Reacting to Apple’s Earnings and Playing Tetris at SXSW

The Daily Observation Deck Feature

Reactions to Apple earnings, South Korea okays Apple Pay, and playing Tetris at SXSW.

Reactions to Apple’s 1Q23 Earnings

What came out of Apple’s first-quarter fiscal year 2023 earnings call seems to have been viewed positively by analysts following the Cupertino-company. Or — at the very least — not negatively. Apple 3.0 ran reactions from the financial folk. Only one moved in a decidedly negative way. Raymond James analyst Melissa Fairbanks decided to take “a more conservative approach to [her firm’s] outlook for the year,” given “FX headwinds and growing consumer-facing macro uncertainty.” She’s expecting normalcy for fiscal year 2024 though. Fairbanks says members of her team “continue to view the stock as being a core tech holding,” which she says, “is likely to provide a relative support for shares despite the market volatility.” Fairbanks has an “Outperform” rating on Apple shares. She did drop her target on the shares though, from $185 to $170. 

One might view a move by Evercore analyst Amit Daryanani as negative, though it seemed less about sentiment than timing. The analyst had had Apple shares on Evercore’s Tactical Outperform list. I got an email from a connected friend who said Apple shares are now off that list, with Daryanani pointing out that “the potential catalyst for [that Tactical Outperform] call took place” during last week’s earnings report. Unless I misunderstand, it sounds like the run-up to earnings was that catalyst. 

As for the call itself, while Apple CEO Tim Cook didn’t want to say for certain how many missed iPhone sales from the December-quarter would be made back this quarter, Daryanani’s still a believer in that happening. He’s also turned on by Apple’s gross margins, as well as the monetization possibilities in Apple’s two-billion devices and growing installed base. He’s got an “Outperform” rating on Apple shares and a price target of $190.

Some Analysts Encouraged Enough to Raise the Bar

One analyst actually raised his price target on Apple shares in the wake of last Thursday’s call. I’ll give you a hint: Rhymes with Chives. 

Apple 3.0 had Wedbush analyst Daniel Ives penning two notes on Apple to end the week last week. In the first he pointed to his belief that the iPhone problem last quarter was driven by a lack of supply, not a lack of demand. It was the second note though where the analyst found encouragement. Like Mr. Daryanani, Ives is turned on by Apple’s gross margins, which are expected to come in around 44% this quarter. Like Daryanani, he is also turned on by Apple’s two-billion device installed base, 1.2-billion of which he believes to be iPhones. “These are both up double digits YoY,” wrote the analyst, “and speaks to a strengthening and growing customer base with iPhone share gains in China front and center.” Mr. Ives has an “Outperform” rating on Apple shares. He moved his price target on the shares from $175 to $180.

What’s the deal with Apple’s gross margins? Morgan Stanley analyst Erik Woodring says as tight as Apple’s running, his team only expects earnings per share for fiscal-23 to drop 1%. That’s despite an anticipated drop in revenue of 4%. He’s got a “Buy” rating on Apple shares and a price target of $175. 

While Jefferies analyst Kyle McNealy came away from last Thursday’s call more worried about macroeconomic concerns facing Apple than he was before the call, he’s still not worried about Apple. He’s got a “Buy” rating on Apple shares and a price target of $195. 

And Piper Sandler analyst Harsh Kumar sees Apple’s more robust supply chain and the reopening of China post zero-COVID restrictions as reasons for optimism. He’s got an “Overweight” rating on Apple shares and a price target of $190. 

Counterpoint: Apple Took 85% of Global Smartphone Profits in 2022

We keep hearing that smartphone sales didst stink in 2022 and that Apple saw the best of the bad situation. Now we are hearing it again. Counterpoint Research hit with dismal numbers for the market as a whole. As that firm sees it, the “global smartphone market declined by 18%” in the December-quarter versus the same quarter a year earlier. That contributed to a decline of 12% in 2022 versus 2021. The 1.2-billion smartphones moved last year represents the lowest level since 2013, while the $409 billion in smartphone revenue (down 9% year-on-year) was the lowest since 2017. 

Of the profits that were made, Counterpoint says Apple got most of them. 85%, according to the firm. Commenting on the Cupertino-company specifically, Counterpoint Research Director Jeff Fieldhack was quoted as saying: 

…Apple was able to weather a year already marred by economic and geopolitical turmoil better than other major smartphone players. Its iPhone Pro series continued performing well and its share of iPhone shipments could have been even higher if not for the production issues caused by the COVID-19 breakout at the Zhengzhou factory, which produces the vast majority of Pro series volumes. As a result, some Pro series volumes got pushed to January.

