Apple Services launches lack depth, while iPhone sales remain shaky claims JP Morgan

in AAPL Investors edited April 2019
Apple has failed to provide enough "depth" in its new services to appease investors, JP Morgan claims, at the same time as suggesting firms in the iPhone supply chain saw good results in March, despite apparent signs of a continued iPhone revenue decline.

Investors are shifting their discussions on Apple towards the potentially lucrative Services arm in the face of "moderating" iPhone revenues, the JP Morgan investor note seen by AppleInsider claims. The services, shown at the March 25 "It's show time" event, covered "more breadth than investors expected," but what transpired seemingly wasn't good enough.

"We believe it failed to offer the depth that investors would have liked to see as it relates to positioning each services offering for success," the note suggests, "particularly for the much anticipated Apple TV+."

Along with Apple TV+, Apple used the event to launch the Apple News+ subscription, Apple Arcade, and the Apple Card credit card. While Apple News+ has become available to use, the remainder are anticipated to go live later in 2019.

JP Morgan believes the launch of Apple TV+ later in 2019 will be an entry into an already competitive and fragmented marketplace, made even tougher as each player tries to carve out their own niche for original content. "While Apple is positioning itself as a hybrid of original content and aggregation of different subscription services, the industry leader Netflix is pursuing original content plans as well as looking to accelerate it" by buying a production studio, according to the analysts.

On the aggregator front, Hulu and Roku are highlighted as positioning themselves as collectors of content and live TV in Hulu's case, subscription services for Roku. Disney's Investor Day on Thursday is also thought to be worth monitoring, due to the media giant's own streaming service intentions, and the likelihood more details will be revealed to observers.

JP Morgan is not the only analysts to be underwhelmed by the collection of new services. On Wednesday, HSBC downgraded Apple's stock to a "reduce" rating, amid complaints AppleTV+ and the other services are "too late" to make a major impact in their respective industries, while other analysts have expressed similar opinions.

For iPhone suppliers, JP Morgan believe they had mixed fortunes for March. On a month-over-month basis, aggregate revenues rose 34 percent in the month following four months of sequential declines, and is up from the historical 21 percent increase seen in earlier years.

On a year-on-year basis, revenue for March grew 8 percent, a change from the year-on-year decline of 4 percent for February, and 2 percent growth for January. "We believe the above supplier revenue trends are starting to point to a likely bottoming out of iPhone revenue headwinds," the analysts suggest, based on anecdotal evidence it receives from the supply chain firms.

On a quarterly basis, aggregate revenues decelerated in the first calendar quarter of 2019 to 2 percent year-on-year from 7 percent growth seen in the fourth quarter of 2018. A strong historical correlation between JP Morgan's supplier tracker and iPhone revenue growth allows the analysts to conclude "the deceleration in supplier revenue growth points to continued iPhone revenue declines" for the second calendar quarter of 2019, "albeit to a lesser degree."


  • Reply 1 of 9
    NY1822NY1822 Posts: 621member

    So whats the deal? A day after the service event an overweight rating and a $228 price target. Constant covering their butts.
    edited April 2019 mwhite
  • Reply 2 of 9
    LenardHLenardH Posts: 20member
    Looks like these analysts are working on getting Apple’s stock down below $200 so they can buy some more....
  • Reply 3 of 9
    So says one of the companies that helped wreck the US economy. It's always a good idea to take financial advice from that crowd. 
  • Reply 4 of 9
    gilly33gilly33 Posts: 394member
    Yep fellas the ‘doom patrol’ is out in full force. Same sh*t different year. 
  • Reply 5 of 9
    jimh2jimh2 Posts: 402member
    At some level these analysts are manipulating the market to capitalize on it. None of them no anything other than what happened in the past. They are pure speculators who happen to be able to manipulate the market without any consequences for doing so. There was a day when analysts provided long term well thought out analysis of companies. Now everything is short-term without any basis. 

    As for services Apple will most likely do fine. They never go all in and don't make irrational moves. Slow and steady is what wins and not fast and reckless. Many of these so-called analysts (market manipulators) believe having large cash reserves is a problem that is solved by acquisitions whether or not they are beneficial or not. 
  • Reply 6 of 9
    pslicepslice Posts: 142member
    JP Morgan did a pretty crappy job with services when they and several other big banks took our economy down in 2008. Who are they to judge other company’s service? 
  • Reply 7 of 9
    horvatichorvatic Posts: 144member
    Lots of blah, blah, blah,....   Investors say all this stuff about a lot of things Apple has done. They said Apple Music would fail, it now has more subscribers than Spotify. 
    These services have not even started yet so how can you judge them? And Apple is very open to what works and what doesn't and can adjust them. 
  • Reply 8 of 9
    dewmedewme Posts: 4,188member
    I wonder how they, i.e., investors, measure "depth" when it comes to services-for-sale? Is there some notion of layering and stratification in the hierarchy and types of services that Apple is proposing that shows that Apple is missing completely or inadequately delivering some critical elements in what would otherwise constitute a fully formed or full-stack set of services? This isn't a wordsmith challenge, it's simply a case where someone is making a claim using what should be a measurable and quantifiable term like "depth" (inches, feet, fathoms, or whatever ...) without giving us the slightest clue about WTF they are talking about. It sounds like these folks are so busy gulping down their own kool-aid cocktails in their own BS-saturated cliques that they don't stop to think about how us regular folks interpret what they are saying. If they don't explain in clear terms all we can do is to consider them to be self-serving purveyors of BS.  
  • Reply 9 of 9
    badmonkbadmonk Posts: 1,073member
    LenardH said:
    Looks like these analysts are working on getting Apple’s stock down below $200 so they can buy some more....
    agree, after they manipulated the stock down, they realized they didn’t acquire a big enough position for their usual doom, pump and doom strategy.
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