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Is Apple, Inc. Still Optimistic About These Products?

By Daniel Sparks - Jan 25, 2016 at 1:40PM

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Here's a look at Tim Cook's thoughts on iPhone and Watch sales. Has his opinion shifted?

While Apple (AAPL 2.14%) CEO Tim Cook is likely to drop some fresh tidbits about the company's business during its earnings call on Tuesday when Apple releases its first fiscal quarter earnings release, the CEO has already alluded to where he believes Apple is headed. One of the key questions, therefore, ahead of Apple's conference call this week, will be whether or not the CEO still feels the same about some crucial aspects of the company's business.

Apple CEO Tim Cook. Image source: Apple.

Here are some important thoughts Cook expressed in Apple's last quarterly conference call ahead of results. Will the CEO remain as optimistic on these topics with the important holiday quarter now over?

iPhone growth
iPhone sales will continue to grow, Cook seemed to suggest in the company's fourth-quarter earnings call.

"We believe that iPhone will grow in Q1," Cook explained, "and we base that on what we are seeing from a switcher point of view. We recorded the highest rate on record for Android switches last quarter at 30%."

He went on to list a number of other catalysts for iPhone sales growth, including expectations for more of its installed base of iPhone users to upgrade to the latest model, fast-growing emerging markets where revenue is meaningful yet market share is low, and the rising importance of its fast-growing "Greater China" segment.

Cook even suggested growth could persist beyond December.

I do think that the sort of the macro things that I spoke about earlier -- the upgrade programs, the Android Switcher rate, the iPhone momentum in the emerging markets, and the LTE penetration in these markets -- these trends are not one-quarter things. These are longer-term things.

With some analysts worrying iPhone 6s demand may be weaker than Apple expected, will Cook still be as optimistic about the potential for further growth in its iPhone segment after it reports first-quarter results?

Apple Watch
One area of focus for Apple investors is the company's Apple Watch, which was launched in the first half of 2015. As its first new product in an entirely new category since the iPad, investors are curious whether or not the new product segment could grow to rival its Mac or iPad segments.

Here's what investors know about Apple Watch ahead of this week's report.

While Apple doesn't provide specific sales figures for its Apple Watch, the company did say sales of the device during Q4 were "up sequentially and ahead of our expectations."

The company also said during the earnings call that the 61% year-over-year growth in its "other products" segment, which represents about 6% of Apple's total revenue, was driven by Apple Watch sales.

It's likely that during Apple's first-quarter earnings call management will provide further insight into the performance of these two important products, as well as an update on expectations for their potential in the future.

At a minimum, investors can look over the financial statements to see if the numbers appear to line up with Cook's comments from last quarter. The company's guidance for Q2 can be used to decipher whether management may be expecting further growth in iPhone sales; since iPhones represent about 63% of Apple's revenue, overall guidance is usually indicative of management's expectations for iPhones. Furthermore, investors can likely glean some insight about how the Apple Watch is performing by analyzing growth in "other products" revenue.

Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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