- Laser focus on iPhone sales ramp into Christmas
- Profits margins to stay firm, say analysts
- Consensus for $1.26 EPS on $88.76 billion revenue
Apple (AAPL:NASDAQ) will report Q4 earnings after the market close on Thursday (26 Oct) and investors should be watching for any indications that the company is seeing signs of strain from the softening consumer economy.
Its flagship iPhone sales make up roughly half of the Cupertino tech giant’s revenues so expect a laser focus on Apple’s sales data for the latest iPhone 14, which went on sale late in the quarter. The big question; will volumes remain on pace for a growth cycle or are global macroeconomic conditions finally starting to bite into demand on high-end electronics.
Consensus Q4 forecasts call for $1.26 per share of earnings on $88.76 billion revenue. That compares to $1.24 and $83.36 billion in Q4 2021 and $1.20 and $82.79 billion in Q3 this year.
IPHONE SALES FOR CHRISTMAS
Fiscal Q1 starts in October, and this is typically a key quarter given that it covers the run-in to Christmas. Analysts will want to get a sense of how Apple could weather a recessionary storm that could hurt discretionary spending and if shares will remain a safe haven as investors reassess other tech names.
Personal computer sales have been falling sharply in recent quarters, as the pandemic-era spike in demand fades. Chip companies like Micron Technology (MU:NASDAQ), Advanced Micro Devices (AMD:NASDAQ) and Texas Instruments (TXN:NASAQ) have cut forecasts in response to the PC downturn.
‘We don’t believe fundamentals are immune to the macro backdrop, but we see the combination of a resilient iPhone product cycle in relation to revenues rather than volumes, as well as margins, to deliver results that demonstrate resiliency above the low bar of investor expectations at this time,’ JPMorgan’s Samik Chatterjee wrote in a note earlier this week.
MACS, ADS AND COMMENTS
There are other elements to the outlook for Apple. For one thing, recent data from market research firm IDC suggests a spike in Mac shipments in the quarter, as Covid-related supply chain restrictions in China eased.
Advertising demand is also worth watching. Apple recently came in from criticism from Facebook-owner Meta Platforms (META:NASDAQ) for amending its App Store terms to take a portion of social-media advertising revenue, according to a Bloomberg report. Meta said Apple was ‘undercutting others in the digital economy,’ according to the report.
Snap (SNAP:NYSE) and Google-owner Alphabet (GOOG:NASDAQ) have already spooked investors with warnings of slowing online ads.
Apple has resisted calls to issue formal guidance since the pandemic created havoc so analysts will be homing in on what CEO Tim Cook says, and how he says it. ‘Guidance commentary to likely feature easier supply, improving growth in Services and lower FX headwinds, but unlikely to get specific growth guidance given macro uncertainty,’ JPMorgan’s Chatterjee said.
