Apple handily beat Wall Street’s expectations for both EPS and revenue in its first-quarter earnings report released Monday, but that still wasn’t enough to stave off investor panic as the company’s shares were trading down by more than 7% on Tuesday morning. There are two obvious reasons for the latest round of Apple-related panic: The company’s 51 million iPhone sales in Q1 were below expectations and its second-quarter guidance was similarly below what the Street had been expecting. These two developments have also predictably led to assorted financial analysts firing off angst-ridden notes outlining what Apple “needs” to do in the coming quarters.
AppleInsider has done a nice job of collecting analysts’ reactions to Apple’s Q1 earnings report, highlighted by Cantor Fitzgerald analyst Brian White’s proclamation that it’s “more clear than ever” that Apple has to release a larger version of its iPhone this year to keep sales of the device surging upward. The Financial Times similarly quotes Berenberg analyst Adnaan Ahmad, who recently wrote that Apple “needs something big to grow the top line by 10%” and that “it needs to find $20bn in revenues from somewhere.”
And per Business Insider, it looks like even Donald Trump is getting in on the action by tweeting that “Apple’s iPhone sales fell way short — they must go to a larger screen, as alternative, fast (as I said long ago)!”
Of course, as smartphone vendors such as Nokia and HTC recently found out, simply making a larger version of your flagship device doesn’t guarantee a big boost in sales. The high-end smartphone market as a whole is flat right now and even phablet king Samsung has been seeing its margins squeezed by an over-saturated market. So while Apple is very likely to release a smartphone with a larger display this year, there’s no guarantee that doing so will turn the company back into the magic profit machine that delivered 70% year-over-year sales growth just two years ago.