It's All About The iPhone X

Apple Inc. AAPL is reporting second-quarter earnings Tuesday. According to Loup Ventures analyst Gene Munster, iPhone sales and top- and bottom-line numbers from Q1 are merely a footnote on the march to the iPhone X later this year.

Munster's Take

“Despite shares trading at an all-time high, investor optimism for an iPhone X super cycle this fall remains high, which should continue to push AAPL’s multiple higher into the fall,” Munster explained.

“There appears to be little risk from the Mar-17 results or Jun-17 guidance that would change iPhone X anticipation.”

Munster believes Apple shares will maintain their positive momentum until the launch of the 10-year anniversary iPhone X and then likely consolidate as iPhone X cycle traders unwind their positions.

What To Watch For

In the meantime, Munster says he will be watching Apple’s earnings call closely for three key elements:

1. Is management expecting a typical iPhone cycle from the iPhone X, or will the model deliver the “super-cycle” many analysts are anticipating?
2. Is Apple’s Services segment still on track to double revenue within the next four years?
3. Will Apple CEO Tim Cook comment on Apple’s development of augmented reality and autonomous driving technology?

Munster’s downplaying of Q1 earnings results is reassuring to Apple shareholders who may have been concerned about a report of slumping iPhone demand from 451 Research on Monday. A survey of more than 4,000 North American consumers revealed that near-term smartphone buying intent recently dropped to a nine-year low.

“Less demand now could mean more later as long as the retention rate remains high,” UBS analyst Steven Milunovich said of the survey results, supporting Munster’s thesis that Apple is all about the iPhone X at the moment.

Apple has been a market leader so far in 2017, surging higher by more than 26.8 percent ahead of the iPhone X launch.

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