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Although Apple (NASDAQ: AAPL) sells a wide range of products, analysts, investors and the media seem to focus mainly on one of the company's product lines: the iPhone. And there is a good reason for that. I would like to explain why the iPhone business is so crucial for Apple and address some of the basic principles that current and potential investors in Apple's stock should know about.
A standard business
During the 2017 fiscal year, Apple achieved a turnover of about 229.2 billion dollars. About $ 141.3 billion, or more than 61.6%, came from iPhone sales. Although this percentage is down slightly from the 63.3% that the iPhone accounted for during the company's previous fiscal year, it's clear that Apple's business lives and dies virtually from the performance of its iPhone business.
Source of the image: Apple.
What's even more interesting is that Apple's iPhone business has been phenomenally successful in fiscal year 2018, with sales up 15% over the first three quarters of the year. Now, since Apple's sales during this period also grew about 15% over the previous year, iPhone sales as a percentage of the total during this period have only increased slightly, 63.9% of sales during this period, compared to almost 63.7% of sales in the same period. same period of the 2017 fiscal year.
The key, however, is that, at least during the first three quarters of fiscal year 2018, Apple has not become less iPhone-dependent – The iPhone has generated robust enough growth so that the company's dependence on the company remains virtually unchanged.
Two metrics to watch
Each quarter, Apple reports two important measures around the iPhone. The first is the total revenue generated by the company from the product line; the second is the total number of units shipped. Investors can deduce from these two indicators a third important indicator: average selling prices.
While the smartphone market was on a fast-growing path, Apple could rely heavily on unit shipment growth to drive strong revenue and profit growth. In a certain way, Apple has recorded a 73% growth in shipments of iPhone units during its 2012 fiscal year, and then an additional 20% growth in shipments of an iPhone during its fiscal year 2013. It is interesting to note that iPhone revenues increased by 71% and 16%, respectively, during those years, implying a contraction of the average selling price.
However, in recent years, Apple has struggled to increase deliveries of iPhone units. After a monster year of growing iPhone units during its 2015 fiscal year, thanks to the so-called "super cycle" that triggered the launch of the iPhone 6 and iPhone 6 Plus (units increased by 37% and the 52% revenue), Apple unit shipments decreased 8% in fiscal 2016, before increasing 2% in fiscal 2017.
What is interesting is that during the 2018 fiscal year, Apple has not been able to generate real growth in shipments of units over the past year. iPhone. IPhone unit shipments increased by only about 754,000 units (virtually the same year-over-year sales) in the first three quarters of the year. IPhone revenues, by contrast, grew by 15% during this period. This means that almost all of iPhone's revenue growth recorded by Apple over the first three quarters of fiscal 2018 is due to an increase in average selling prices.
It will be interesting to see the evolution of iPhone unit shipments and average sales prices during fiscal year 2019 – and beyond.
Ashraf Eassa does not hold any of the shares mentioned. The Motley Fool owns shares and recommends Apple. The Motley Fool offers the following options: Long calls from $ 150 to January 2020 for Apple and short calls from $ 155 to January 2020 on Apple. Motley Fool has a disclosure policy.
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