Here’s What To Look For In Apple’s Earnings

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Later today, Apple will report its fiscal Q2 2014 earnings. Apple CFO Peter Oppenheimer said in the previous earnings call that the company expected more or less a flat quarter in Q2. And analysts agree. Apple should report flat revenue, flat gross margin, flat net profit — flat everything. But there are a couple of interesting numbers to look at.

The two main factors in today’s earnings should be iPad sales and iPhone 5c sales. iPad sales should be down year-over-year. Last year, Apple sold 18.1 million iPads. It’s a strong sales number — the iPad mini was still a relatively new product. This year, iPad sales should be down, but the question is by how much.

In the last earnings call, the company said that it was selling its tablets as quickly as it could produce them. It could have delayed some purchases, but it won’t be enough to offset the overall trend. As iPads are unsubsidized gadgets, many iPad customers probably don’t upgrade their iPads as often as their phones. It could explain why iPad sales are down.

iPhone sales should be up year-over-year, which should offset iPad sales. But the performance of the iPhone lineup largely depends on the iPhone 5c. While Apple doesn’t usually break down iPhone sales, it is clear now that the iPhone 5c is not doing as well as Apple anticipated. You can now see ads for the iPhone 5c everywhere, but you won’t see a lot of them in the wild.

It’s not necessarily a bad thing as the current model breakdown drives the gross margin up. But Apple thought the iPhone 5c was a true growth driver for the iPhone. Instead, iPhone sales should be slightly up.

In other news, iPod sales will shrink again, iTunes and software sales should grow a bit. While most of Apple’s apps are now free, App Store and iTunes Store purchases are still growing a lot.

When it comes to the stock market, Apple shares have been very stable for the last two months, oscillating between $520 and $540. The share buyback program didn’t have any apparent impact on the share price. Today is no exception, shares are down 0.53 percent so far.

In other words, the most interesting aspect of Apple’s earnings should be the subtext. Analysts are getting impatient and wonder whether iPhone sales won’t peak in the next couple of years. Tim Cook usually hints at upcoming products during the earnings call, but without sharing much detail. Maybe this time we will get better hints.

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