Apple Inc. reported better-than-expected iPhone sales that kicked the company’s stock market valuation up by about $35 billion.
Earnings per share of $1.42 beat Wall Street estimates by 4 cents per share, despite revenues falling by 14 percent to $42.4 billion. The good news for Apple (NASDAQ:AAPL) is that iPhone sales came in at 40.4 million, about 500,000 higher than expected, even as the rest of the business is losing momentum.
Wall Street analysts were correct to look for severe deceleration in Apple’s year-over-year results, due to almost a third of Apple’s sales coming from China during the iPhone 6 and 6S roll-outs. Revenue from the Red Dragon fell by about 30 percent from the prior quarter, due to the slowing China economy and Apple losing market share to Huawei.
Although Apple saw smartphone gains for this quarter and took a slight market share gain from the industry, Juniper Research warns that the smartphone business is saturated and sales are on a 6 percent annual decline path going forward. This will soon impact Samsung (OTC:SSNLF) and Google Android (NASDAQ:GOOG) (NASDAQ:GOOGL) as well as BlackBerry (NASDAQ:BBRY), Xiaomi (Private:XI) and Huawei, but it will also impact Apple as competitors cut prices to maintain market share.
Apple’s quarterly earnings report does not break out sales for the Apple Watch, which management promised last year would be a growing product category. But IDC Research continues to lower its forecast for all “wearable” shipments and reported that Apple Watch shipments declined by 55 percent for the second quarter of 2016.
IDC suggests the Apple Watch lacks sustainability, because it does not address or fix a societal problem or advance itself in terms of beneficial usage beyond its predecessor platform, the smartphone. They warn, “Smartwatch category and/or products will be discontinued from mainstream retail sales by 2018.”
Apple stock normally enjoys a boost in the three months leading up to an iPhone update. With the iPhone7 and iPhone 7Plus expected to be released on September 16, Apple stock should be expected to trade higher.
But Breitbart News expects the new Apple iPhone 7 line to only be evolutionary, rather than revolutionary. The smartphone introduction will launch the iOS 10 operating system; both screen sizes will be slightly larger with OLED display; there will be an improved 13 megapixel primary iSight camera, with an 8 megapixel secondary camera; and iPhone will use American-made Sapphire glass, rather than Gorilla glass made offshore.