After the bell on Thursday, Apple will release its fourth-quarter earnings for the fiscal quarter that ended in September.
Any details the tech giant provides on how the iPhone 14 series is selling will be the most important new information.
Many investors will be looking to see if Apple’s latest iPhones, which were released late in the quarter, are on track for a growth cycle or if global macroeconomic conditions have finally begun to weigh on the high-end electronics market.
“We do not believe fundamentals are immune to the macro backdrop,” JPMorgan’s Samik Chatterjee wrote in a note on Monday. “However, we see the combination of a resilient iPhone product cycle about revenues rather than volumes, as well as margins, to deliver results that demonstrate resiliency above the low bar of investor expectations at this time.”
Apple may also benefit from higher-than-expected iPad and Mac sales, which have been slowed by part shortages in recent quarters. Apple warned in July that supply shortages could cost the company $4 billion in revenue, but some analysts believe the company will claim that it was better able to manage the supply chain this quarter.
Apple has not provided official guidance since 2020, citing uncertainty caused by the pandemic. However, management has provided individual data points to analysts each quarter, allowing them to back into the ability to forecast sales.
According to FactSet estimates, Wall Street is expecting:
- $88.79 billion in revenue
- EPS: $1.27
Apple Chief Financial Officer Luca Maestri stated in July that revenue growth in the September quarter would be greater than the 2% annual growth in the third quarter.
Maestri also warned investors that, while the high-margin services business would continue to grow, the rate of growth would slow from 12% in the June quarter to 8% in the September quarter, citing the strong dollar and economic factors.
According to Morgan Stanley’s Erik Woodring, “most investors are aligned that services revenue growth should accelerate” again during the December quarter.
Investors will be paying close attention to what Apple says about that quarter. Any forecast or guidance indicating a lighter-than-expected holiday season could pose the greatest risk to stocks.
“We do not expect AAPL to provide revenue guidance for F1Q (Dec) due to the ongoing macro uncertainty,” wrote Deutsche Bank analyst Stanley Ho in a note over the weekend.
According to an analysis of iPhone wait times and third-party premium smartphone market estimates, Apple sales appear to have remained strong.
“Guidance commentary will likely feature easier supply, improving Services growth, and lower FX headwinds, but specific growth guidance is unlikely given macro uncertainty,” Chatterjee wrote in a note.
The company’s wearables division, which includes Apple Watch and wireless headphone sales, is one product category that could be impacted by slowing demand.
“We believe Wearables are the most discretionary product in Apple’s portfolio, and thus most vulnerable to the consumer electronics spending pullback,” Morgan Stanley’s Woodring wrote in a note.
Apple’s first fiscal quarter, which runs from October to the end of December, is the company’s largest of the year, thanks to increased holiday spending and a product launch schedule that puts new products on the market in the fall.
Finally, analysts want to know how Apple will fare in the face of an impending storm that could hurt discretionary spending, as well as whether shares will remain a haven as investors reassess other tech names on Thursday.
Apple continues to have extremely strong free cash flow and spends billions of dollars per year on share buybacks and dividends. Year to date, the stock is down 16%, while the Nasdaq Composite is down more than 30%.
“We continue to view AAPL as a defensive name given strong [free cash flow] and estimated $90-100B capital returns in CY23 even as premium smartphones and macro slow further,” wrote Cowen analyst Krish Sankar in a note.