After a few tech earnings disappointments, traders are looking ahead at Apple Inc. AAPL, which is scheduled to release its fiscal year fourth-quarter results on Thursday after the market close.
Key Q4 Metrics To Watch Out For: Amid the macroeconomic and geopolitical uncertainties, Apple is expected to report low-single-digit earnings per share, or EPS, growth, and mid-single-digit revenue growth for the fourth quarter.
The fourth quarter is the second busiest season for Cupertino, as it encompasses the key back-to-school season.
Q4 Consensus Estimates:
- EPS: $1.27 Vs. $1.24 a year ago and $1.20 in the preceding quarter
- Revenue: $88.9 billion Vs $83.36 billion a year ago and $82.96 billion in the preceding quarter
The consensus EPS estimate has been trimmed from $1.31 about three months ago to the current number.
Recent quarterly performances show that Cupertino beat bottom-line estimates in the previous three quarters and reported in-line results in the quarter ahead of these.
“We view this as a seminal print for Apple as the Street gauges the underlying demand for iPhone 14,” Wedbush analyst Daniel Ives said in a recent note.
See Also: Is iPhone Demand Really Slowing Down? Apple Analyst Says This Data Point Proves Otherwise
How iPhone, Services Fared? Despite the industry-wide impact of the stronger dollar, Ives expects Apple to hit the Street estimate of $89 billion, thanks to higher ASPs as the mix shifts toward higher-end iPhone models. The analyst said more consumers prefer Pro, swayed by abounding carrier promotions and improved chip/camera technology.
BofA Securities' Wamsi Mohan had a different take. In a recent note, the analyst downgraded the stock, citing a weaker iPhone 14 cycle as risk to consumer spending remains elevated globally, especially in Europe. The lead time has been moderating even for the Pro models, he added.
Morgan Stanley analyst Eric Woodring predicts 51.1 million iPhone unit shipments for the quarter at an ASP of $838, potentially raking in $43 billion in iPhone revenue. The analyst is also hopeful of iPad and Mac growing above normal seasonality, with iPad revenue likely remaining flat at $8.3 billion from a year ago and Mac revenue growing 14% to $1.04 billion. Gartner's third-quarter PC shipments data released earlier this month showed that Apple was one of the three major vendors, which grew its market share from a year ago.
Despite three new compelling September product launches in Watch Series 8, Watch Ultra and AirPods Pro 2, Wearables may have seen a below-seasonal performance, Woodring said. He also expects Services revenue of $19.7 billion, about two points below consensus.
Ives, meanwhile, expects the Services segment’s revenue to meet estimates despite challenges on the App Store front. His counterpart at BofA sees a weaker near-term Services trajectory, given the incremental risk of deceleration for App Store and licensing, which account for over 60% of the Services segment.
Focal Points Of Earnings Call: Wedbush’s Ives expects Apple to give directional commentary rather than specific guidance for the December quarter. CEO Tim Cook is likely to rave above iPhone 14 Pro's strength, heading into the holiday quarter, he added.
Credit Suisse analyst Shannon Cross said she would look for commentary about demand elasticity. She noted that Apple did not raise iPhone prices in China to retain demand in a market “weighted to flagship models,” but hiked in Japan and Europe. Installment plans available in most geographies would have helped mitigate the impact of price increases, she added.
How Apple Trades Around Quarterly Results? The stock gained a little over 2% in the run-up to the company’s third-quarter results announced on July 28. Over the next five sessions following the date, the stock gained an incremental 5.4%.
When the company reported its second-quarter results on April 28, the stock was down about 2.2% going into the earnings day and fell about 4.2% over the next five sessions.
Apple’s stock fell 4.2% ahead of its first-quarter results released on Jan. 27 but ran up 8.6% following the results.
Forward Outlook: For the key holiday selling season, when the company pushes out about one-third of total sales, analysts expect revenue of $128.38 billion, up about 3.6% year-over-year.
Most analysts have tempered their expectations for Apple for the fiscal years 2023 as well as 2024, citing a weaker consumer spending backdrop.
But one thing working in Apple’s favor would be a 14-week quarter in the fiscal year’s first quarter, Morgan Stanley’s Woodring said. This, according to the analyst, will drive an “acceleration in Y/Y Services revenue growth and sets up the Product business to grow above normal seasonality in the quarter.”
Take On Apple Stock: Apple shares have shed roughly 14% year-to-date, which is a more modest decline when compared to the Invesco QQQ Trust’s QQQ 28% drop.
The average analysts’ rating for the stock is $183.37, suggesting a roughly 21% upside from current levels, according to data compiled by TipRanks.
Technically, Apple shares are currently attempting to break above a resistance area of around $151, which has served as support and resistance levels multiple times since September 2021. If the stock convincingly breaks this barrier, the next resistance lies around the $160 level. On any downside, the $138 area could serve as support.
Source: TradingView
Price Action: Apple shares closed Wednesday's session down 1.96% lower at $149.35 but edged up 0.30% to $149.80 in after-hours trading, according to Benzinga Pro data.
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