Apple offers breadcrumbs for a forecast, but is that enough to reassure Wall Street?






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Apple Inc.’s breadcrumbs lead back to a familiar place: The iPhone is all that matters.

After posting its largest revenue decline in more than six years — led by underwhelming iPhone sales — in its fiscal first-quarter earnings report Thursday, Apple once again refused to provide a traditional forecast for the coming quarter or year.

Apple executives stopped giving quarterly revenue guidance at the start of the global pandemic, after issuing a warning in February 2020 that it would not meet its previous guidance for the March 2020 quarter because production in China was halted to due COVID-19 lockdowns.

Three years later, the uncertainty is still there. COVID-related disruptions in China led to another Apple warning last November about production snags at Foxconn’s primary iPhone factory, but iPhone sales still missed analysts’ reduced sales projections by $2 billion. Without those production problems in China, Chief Executive Tim Cook said Thursday he thought iPhone sales could have been even with last year instead of declining by $4.8 billion, but isn’t so sure those sales will still be waiting for him.

“From our supply-chain point of view, we’re now at a point where production is what we needed to be, and so the problem is behind us,” Cook said during the earnings call, while admitting it’s “very hard” to estimate the ability to recapture lost sales, “because you have to know exactly what would’ve happened.”

Needing to calm down Wall Street more than that, Apple executives decided to bring back a forecast of sorts, though more breadcrumbs than hard numbers.

The most important nugget from Chief Financial Officer Luca Maestri was that “in total, we expect our March-quarter year-over-year revenue performance to be similar to the December quarter.” That would suggest sales will decline by about 5.5%, when Wall Street expected flat sales.

The next-most important forecast was for iPhone revenue, which will “accelerate relative to the December quarter” — phrasing that gives Apple a lot of room. IPhone sales declined 8.2% in the holiday quarter, and the phrasing could just as well mean a smaller decline as a gain.

Only one semi-specific number was given: A double-digit decline in quarterly revenue for both the Mac and the iPad, both of which have had strong runs during the pandemic. The forecast for the services business was more vague — revenue “will grow year over year,” despite troublesome digital-ad and mobile-games markets. The wearables segment did not receive a forecast, after declining year over year for the second time in three quarters.

What you can take from that is Apple expects sales to decline more than 5% again this quarter, and is hoping that potential customers who didn’t get a new iPhone under the Christmas tree are still looking to buy one. But if they aren’t, the rest of the business isn’t going to be able to bail out Apple’s biggest source of revenue.

Some analysts, though, are already betting that iPhone demand is still there. Wells Fargo analyst Aaron Rakers raised his estimates for the fiscal second quarter and the next two years.  “Apple’s ‘directional’  F2Q23 outlook support our previewed cautious NT [near-term] stance,” he wrote in a note to clients late Thursday. He did add that he believed Apple should “provide better disclosures to help appreciation monetization growth.”

It’s not clear if Apple will go beyond giving Wall Street more than breadcrumbs for its outlook anytime soon. It would make it a lot easier, though, for all investors.

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