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Apple Q4 Earnings Preview: The Street Eyes Strength In iPhone, Services

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Apple Q4 Earnings Preview: The Street Eyes Strength In iPhone, Services

Apple Inc. (NASDAQ: AAPL) shares have been flirting with record highs in recent sessions, thanks to upbeat expectations surrounding the uptake of the latest iPhone.

The Cupertino, California-based company is set to report fourth-quarter results Wednesday after the market close.

Upbeat Q4 Expectations

Analysts, on average, expect Apple to report fourth-quarter earnings per share of $2.84 compared to $2.91 one year ago, according to the Yahoo Finance database.

The Street EPS estimate has been revised substantially higher, from $2.67 at the start of the quarter to the current $2.84.

The consensus revenue estimate is $62.99 billion, almost flat with $62.9 billion a year ago. 

Over the past four quarters, Apple has beaten EPS estimates by an average of 3.23%.

Following a forecast-beating third quarter, when revenues broke a two-quarter streak of declines, Apple's shares added 2% after rising as much as 6.4% in intraday trading.

iPhone 11 Lineup Deemed A Success

Apple unveiled its iPhone 11 lineup, comprising the budget iPhone 11, the iPhone Pro and iPhone Pro Max, in late September, giving the fourth-quarter 10 days of sales for the newest iteration.

Strong data points on the phone launch bode well for Apple, which suffered a backlash last year due to the lukewarm reception for the phone's 10th anniversary model.

iPhone is maintaining leading market share among customers of all four major U.S. wireless carriers, Canaccord Genuity analyst Michael Walkley said in a note, citing a survey conducted by the research firm. 

The analyst expects fourth-quarter results to hit the top end of the guidance due to the stronger-than-anticipated initial sales.

Canaccord estimates iPhone volume of 43 million for the quarter, higher than an earlier estimate of 41 million.

iPhone revenues, which accounted for roughly 48% of Apple's total revenue in the third quarter, fell about 12% year-over-year to $25.99 million. Apple stopped reporting unit sales in the December quarter of 2018.

iPhone revenues comprised 61.4% of the company's product revenue in the quarter.

Services: The Future Growth Engine?

Apple is becoming a services-focused company.

Its Services business consists of digital content and streaming services, iCloud, AppleCare, Apple Pay, licensing and other services.

Apple launched its Apple Card in late August and unveiled Apple TV+, a streaming service that is set to launch Nov. 1.

In fiscal year 2018, the Services business contributed $37.19 billion, or 14%, to Apple's top line. The business accounted for 21.3% of third-quarter revenue. 

The company could double its 2016 Services segment revenue by 2020, said Canaccord's Walkley said.

Conversely, KeyBanc Capital Markets analyst Andy Hargreaves said the Services narrative is already priced into the stock.

Q1 Expectations

The consensus expectations for the December quarter are upbeat, with the Street calling for EPS of $4.45 on revenue of $86.92 billion. This compares to the year-ago EPS of $4.18 and revenue of $84.3 billion.

Related Links: 

Spotify Reports Q3 Earnings Beat, Throws Some Shade at Apple And Amazon

The Bull And Bear Case For Apple TV+

Photo courtesy of Apple. 

Posted-In: Canaccord Genuity iPhoneEarnings News Previews Top Stories Tech Trading Ideas Best of Benzinga

 

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