Apple, Despite Short-Term Earnings Concerns... "iPhone Will Lift Stock Price"

China lockdown, Russia market withdrawal, etc.
Q2 performance weakness should be noted,
but considering iPhone competitiveness, an attractive stock

On the 10th, customers visiting Apple Myeongdong, the third Apple Store in Korea located in Jung-gu, Seoul, are experiencing the products. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Minji Lee] Apple recorded first-quarter results that exceeded market expectations by leveraging the competitiveness of the iPhone. Although the U.S. stock market showed overall weakness and the stock price did not react significantly, market experts unanimously stated that Apple is an attractive stock considering the outlook.

According to the financial investment industry on the 1st, Apple's first-quarter (January to March, fiscal second quarter) revenue was $97.3 billion, an 8.6% increase compared to the same period last year. Operating profit was $30 billion, up 9%. Both revenue and operating profit exceeded market expectations by 3.5% and 7.4%, respectively, marking strong performance. Despite solid results in the first quarter of last year, revenue growth was driven by strong sales of the iPhone 13 series.

Hardware segment revenue was $77.5 billion. By product category, iPhone revenue was $50.6 billion, up 6% from the same period last year, and Mac revenue increased 15% to $10.4 billion. Wearables recorded $8.8 billion, a 12% increase. On the other hand, iPad revenue decreased 2% to $7.7 billion. Service revenue grew 17% to $19.8 billion, marking seven consecutive quarters of growth. The number of paid subscribers reached 825 million due to increased device sales and strengthened content mix.

Researcher Cheolhee Jo of Korea Investment & Securities analyzed, “Mac sales increased 14.6% due to the effect of the in-house developed M1 chip. However, iPad sales declined 2.1% year-over-year due to semiconductor chip supply issues, as mentioned in the previous quarter’s earnings announcement.”

Regarding second-quarter results, Apple did not provide official guidance but anticipated an unfavorable operating environment through multiple conference calls. This is due to expected supply and demand disruptions in China caused by COVID-19 and the ongoing impact of semiconductor chip shortages. Additionally, revenue declines from store withdrawals in the Russian region are expected to be reflected in the second quarter.

Most notably, Apple expressed greater concern about supply shortages, forecasting a sales shortfall of $4 billion to $8 billion in the second quarter alone due to supply constraints. Researcher Hyungtae Kim of Shinhan Financial Investment stated, “Concerns about lockdowns in China are expected to peak in the second quarter, and current issues amplifying market worries will not impair mid- to long-term growth potential.”

Despite short-term performance concerns, the securities industry advises maintaining a positive view on Apple. This is because Apple’s existing investment strategy of expanding hardware first, followed by increasing service revenue, is proceeding smoothly. In particular, attention should be paid to the fact that iPhone sales grew 6% in the first quarter alone.

Researcher Jongwook Lee of Samsung Securities analyzed, “For service revenue to grow, the number of paid subscribers must increase, and currently, the biggest factor driving paid subscriber growth is users switching from Android to iOS. Apple’s market share in the segment above $500 has surpassed 80%, and so far, there is no competitor capable of stopping Apple’s dominance.”

This content was produced with the assistance of AI translation services.