Hollis Johnson
- Apple reports its first-quarter earnings early next month.
- One analyst thinks that Apple will post strong sales, and higher margins for its phone business, thanks to a higher average selling price of the iPhone X.
- It seems as if investor worry about the high cost of the phone and reported manufacturing issues were overblown.
- Watch Apple trade in real time here.
Apple reports first-quarter earnings on February 1, and all eyes will be on how the flagship iPhone X sold during the holidays.
After details of the phone were announced, investors worried that the $1,000 price tag would lessen the impact of a new form factor and face tracking technology would have on demand. According to Amit Daryanani, an analyst at RBC Capital Markets, Apple has overcome those challenges to sell a lot of new phones in the last quarter.
"While investors have been debating about implications/drivers behind short lead-times for iPhone X, we think this reflects supply chain bottlenecks being alleviated vs. tepid demand for iPhone X," Daryanani, said in a note to clients.
Daryanani is optimistic about Apple's quarterly results because he thinks the higher average selling price of the iPhone, enabled by the expensive iPhone X, will lead to better margins for the company. He's expecting earnings of $3.14 per share on revenue of $86.0 billion. Wall Street is expecting adjusted earnings of $3.77 per share on revenue of $86.17 billion, according to data from Bloomberg.
The primary sales season for the iPhone X could be longer than previous phones too. Daryanani is expecting sales of 81 million devices on the high end, while the rest of Wall Street is closer to 79 million.
Apple could also be helped by the recent tax reform measures in the US. The company is expected to see its effective tax rates lowered from around 25% to the high teens, which could be worth about $1.25 per share in recurring earnings.
Apple is up 46.75% over the last year.
Read more about how the new US tax laws could benefit Apple here.
