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iPhone Still Has Its Edge

Near-term headwinds from a strong dollar and a weaker global economy don't mean Apple is losing its market position in smartphones, and the firm's shares currently look undervalued, says Morningstar's Brian Colello.

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Brian Colello: Apple (AAPL) reported fiscal first-quarter earnings tonight and, overall, the near term is a bit weaker of a picture than what we were expecting heading into the quarter, but it wasn't as bad as some of the drastic measures that we've seen from some other analysts as well. We are seeing currency headwinds and a little bit weaker macro picture than what we expected.

For the iPhone for the December quarter, they barely obtained growth. It sold pretty much flat-ish with the prior year and was actually down a little bit if you look at sales to end customers and take out what's in the channel as well. The bright side of this is that pricing was actually fairly strong; it was still up 3% despite a lot of currency headwinds. But because of a weakening macroeconomic picture because of weakening currency, they did face a some headwinds.

Brian Colello does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.