In the following video, senior technology analyst Eric Bleeker talks about Apple's (NAS: AAPL) wild ride over the past couple of weeks. In particular, he takes aim at some misguided storylines that have gotten quite a bit of media attention.
First off, Verizon (NYS: VZ) reported results last week, and iPhone sales were off about 24% from the holiday quarter. Coming into Apple's report this Tuesday, most analysts seem to be clustering around a 16% to 20% drop in iPhone sales from last quarter, so media reports -- and analysts -- were quick to pick up on this data point as a reason Apple could miss expectations this Tuesday.
However, that storyline appears bogus. First off, Apple continues to hold greater than 50% market share on Verizon, and that's a pretty positive long-term sign for the company in its own right. Second, the United States was never going to carry the iPhone to its lofty expectations this quarter. Instead, the main driver of iPhone sales will be in markets such as Brazil and China, where the iPhone 4S was released right before the quarter ended -- or, in China's case, wasn't released even released during the December quarter. To me, having U.S. sales within striking distance of analyst targets and allowing upside for more growth in foreign markets where the iPhone 4S didn't hit until last quarter is a positive heading into Tuesday.
Second, analysts homed in on weaker-than-expected guidance next quarter in key Apple supplier Qualcomm's (NAS: QCOM) chipset division. The line of thought surrounding Apple was that Qualcomm's guidance suggested that Apple could be light next quarter as it "de-stocked" chipsets for the iPhone 4S in preparation of an LTE-enabled iPhone 4 in September or October. Qualcomm actually slightly bumped its full-year profit target, so the picture on long-term demand seems to be in place. This seems like a lot of quarter-over-quarter noise and doesn't say much about the long-term picture of Apple's success.
So we have a lot of people seeking out explanations for Apple's fall, but the simplest explanation is probably the best: The company has been on an absolute tear this year, and a slow-down was inevitable.
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At the time this article was published Eric Bleeker owns shares of no companies listed above. The Motley Fool owns shares of Qualcomm and Apple. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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