South Korean Regulators Give Green Light to Apple Pay

Apple Pay is poised to pounce on another market. TechCrunch says South Korea’s Financial Service Commission (FSC) has given the go-ahead for the service in that country. Success is hardly guaranteed, though. 

Apple Pay relies on near-field communication (NFC). NFC is not big in South Korea. According to TechCrunch, “only about 10% of 2.9 million local retailers in South Korea reportedly have NFC enabled in their credit card terminals.” Not that mobile payments aren’t big. According to the report:

Most Korean retailers use magnetic secure transmission (MST), a mobile payment technology allowing smartphones to transact wireless payments with traditional credit card swipe readers and terminals.

Samsung uses both MST and NFC, according to the report. 

macOS 13.2 Update Kills Compatibility with Pioneer Optical Drives

It looks like the latest Ventura update has borked a Pioneer peripheral. iDownloadBlog says the recent macOS Ventura 13.2 update is incompatible with Pioneer USB drives for CD, DVD, and Blu-ray discs. This appears to be a problem specific to Pioneer. According to the report, “Apple’s own SuperDrive and other manufacturers’ optical disc drives are unaffected.”

If you use or rely on one of these external drives and have not updated to Ventura 13.2, Pioneer suggests you hold-off for the time being. For folks who have upgraded but still need the drive, the only fix appears to be backing down to macOS 13.1, “which has no issues with the Pioneer drives. Other than avoiding the update and downgrading,” iDownloadBlog says “there don’t seem to be any other temporary fixes for this problem.”

iDownloadBlog thinks a fix could come along in something like a 13.2.1 update. So far, there seems to be no comment from Apple. 

Apple Original Tetris to See SXSW Premier

Apple TV+ has at least one big premier planned for SXSW. iLounge says the official Twitter account for the Tetris brand has Tweeted news about the movie about the game. From the Tetris Tweet:

#Tetris, a new Apple Original Film, is based on the incredible true story of one of the most iconic video games in the world. 

Premiering worldwide at @SXSW. Coming soon to @AppleTVPlus!

The Austin, Texas pop-culture festival is scheduled to run March 10 through March 19. No word yet on a date for the Apple TV+ premier.

Bloomberg: Apple to Do Without Industrial Design Chief

Who will be Apple’s next Industrial Design Chief? Well — heck. It could be you. It looks like the company is going to do without for a while. Bloomberg’s Mark Gurman says he’s heard from secret peeps that Evans Hankey, the company’s VP of industrial design, will not be replaced when she leaves Apple — a departure that’s expected in “coming months.” Hankey succeeded design-deity Jony Ive on the physical product side when he left in 2019. Now, it sounds like it’ll be design by committee. According to the report:

…the company’s core group of about 20 industrial designers will report to Jeff Williams, Apple’s chief operating officer. The company will also give larger roles to a group of Apple’s longest-tenured designers.

Again, this comes compliments of secret people said to know something about something. Apple declined to comment for the Bloomberg piece.

Original MIB iPhone Up for Auction

And finally today, you can get a sample of one of Jony Ive’s most groundbreaking bits of design — mint in box. 9to5Mac says an original, unopened iPhone is up for auction. The soon-to-be former owner says

…she was gifted this iPhone in 2007, but she was a Verizon customer, and the original iPhone could only be used with AT&T. Instead of selling it at the time, [she] kept it in its sealed box and put it on a shelf, “wrapped in a pair of felt pajamas for extra storage.”

Just under two-weeks left in this auction. As of this writing, bidding stands at $15,200-and-change. Bids are expected to land in the $50,000 range, which is not outlandish. One sold back in October for just over $39,000. 

The current owner would like to hold onto it for another 10 years and really drive up the value. However, she wants the money now to help fund her new business — a tattoo studio. So you can own a piece of industrial design history, smartphone history, and Apple history — plus help an entrepreneur. 

Sounds like a win-win-win… win? I lost count.

Today on The Mac Observer’s Daily Observations Podcast

TMO managing editor Jeff Butts and I will be talking over reactions to Apple’s call. Plus will the general consumer miss an industrial design lead at Apple? That’s all today on the Daily Observations Podcast from The Mac Observer.

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