China doubts may cloud Apple's record holiday season sales
Apple may notch up its most successful holiday shopping season yet when it reports quarterly results on Monday, setting records for sales of its gift-friendly iPhones and iPads.
It will, however, continue to draw investor scrutiny over sales in ultra-competitive China, its No 2 market but a drag on revenue and margins in recent quarters.
The iPhone maker has been ceding ground to Samsung Electronics and other rivals on the mainland, but has now sealed a long-awaited deal to sell iPhones through China Mobile that could bear fruit this year.
Apple, which once routinely blew away Wall Street's most bullish expectations, needs a superb quarter to galvanise the stock. Its shares are down about 3 per cent this year.
Activist investor Carl Icahn, arguing that the stock is undervalued, is building up his stake and demanding the company share more of its US$146 billion cash hoard.
Longer term, investors want to see what new gadgets Apple can pull out of its hat, a central issue about which chief executive Tim Cook has been cagey.
Speculation revolves around a smartwatch, a larger-screened iPhone and persistent talk of a TV product.
"Beyond fiscal 2014, it is not a slam dunk that Apple's net income will be higher in three to five years," said Bernstein Research analyst Toni Sacconaghi. "Without new product categories, we see Apple's end markets as increasingly mature and competitive, which could pressure or limit revenue growth and gross margins."
Samsung, reflecting how intensifying global competition is eroding smartphone profits and margins after years of explosive growth, on Friday reported its first quarterly profit decline in two years.
Sales-wise, Apple's current line-up is still expected to enjoy a strong following despite stiff competition from Samsung and Amazon.com's Kindle Fire.
Wall Street analysts are expecting Apple to report sales of around 55 million iPhones and 26 million iPads, up from 48 million and 23 million respectively in the year-ago quarter.
Of that iPhone estimate, analysts expect good sales of the 5S due to pent up demand and limited supply around launch time, but remain less sanguine about a 5C that has so far failed to excite the cost-conscious consumers it targets.
Apple's stock is up 21.7 per cent over the past 12 months. Still, that has disappointed some investors after the shares increased five-fold in the last five years.
In a letter to shareholders on Thursday, Icahn urged them to approve his proposal for a new US$50 billion share buyback, arguing the company did not need so much cash.