Wednesday, January 27, 2016

Apple's call: Chinese macro, forex, virtual reality, iPhone ASP discussed

In its supplemental slides[1] (.pdf), Apple (NASDAQ:AAPL[2]) notes forex had a 600 bps impact on FQ1 revenue growth (2% vs. 8%). The effect was particularly strong in Europe (+4% vs. +18%) and Rest of Asia-Pac (excludes China/Japan, +4% vs. +19%).

On the earnings call, Tim Cook noted Apple has seen economic turbulence in China/Hong Kong - Intel[3] has also reported seeing Chinese macro pressures. Cook insists Apple remains bullish on China, and predicts rising 4G penetration will continue lifting iPhone sales. 50% of Chinese iPhone sales are said to be to first-time buyers. (live blogs: WSJ[4], Business Insider[5])

Notably, when asked about virtual realty, Cook suggested[6] he's positive on the technology. "I don't think it's a niche. I think it can be … it's really cool and has some interesting applications." Apple recently hired[7] VR expert Doug Bowman; Facebook is getting set to ship[8] its first consumer Oculus Rift model, and Google/Alphabet has created a dedicated VR unit.

When asked about iPhone ASP, CFO Luca Maestri suggested a favorable mix gave a lift - demand for 5.5" iPhones and higher storage tiers could be helping. Regarding forex, Maestri said Apple expects a 4% FQ2 revenue hit, and sees sales dropping 5%-10% Y/Y in constant currency (implies a 9%-14% drop in dollars). Forex had a $49 impact on FQ1 iPhone ASP ($691 vs. $740).

Also mentioned: 1) iPhone channel inventory was at the low end of Apple's target range at the end of FQ1, and iPad channel inventory within its target range. 2) App Store revenue rose 27% Y/Y, and App Store customers 18%. 3) Apple plans to update its capital return plan next quarter, and to be active in debt markets.

AAPL[9] now -2.2% after hours to $97.80.

Apple's results/guidance, FQ1 details/dividend[10][11]


  1. ^ supplemental slides (
  2. ^ Apple Inc. (
  3. ^ Intel (
  4. ^ WSJ (
  5. ^ Business Insider (
  6. ^ Cook suggested (
  7. ^ recently hired (
  8. ^ getting set to ship (
  9. ^ Apple Inc. (
  10. ^ Apple's results/guidance (
  11. ^ FQ1 details/dividend (

Apple's call: Chinese macro, forex, virtual reality, iPhone ASP discussed Rating: 4.5 Posted by: Unknown


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