Apple will report its fourth-quarter earnings for the quarter ending in September after the bell on Thursday.
The most important new information will be any details the tech giant offers about how the iPhone 14 series is sold.
Many investors will be watching to see if Apple’s newest iPhones, which went on sale late in the quarter, are on pace for a growth cycle or if global macroeconomic conditions have finally begun to affect the market for high-end electronics. .
“We don’t believe fundamentals are immune to macroeconomic backdrop, but we see the combination of a resilient iPhone product cycle relative to revenue rather than volumes, as well as margins, to deliver results that demonstrate resilience above the investors low bar. expectations right now,” JPMorgan’s Samik Chatterjee wrote in a note Monday.
Apple could also see a boost from better-than-expected sales of iPads and Macs, which have been slowed by parts shortages in recent quarters. Apple said in July supply shortages could hit the company’s sales by $4 billion, but some analysts believe the company will say it was able to manage its supply chain better this quarter.
Apple has offered no official guidance since 2020, initially citing the uncertainty caused by the pandemic. But management has offered individual data points each quarter that allow analysts to get back to the ability to forecast sales.
Here’s what Wall Street expects, according to estimates from FactSet:
- Income: $88.79 billion
- EPS: $1.27
In July, Apple CFO Luca Maestri said revenue growth in the September quarter would be higher than the 2% annual growth in the third quarter.
Maestri also warned investors that while the high-margin services business would continue to expand, its growth rate would slow from 12% during the June quarter, citing dollar strength and economic factors.
However, “most investors are aligned that service revenue growth should accelerate” during the December quarter again, according to Morgan Stanley’s Erik Woodring.
Investors will be watching what Apple says about that quarter. Any forecast or guidance that suggests a lighter-than-expected holiday season could present the biggest risk to stocks.
“We do not expect AAPL to provide earnings guidance for the first quarter (December) due to the current macro uncertainty, but we believe the company will suggest that earnings growth will slow,” Deutsche Bank’s Stanley Ho wrote in a note during weekend.
However, Apple’s sales appear to have remained strong, according to an analysis of iPhone wait times and third-party estimates of the premium smartphone market.
“Guidance comments are likely to feature easier supply, better services growth and lower FX headwinds, but are unlikely to get specific growth guidance given macro uncertainty,” Chatterjee wrote in a note.
One product category that could be affected by slowing demand is the company’s wearables division, which includes sales of the Apple Watch and wireless headphones.
“We believe wearables are the most discretionary product in Apple’s portfolio and therefore most prone to the pullback we’re seeing in consumer electronics spending,” Morgan Stanley’s Woodring said in a note.
Apple’s fiscal first quarter runs from October through the end of December and is the company’s biggest of the year, fueled by higher holiday spending and a launch schedule that puts new products on the market in the fall.
Ultimately, analysts want to get a sense Thursday of how Apple might weather a brewing storm that could hit discretionary spending and whether stocks will remain a safe haven as investors reevaluate other tech names.
Apple still has incredibly strong free cash flow and spends tens of billions per year on share buybacks and dividends. The stock is down 16% year to date, while the Nasdaq Composite is down more than 30%.
“We still see AAPL as a defensive name given [free cash flow] and estimated capital returns of $90-100bn in CY23 even as premium smartphones and macros slow further,” Cowen analyst Krish Sankar wrote in a note.
— CNBC’s Michael Bloom contributed to this report.