Apple’s New Mantra: Good Enough
The new iPhone might boost Apple’s sales, though expectations are low
Apple has never found “good enough” to be acceptable for its products, except maybe for its latest results.
And that is telling. Apple reported another sharp drop in iPhone sales for its fiscal third quarter ended June 25. The company also projected what will be its third consecutive revenue decline for the current quarter—making this slump unprecedented in at least the last 15 years of the company’s operating history.
Apple’s saving grace this time around is that few expected anything better—and many expected worse. The midpoint of company’s revenue forecast for the current quarter ending in September came in ahead of Wall Street’s estimates—an important point, since the period is expected to include the initial launch of the next iPhone model. That set up a relief rally for a stock that has badly lagged behind peers, down 8% so far this year.
But relief will only go so far. Apple’s outlook is the latest indication that the next iPhone will indeed be a modest upgrade—and unlikely to spark a big resurgence in sales. That could put the company’s largest business into a holding pattern for another year. And while the smaller, cheaper iPhone SE appears to be a success, that comes at a cost. The average selling price of the iPhone lineup slipped below the $600 mark for the first time in two years.
Still, at just eight times forward earnings excluding net cash, Apple is chronically undervalued. At the current price, no bad news is good enough.