Apple stock can't 'solely rely' on iPhone sales: Analyst

Apple (AAPL) reported fiscal fourth-quarter results that topped Street expectations. The tech giant reported earnings per share of $1.46 compared to estimates of $1.39 and revenue of $89.50 billion versus estimates of $89.35 billion. The results got a boost from better-than-expected iPhone sales and its services segment. Greater China sales missed analyst estimates, however.

Tom Forte, D.A. Davidson Managing Director and Senior Research Analyst, discusses Apple's earnings results ahead of its earnings calls and the challenges the iPhone maker is seeing in device sales and China.

"The 2% decline in China is a concern and China is about 20% of revenue for Apple," Forte tells Yahoo Finance. "But, again, investors should breathe a sigh of relief to the extent that sales and earnings were better than expected and there's enough in there to give some people hope."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

This post was written by Luke Carberry Mogan.

Video transcript

JOSH LIPTON: Let's move on and dig into the latest quarter from Apple.

We're going to have Tom Forte from DA Davidson, managing director, senior research analyst.

Tom, the numbers are out.

Interested to get your first look.

TOM FORTE: Sure.

So on first blush, I think investors should be sighing-- breathing a sigh of relief here, to the extent that results were better than expected pretty much across the board, except for the Macs.

And so I would say that that's kind of a win on a relative basis, despite the fact that they had their fourth consecutive quarter of declining revenue.

AKIKO FUJITA: Yeah, Tom, you've been pretty vocal in sort of pulling back the expectation on the iPhone 15.

Number one, there was the issue, sort of a pricing-- though they still-- Apple still priced at a higher price point, and then also questions about demand, given that.

I realize in this quarter, it doesn't give you the full picture of what that demand looks like because it was still early days.

But given the numbers that we got today, does that change the way you view the outlook particularly on the iPhone right now?

TOM FORTE: It doesn't change the outlook.

I think that Apple is still in a position where it can't solely rely on the iPhone to drive shares higher.

This is going to put more pressure on the Vision Pro launch at the start of calendar next year.

The 2% decline in China, I think, is a concern.

And China is about 20% of revenue for Apple.

But I think that, again, investors should breathe a sigh of relief to the extent that sales and earnings were better than expected.

And there's enough in there to give some people hope.

AKIKO FUJITA: Tom, on China specifically, what's the bigger concern for you?

Is it about the consumer sentiment, what the macro environment is like, or is it about homegrown competition, particularly around Huawei?

So TOM FORTE: It's twofold.

One, the weak Chinese economy, to the extent that that's a large portion of Apple's revenue, two, to the extent they're still heavily dependent on China from a supply chain standpoint, and I guess, three, to the extent that you're seeing this trade war, however you want to think about the tensions between the US and China, and that seems to be escalating, and Apple's caught right in the middle.

So multiple challenges for Apple in China right now.

JOSH LIPTON: Talk to me, Tom, too.

Listen, we're waiting for the call, which we'll get a lot more insight and guidance, color and commentary from Tim Cook and Luca Maestri about the outlook there.

I was interested about margins, though, Tom, hanging in there.

It clocked in for the September quarter at 45.2%.

The Street was closer to 44.5%.

I'm interested, what do you think the puts and takes are there?

Where do you think gross margins could go from here?

TOM FORTE: So generally speaking, I think the fact that they had better than expected iPhone sales, that tends to be one of their higher margin hardware items.

And then also to the extent that their services revenue exceeded expectations, that's very important for margin.

So the question then is, what are the expectations for the higher margin categories, iPhones, and services in the December quarter?

So look forward to additional details on the call in that regard.