With weak iPhone sales causing Apple to suffer its first full-year revenue and profit declines since 2001, several analysts are downgrading Apple and upgrading the potential for Google’s new Pixel smartphone line.
Apple (NASDAQ:AAPL) stock lost $15 billion in market value on October 26, as analysts perceived the company has lost iPhones and Apple Watch sales momentum. The poor earnings report highlighted that even with Samsung recalling 2.5 million units of the company’s hot-selling Galaxy Note 7 phablet and then cancelling the latest product generation, iPhone seems poorly positioned to enjoy a big demand spurt from its higher-priced iPhone 7 Plus.
The iPhone “sell-through” for the last quarter came in at 43 million units, down almost 10 percent from the estimate of top tech analyst Aaron Rakers of Stifel Nichlaus. He blamed the disappointment on poor Apple hardware, installed base upgrade rates, and an outright 30 percent decline in Greater China revenues from the prior-year period.
Rakers cut his recommendation from “buy” to “hold,” expressing big concerns that Apple management’s current quarter guidance is for “flat” iPhone average selling prices for the current quarter. Given that the iPhone 7 Plus retails for about $125 more than the standard size iPhone 7, apparently Apple is not enticing many customers to switch from Google’s open-source Android operating system, which drove the Samsung Galaxy Note 7.
Apple’s latest earnings report and CEO Tim Cook’s comments on the analysts’ conference call indicate Apple is facing real challenges in its hope to diversify from iPhones sales, which now account for almost two-thirds of corporate revenue.
Apple will soon introduce new Macintosh desktops, but sales fell by 17 percent over the prior year. Apple Watch sales fell by 22 percent, iPad sales have fallen for several years, and Apple is believed to have abandoned its secretive Project Titan electric car project.
In more bad news, Apple late on October 26 said its highly-promoted wireless AirPod headphones will be delayed because “We don’t believe in shipping a product before it’s ready, and we need a little more time before AirPods are ready for our customers.”
This dreary environment for Apple means that the October 4 release of Google’s Pixel smartphones and Pixel XL phablets is looking brilliant. Most Samsung users already made the conscious choice to not be locked into Apple’s walled garden.
With Android-based apps running on the Galaxy 7 and Note 7 easily modifiable to run on Pixel devices, demand for Google’s new devices is running much higher than expected. The 9to5Google report revealed that Google Store pre-order delivery dates are being pushed back by several weeks into November.
A spokesperson told Reddit that Google is working furiously to fill backorders: “We’re thrilled to see the excitement for our new Pixel phones, and frankly pre-order demand has exceeded our expectations. We’re working to restock our inventory as soon as possible.”
The Google Store site is offering standard Pixel and Pixel XL device delivery dates of 3 to 4 weeks.