A letter released last week by Apple’s CEO, Tim Cook, sent shockwaves throughout the market. The letter warned investors of lower guidance for the first quarter of the fiscal year. While the admission sent Apple’s stock plunging, there was one silver lining – high earnings.
As expected, Cook’s news left the market reeling and furious. The noise surrounding the Apple letter was so loud that the remark that the tech giant was also expecting “a new all-time record for Apple’s earnings per share” was dismissed by most.
Cook underlined four critical factors behind the guidance downgrade – the strong showing of the US dollar, the timing of iPhone releases, the limited sales of the Apple Watch Series 4, AirPods, the iPad Pro, and the MacBook Air, and lastly, the economic slowdown in markets like China.
The CEO also emphasized the expected “all-time revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands, and Korea.” Developing markets like those in Malaysia, Mexico, Poland, and Vietnam are also expected to set the bar high.
This isn’t the first time Apple released this type of message. Last year, it reported the 2018 fiscal first-quarter results along with the information that the company hit unmatched earnings per share (EPS) of $3.89, a 16 percent increase from the same period of 2017.
Despite China emerging as a thorn on Apple’s side and Wall Street’s wariness, Apple still has reasons to be confident. For one, the company has raised prices for its iPhones. The company will generate a tidy sum off every sold unit even if their sales numbers go down.
Apple increased its average selling price (ASP) by $100, with the iPhone X carrying a price tag of $999. The recent holiday could see Apple raking in the dough, especially if the majority of iPhone lovers picked the new XS Max. Apple’s latest model costs anywhere from $1,100 to $1,449.
The upgraded price of the iPhone XS Max isn’t the only reason for the tech company’s reportedly high earnings. According to Cook’s letter, the company’s collated revenue from the Mac, wearables, and services grew by as much as 19 percent.
“Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and we are on track to achieve our goal of doubling the size of this business from 2016 to 2020,” explained Cook.
This geographic growth includes China as well; the country that has had Wall Street worried. Even though Apple is not selling a lot of iPhones in some Asian markets due to the competition from Samsung and Huawei, it’s still generating more money from the services that are already running on the devices that people already have.