Apple reviews earnings for its second fiscal quarter on Thursday after the markets shut.
Investor expectations are low and Apple may surpass them even when gross sales progress is weak. In February, Apple mentioned it anticipated gross sales much like final 12 months’s $94.84 billion throughout the identical interval and flat iPhone gross sales.
This is what analysts anticipate from Apple, in line with LSEG consensus estimates:
- Earnings per share: $1.50
- Income: $90.01 billion
This is how Apple’s enterprise items are anticipated to fare within the March quarter, per LSEG estimates:
- iPhone income: $46.00billion
- Mac income: $6.86 billion
- iPad income: $5.91 billion
- Wearables, residence and equipment income: $8.08 billion
- Providers income: $23.27 billion
Analysts anticipate Apple to present a forecast for the present quarter of about $83.23 billion in gross sales, which might be 1.8% annual progress. Apple shares are down about 10% this 12 months, underperforming its friends and the broader market. Some fear that the 2023 iPhone 15 could also be seeing weak demand.
However the largest theme that traders can be anticipating is the general pattern in Apple’s third-largest market: China. Within the December quarter, gross sales dropped 13% in Larger China, which incorporates Hong Kong and Taiwan. Analysts polled by FactSet anticipate $15.25 billion in China regional gross sales, which might be a 14% year-over-year decline.
Even worse is what the droop may point out: Deteriorating circumstances in a key marketplace for Apple the place it additionally manufactures the overwhelming majority of its merchandise. Chinese language authorities businesses over the previous 12 months have reportedly requested employees to curtail use of “overseas” gadgets — iPhones — suggesting that Apple might not have the assist of Chinese language nationwide management.
Apple additionally faces elevated competitors from native firms, together with Huawei, which just lately launched a 5G smartphone regardless of U.S. export controls on superior chips.
“AAPL has de-rated considerably amid a weak iPhone 15 cycle and fears that Apple’s China enterprise is structurally impaired,” Bernstein analyst Toni Sacconaghi wrote in a be aware final week. He has an outperform ranking on the inventory.
However Sacconaghi would not see Apple being completely hampered by Chinese language Communist Social gathering sentiment, calling the present weak cycle “extra cyclical than structural” and declaring Apple’s historic volatility within the area.
“In robust iPhone cycles, Apple’s China revenues usually develop a lot quicker than Apple total, as Chinese language shoppers embrace the brand new cellphone,” Sacconaghi wrote. “The robust embrace is usually adopted by a number of quarters of weaker (and sometimes detrimental YoY progress), as we’re seeing now.”
Third-party information factors on China aren’t robust, both.
Information from Counterpoint Analysis reveals Huawei surged 70% on an annual foundation in March, whereas Apple declined 19%, falling into third place. Nevertheless, evaluation of the info means that the “preliminary indicators of iPhone demand enchancment … is broader than beforehand anticipated,” UBS’ David Vogt wrote this week.
In the meantime, state statistics present iPhone gross sales falling 33% in February, the second consecutive month of declining shipments.
Wells Fargo analyst Aaron Rakers mentioned in a March be aware that iPhone gross sales might be down 20% on an annual foundation through the quarter.
Expectations for the quarter are muted, and the way Apple says it sees the present quarter shaping up could also be extra necessary than the outcomes for the March quarter.
“There’s an opportunity Apple may see a aid rally/squeeze greater on a ‘higher than feared’ earnings report/information,” Morgan Stanley analyst Erik Woodring, who has an obese ranking on the inventory, wrote in an April be aware. “This creates a difficult setup, and one we do not imagine traders essentially have to step in entrance of.”
Apple hasn’t supplied steerage since 2020, however firm executives give information factors that analysts can use to venture gross sales. “June quarter income and gross margin steerage can be essential this quarter,” Woodring wrote.
Apple additionally usually updates traders throughout second-quarter earnings about how a lot it plans to spend on share buybacks for the remainder of the 12 months.
“We anticipate Apple to replace its capital return plans at March quarter earnings, and do not anticipate any significant deviation from latest plans,” Woodring wrote. In Might 2023, Apple mentioned it had approved a further $90 billion in repurchases.
