Apple, China, Analyst discussed on Bloomberg Markets
From apple ahead of that shares down one point six percent so far in the first hour of trading. The US certainly weighing over apple is what happened with Invidia and Caterpillar, both signaling a slowdown in China. We know how important China is to apples forecasts joining us here in our Bloomberg. Interactive brokers studios is our own John Butler, senior telecom services and equipment analyst for Bloomberg intelligence, John we love having you. Thank you. Do you think that people are still to optimistic about Apple's results based on what we've seen from Caterpillar from NVIDIA? They may be is the answer. Normally when you see a pre announcement for a big company like apple they preannounced they issued new numbers for the quarter. But they kind of warned do, you know, this is our first take at the. The quarter. We really haven't rolled up all the numbers yet. So the actual numbers could differ from the pre-announcement Abed. And I think analysts are operating a little bit in the dark. I mean, we had a press release, but we had no call to go along with it. So really all eyes are going to be on the outlook. Tomorrow went apple reports. After the close they typically give a forward one quarter, look, but people can extrapolate from that based on commentary on what's going on in China. What's going on with the pricing situation with the iphone and so forth? So John frame out for us. Just how important China is to the apple story. So in the last quarter, China was just shy at twenty percent of revenue. So China has been a huge market for apple they've done very well there they have a large basis stores there and they're selling more than the iphone. They're right there. There are services being sold in China, their, ipads, and Macs being sold in China's so in my view, the whole price war has really hurt them on the smartphone side, and they probably have a similar mix. There were iphone is over sixty percent of revenue in China. That's my guess. Certainly the rise of the Chinese rivals. There has been a big factor for them while way up. Oh, Yami vivo. These are all great phone makers. Yeah. It talking about the phone in particular. I was looking at a Sanford Bernstein analyst commentary on Friday, Tony Sakanaka, and he was saying that the iphone inventory buildup may lead to lower guidance for the current quarter. Can you give us some color on the iphone inventory buildup, and why that could be so concerning so typically apple will keep they manage to four to six weeks of inventory in the channel. So they ship out to retailers like best buy, for example. And then best buy we'll sell through to consumers if in the Kate in this case, I think apple miss price, the high end the iphone and they misjudged demand. And so. Guys, like best buy ended up with bloated inventories. And so there's more than four to six weeks or we'll take more than forty six weeks to work that inventory down to the four to six week range in. So apple ends up in future quarters shipping. More shipping less pardon me out to those channels. And so ultimately, they end up lowering their revenue guidance on the on the coming quarter the quarters beyond that is anyone's guess, it's left up to the analyst to cat recast estimates. So John looks like the stocks kind of treading water here. It's only about fan about eight percent for the last twelve months. I think you know, if I'm an investor in this name, I gotta get comfortable with the fact that I think the stories transitioning from a phone unit sales story to a services business and beauty think the services for apple can ever be a driver for this company. Or is it always going to be what what's the next product. I think it can. I mean that is the big question on apple kind of like a Cisco has gone through this where they were appear hardware vendor. And then they realized they really needed a lot more software in the mix. And I think apple has gone through that they've gotten ahead of it a little bit this services business is sizable. It's not gigantic. But it's around fifteen percent of revenue and growing it's been a big focus for them. So the easy answer is someday. I think they could get their can they get there in the next year or so I don't think so I think it's gonna take time, but they have. One hundred and thirty billion in cash on the balance sheet that they can put to work to really get their almost overnight. So there's been a lot of speculation about what apple could buy to get there. Just real quick here. I'm curious. Do you think it's going to be a negative surprise? And do you think the shares will tank in response to a mess? So I can't comment on price action in the stock. I will say there is a little room for downside in the current quarter. It's all about the outlook. And so it typically takes a couple of quarters for the company and analysts to get it. Right. And I think part of it is management sort of it doesn't always know what's going on. And it takes time to really get a handle on the problems how to address them. And then ultimately worked down those him Tories. John Butler, senior telecom services and Allison Bloomberg intelligence. Thanks so much John for bringing us up to speed on what to look for for the apple after the close tomorrow this gopher world and national headlines with Martin Carl Bloomberg news, Paul and some folks usually aren't. Related to return to work on a Monday morning. But this morning is different for hundreds of thousands of federal employees like Linda hill who works at the EPA exhilarating knowing that will give paid for in the future. 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