Investors Eye Apple’s Services Amid Slowing iPhone Sales

As Apple heads into its quarterly earnings report on Tuesday (May 1), some investors are looking for the company to address its slow growth in services and its large stockpile of cash, Reuters reported.

While the iPhone counted for the lion’s share of Apple’s sales in 2017 at 60 percent of revenue, expectations for sales of the smartphones have fallen following disappointing forecasts. As a result, Apple CEO Tim Cook and other executives are looking to services for growth. Some investors are wondering if the company can bring in more revenue from Apple Music, iCloud and the App Store, but they haven’t given up on the company.

“When people asked what Apple’s next big product was, we kept saying it was services for several years, but then last quarter it stalled,” Gullane Capital Partners’ managing partner, Trip Miller, told Reuters. “Apple is like an A student with a bad report card. We’re not going to throw them out of the house just yet, but we want to see that number pick back up.”

Miller, who is an Apple investor, wants Apple to use some of its stockpiled cash to invest in its service business as well as repurchase shares. Another investor, Wisconsin Capital Management founder Tom Plumb, said he wants Apple to look into areas such as financial services.

The news comes as Bernstein analyst Toni Sacconaghi predicted that Apple’s revenue will fall in the range of $47 billion to $49 billion for its June quarter, compared to the analyst average of $51.9 billion.

“Investors are squarely focused on the health of the iPhone business, as supply chain data increasingly points to weakness. Based on our detailed analysis of supply chain companies with historically high correlations to iPhone unit sales, we revise our iPhone unit estimates [lower],” Sacconaghi wrote in a note to clients on Thursday (April 26).

Sacconaghi reduced Apple’s fiscal 2018 earnings-per-share estimate to $10.71 from $10.93, different from the Wall Street consensus of $11.43. He also lowered his iPhone forecast for the company’s fiscal third quarter to 38.8 million units from 41 million units in lieu of the 43 million units average estimate.