As companies offer cautious insights into consumer-electronics spending this earnings season, all eyes are on Apple Inc. to see if its brand power can propel the tech giant forward.
According to Monness, Crespi, Hardt & Co. analyst Brian White, Apple has the potential to outperform the overall market, despite the ongoing pressure in the smartphone industry.
Expected to release its fiscal third-quarter results after the closing bell on Thursday, Apple faces tough comparisons to last year’s performance. Morgan Stanley’s Erik Woodring predicts that the numbers will reflect “stable but subdued demand.”
Woodring also anticipates a significant increase in Apple’s estimates, driven by positive outlooks for the current quarter. He cites stable iPhone production, seasonal strength in Mac sales, low-teens growth in services, and favorable market conditions as potential drivers for this growth.
While Apple no longer provides traditional financial forecasts, the company does offer some indication of relative performance. Woodring believes Apple will call for year-over-year revenue growth for the September quarter. According to FactSet consensus, analysts expect revenue of $90.18 billion, which implies essentially flat growth compared to the previous year.
Looking ahead, Krish Sankar of TD Cowen acknowledges moderate headwinds in Apple’s hardware business due to macroeconomic factors. However, he expects overall stability in iPhone demand, while products such as iPad, Mac, AirPods, and Apple Watch may experience seasonality in the second half of the calendar year.
Key Takeaways:
- Earnings: Analysts tracked by FactSet forecast earnings of $1.20 per share for the June quarter, in line with the previous year’s performance.
Revenue
The FactSet consensus is for $81.8 billion in June-quarter revenue, down from $82.96 billion a year before. Analysts expect iPhone revenue to fall as well — to $40.2 billion from $40.7 billion.
Stock Movement
Apple shares have gained following each of the company’s past four earnings reports, including when they staged a 4.7% rally last quarter. The stock is up 48% so far this year, as the Dow Jones Industrial Average DJIA has ticked up 6%.
Analyst Ratings
Of the 44 analysts tracked by FactSet who cover Apple’s stock, 29 have buy ratings, 14 have hold ratings and one has a sell rating, with an average price target of $197.16.
What else to watch for
Analysts will be looking for the latest signs of momentum in India, where Apple is making a big push amid the recent launch of physical stores.
U.S. vs. International Revenue Growth
Analysts will be paying close attention to the U.S. versus international revenue growth, with a key focus on China. Management is expected to highlight emerging markets like India as a key source of demand strength in the quarter.
Additional Insight
- Apple has a juicy $40 billion opportunity ahead of it
- Apple savings account racks up $10 billion in deposits since April debut
Barclays analyst Tim Long expects a more pessimistic outlook for the September quarter than some other analysts amid reports of potential production issues.
Deutsche Bank’s Sidney Ho, however, said that “the China market could see more meaningful recovery post-COVID reopening.”
