices. Analysts surveyed by FactSet project that the iPhone commanded an average selling price of $693 during the quarter, up from $606 in the year-earlier period but down from $728 in the March quarter. The June quarter tends to be the lowest quarter seasonally in terms of average selling price. China China revenue is a closely watched but hotly debated element of Apple’s business. Greater China sales have been on the upswing for Apple lately after a period of weakness, but analysts want to know the source of the turnaround. Watch for commentary on whether unit sales in China remain strong, or whether other areas are driving China strength. The services business is likely getting a nice lift in China, and watches could also be helping matters somewhat.