Apple shares buoyed by high prices of iPhone X

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Apple Inc yesterday gave a disappointing revenue and profit forecast for the first three months of 2018 as its sales of iPhones missed Wall Street’s expectations, deepening concerns that enthusiasm for the iPhone has permanently waned since its 2015 peak.

Apple forecast revenue of $60bn to $62bn (€49bn to €49.5bn) and gross margins of between 38pc and 38.5pc for its fiscal first quarter ending in March.

Analysts were expecting $65.7bn (€52.5bn) in sales and a gross margin of 38.9pc for the March quarter, though some had forecast sales as low as $60bn.

The stock had declined to its lowest point since November in recent weeks.

Bright spots in the fiscal first quarter ending December 30 included average selling prices for the iPhone that topped Wall Street expectations, driven by demand for newer models like the iPhone X.

Apple’s shares, after initially falling, ticked up about 1pc to $169.50 (€135.50) in after-the-bell trading.

The company’s chief financial officer Luca Maestri hinted at what Apple will do with its cash pile.

At the end of the December quarter, Apple had about $285bn (€227.8bn) in cash, cash equivalents and short- and long-term marketable securities.

In an interview with Reuters, Maestri said Apple plans to balance its cash and debt.

“Over time, we are trying to target a capital structure that is approximately net neutral. We will have approximately the same level of cash and debt on the balance sheet,” Maestri said. “We’re going to take that balance down from $163bn (€130.3bn) to zero,” he said, referring to Apple’s current level of cash net of debt.

Maestri did not say whether the reduction in net cash would come in the form of returning capital to shareholders or capital expenditures.

The restrained revenue

forecast comes after Wall Street analysts widely agreed that Apple had trimmed its expectations for the March quarter for the $999 iPhone X, the first major rework of the company’s best-selling product since 2014.

The weak expectations for the March quarter could signal that, while Apple’s diehard fans are willing to pay the iPhone X’s steep price, the new phone remains too expensive to tempt mainstream shoppers, especially in countries like China.

Those customers may opt instead for older, cheaper iPhone models that Apple has kept in its lineup.

Average selling prices for iPhones were stronger than Wall Street expected during the holiday – $796 versus expectations of $756.

“It was really driven by the success of the iPhone X and also the iPhone 8 and iPhone 8 Plus,” Maestri told Reuters in an interview.

“The new lineup has done incredibly well.”