Charting The iPhone; A Video Preview Of Apple's FY16 Report

| About: Apple Inc. (AAPL)

Summary

iPhone sales account for the bulk of Apple’s (AAPL) revenue and margin.

Declining shipments of the iPhone are expected to begin to level out.

An examination of levers that could offset further iPhone softness.

The hard data that can be used to make an assessment of the quarter, beyond EPS.

In this video Senior Equity Analyst Ben Nye previews Apple's (NASDAQ:AAPL) final quarter of the 2016 fiscal year. The deep dive takes a look into iPhone unit expectations, revenue expectations, and margin forecasts.

First, host Garrett Palmer discusses the newest products in AAPL's line-up, the iPhone 7/7S. While new Macs are expected to be announced in the next couple weeks, the iPhone continues to be the driver for AAPL, generating ~65% of sales on a trailing 12-month basis. Moreover, the iPhone generates higher-than-corporate gross margins which means that the iPhone produces an even greater share of the gross profit than 65%. Although iPhone units are expected to be down 6% Y/y in the September quarter, this marks an improvement from the -15% that AAPL reported in the June quarter.

Pricing has softened after the launch of the "Plus" variety in 2014. Ben and Garrett examine the likelihood that additional memory and features will result in price stabilization on a year over year basis.

Second, the pair take a look at the ability for new avenues of growth to offset a "new normal" of iPhone growth. With iPhones maturing and appearing to settle in a range of 200-230 million units per year, the video looks at how AAPL could reinvigorate sales growth. Services, geographic expansion, and new products have all been touted as ways to energize the top line but as Nye and Palmer discover, it becomes very challenging to move the needle for the company that has built arguably one of the greatest product franchises of all time.

Finally, the end of the video reviews the estimates for the quarter, which are as follows:

· EPS: $1.65

· Revenue: $46.9b (guidance is $45.5b-$47.5b)

· Gross margin: 37.9% (guidance is 37.5%-38.0%)

Wall Street estimates for next quarter are:

· Revenue: $75.3b

· Gross margin: 38.9%

Note that figures quoted in the video may not be the same as numbers in the article. The data are sourced from Bloomberg and may change as analysts update their models prior to the report.

We will be releasing a series of these preview videos in the coming days so please let us know if there is a stock you would like us to cover. You can tweet at us @tuskmediallc.

Disclosure: I am/we are long AAPL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.