Apple (AAPL) stock has gone on an impressive run, rising some 50% year to date, almost three times the 18% gain in the S&P 500 index. Its shares have returned more than 30% just in the past six months, pushing the tech giant past a $3 trillion valuation. The market is clearly bullish on the company’s growth potential.
Investors want to know whether it is time to take profits or if the momentum can continue. Investors are also excited about prospects for the new iPhone 15 which is scheduled to launch in September. How many new phones will Apple sell and how will it guide for the holiday quarter? These answers will be more clear when the tech giant reports third quarter fiscal 2023 earnings results after the closing bell Thursday. However, for this quarter, it’s not going to be just about the iPhone.
Goldman Sachs analyst Michael Ng expects Apple to surpass earnings estimates, led by strength in its Mac and Services segments. Ng is expecting Services revenue of $21.8 billion to rise 11% year over year, clearing Wall Street forecasts of $20.7 billion. “Upside to our Services forecast reflects the inflection in App Store spending, per Sensor Tower, strong growth in advertising, continued content investments in AppleTV, and a more benign forex headwind relative to company guidance of -400 bps," Ng wrote in an investor note.
The market will also look for additional details about the its long-awaited mixed reality headset, dubbed Vision Pro, which was unveiled at the company's Worldwide Developers Conference. Wall Street analysts were impressed, including Credit Suisse analyst Shannon Cross who said the device "solves many of the technical limitations.” At a hefty price tag of $3,499, the questions becomes how much revenue and profits can Apple expect upon launch. This and other topics will be front and center on the conference call with analysts on Thursday.
In the three months that ended June, Wall Street expect the Cupertino, Calif.-based tech giant to earn $1.19 per share on revenue of $81.63 billion. This compares to the year-ago quarter when earnings came to $1.20 per share on revenue of $82.96 billion. For the full year, ending in October, earnings are expected to decline 2.2% year over year to $5.98 per share, while full-year revenue of $384.99 billion will decline 2.4% year over year.
The tech giant has benefited from, among other things, the re-opening of China, its second-largest market. Despite the overall smartphone market shrinking amid an economic slowdown, recent reports suggests Apple is still gaining share in the Chinese smartphone market during the second-quarter, with iPhone sales rising 6.1%.
Apple’s overall Chinese smartphone market shares stands at 15.3%, according to research firm IDC, which noted a 2.1% decline in Q2 smartphone shipments in China. It’s notable that Apple still experienced growth. Could that be a sign of things to come during the quarterly results given that iPhone sales generate a sizable portion of revenues? This was the theme in the second quarter, with Apple beating on both the top and bottom lines, thanks to 1.5% rise in iPhone sales to $51.33 billion.
With Q2 revenue of $94.84 billion, down 3% year over year, this means iPhone sales accounted for 54% of the overall total. This was Apple's first quarterly revenue drop in almost four years. Apple earned an adjusted EPS of $1.52 which was 8 cents better than estimates. Services revenue, which includes subscriptions to products such as Apple TV+, iCloud storage and Apple Music, rose 5.5% year over year to $20.91 billion, accounting for 22% of revenue.
On Thursday investors will be watching closely to see whether (or how) inflation might have impacted spending on Apple’s pricey hardware and how the company guides for the next quarter and full year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
Read Richard's Bio