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Can Apple's 24X7 services store-front make up for falling iPhone sales?

When Apple reports earnings Thursday, investors will be keen to see if its services segment raked in enough to help offset expected declines in most hardware sales and uncertainty about the timing of this fall's iPhone lineup, historically the company's biggest sales driver.

July 29, 2020 / 04:48 PM IST

Many of Apple Inc's physical stores re-opened and re-closed in recent months because of spikes in cases of the novel coronavirus.

But two of the iPhone maker's most important storefronts were open the whole time: The App Store and Apple's content businesses such as music and streaming video.

When Apple reports earnings Thursday, investors will be keen to see if its services segment raked in enough to help offset expected declines in most hardware sales and uncertainty about the timing of this fall's iPhone lineup, historically the company's biggest sales driver.

Analysts expect pandemic disruptions to pull down total revenue about 3% year-over-year to $52.1 billion and Apple's bellwether iPhone business by nearly 14% in the third quarter, according to IBES data from Refinitiv as of July 28.

The two expected growth spots are services revenue - expected to be up 15% to $13.18 billion - and revenue from the companies wearables segment, expected to rise 8.6% to $6 billion, according to Refinitiv data on July 28.

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A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

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Investors have viewed Apple as a comparative safe haven during the pandemic, pushing up shares 65% since mid-March when much of the world was urged to stay home to help slow the spread of the novel coronavirus.

When Apple last reported its fiscal second quarter in April, the company did not give a forecast. Analysts do not expect it to give a forecast when it reports this week but will be listening for clues about whether iPhone production for this fall is on track after reports of production delays because of the pandemic.

Analysts are also likely to watch for clues about whether the budget iPhone SE, priced at $399 and released in April, is helping Apple gain or retain customers.

Twenty-nine analysts rate Apple "buy" or "strong buy" and seven say "hold" and three have "sell" or lower ratings.

 
Reuters
first published: Jul 29, 2020 04:48 pm

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