Apple Analysts Shift Focus To Asia-Pacific Sales

By Daniel Sparks - September 11, 2012 | Tickers: AMZN, AAPL, CMGE, GOOG, MSFT | 0 Comments

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Apple (NASDAQ: AAPL) analysts have shifted focus from domestic carrier iPhone sales to Apple's exploding revenue growth in markets abroad. Domestic sales are simply not as relevant in forecasting Apple's revenue as they once were. International opportunities and growth prospects are now in the limelight . . . especially Apple's Asia-Pacific operating segment.

Robert Leitao makes a solid point regarding Apple's growth in markets abroad: 

"By the March quarter of next year, two-thirds or more of Apple's revenue will be sourced outside the United States" (Posts At Eventide).

Compare this with Amazon (NASDAQ: AMZN), where in 2011 only 44.4% of total net sales were international. On top of that, Amazon's international sales are growing at a slower rate than domestic sales. Or consider Google (NASDAQ: GOOG), with international net sales remaining around 47% for the last 10 quarters in a row. Finally, even Microsoft's (NASDAQ: MSFT) revenue is mostly domestic, with only 45% of revenue recognized in countries outside of the United States.

Apple's Exploding Asia-Pacific Sales

Apple's Asia-Pacific operating segment (which includes China) should now be central to estimating Apple's growth prospects for (at least) the next 5 years. Consider this: Between 2009 and 2011, Apple's Asia-Pacific operating segment sales have exploded as a percentage of total net sales from just 7% in 2009 to 21% in 2011. Or you can look at it another way: Apple's Asia-Pacific net sales increased by more than 610% during that two year period. And growth hasn't slowed -- the 2010 to 2011 growth rate was 173.6%.

The chart below highlights the growth of Apple's Asia-Pacific operating segment as a percentage of total net sales over the last 3 years:

This growth is phenomenal. In 2009 Apple's Asia-Pacific sales growth were relevant, but not an imperative portion of Apple's total sales. In 2011 and on, however, Apple's America's region is becoming less significant as its Asia-Pacific segment soars.

Or, look at it another way. Baird Senior Research Analyst, William Power, suggests that, based on a recent consumer study, Apple will likely sell 50 million iPhones in the US over the next 12 months (Bloomberg). If historical trends persist and US sales continue to represent just 25% of total iPhone sales, this would imply another 150 million iPhone's sold outside of the United States over the next 12 months. Considering recent growth rates of Apple's Asia-Pacific segment and a few untapped opportunities, I believe this is highly possible.

Untapped Opportunity

Take a look at the year over year growth of Asia-Pacific net sales for Q2, 2012, the iPhone 4S launch quarter for China:

There is clearly an untapped opportunity in China, as the word's most populated country. Its citizens are eagerly adopting Apple products at an unprecedented rate.

But there is no clearer opportunity in China than China's most prominent phone carrier that currently does not offer the iPhone. If China Mobile (NYSE: CHL) adopts the iPhone, Apple will tap into China Mobile's 645 million customers. Let me say that again . . . 645 million customers--that's twice the population of the United States.

The Bottom Line

US iPhone sales are becoming a much less relevant factor in forecasting Apple's sales. With more than two-thirds of net sales happening outside of the United States by March of 2013, analysts and investors should eye Apple's international opportunities and consider them central in forecasting Apple's future growth prospects. Questions like this are the ones analysts need to explore: At what point will Apple reach saturation in its Asia-Pacific segment? It doesn't look like Apple has reached market saturation in China yet. In fact, it's reasonable to expect another year of doubling sales in Apple's Asia-Pacific operating segment.

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