Stephen Silver
As they do every year at this time, analysts are looking past the concluded quarter and are expressing concern about how Apple may perform later this year mostly due to guesses at iPhone demand. Here's what to expect from Tuesday's earnings release.
Concerns from the supply chain about demand in the next iPhone cycle hit Apple's stock price hard in April. However, analyst consensus predicts that the company will post a March quarter in line with Apple's guidance when it announces quarterly earnings after market close on Tuesday.
Apple's guidance, issued when it announced its last quarterly earnings Feb. 1, showed revenue between $60 billion and $62 billion for the second quarter of the year. Analysts mostly predict a number in that range, but are already shifting the gaze forward to Apple's next quarter.
The analyst view
Analyst Katy Huberty from Morgan Stanley, whose analyst note on April 20 sent Apple's stock tumbling, nevertheless predicted that "we expect Apple to report an in-line March quarter." Huberty predicted that Apple will have sold 52.3 million iPhones in the March quarter, compared to a previous estimate by Morgan Stanley of 53.3 million. Apple sold 50.8 million iPhones in Q2 of 2017.
Analysts surveyed by Bloomberg agreed, with a consensus that Apple would show revenue of $61 billion for the second quarter. Apple posted revenue of $52.9 billion in the second quarter in 2017.
Other numbers from the second fiscal quarter of 2017 included 4.2 million Macs sold and $7.042 billion in revenue from the software/services category, which includes the App Store, Apple Music, Apple Pay, iTunes and AppleCare.
Looking to the future
Huberty predicted a much bigger cut to June quarter estimates of iPhone sales, predicting 34 million sold compared to her previous estimate of 40.5 million based on soft demand and reports from the supply chain. This has been a continuing theme in analyst predictions of the upcoming iPhone cycle throughout the spring.
Eyes Tuesday will be on what guidance number Apple announces for its third quarter.
Other factors
The second quarter is also the first full quarter since the enactment of the 2017 tax reform, raising questions as to whether it will affect Apple's earnings. The Wall Street Journal predicted a "capital return bonanza," which may return some of the $269 billion the company has stashed overseas, and perhaps offset some of the trouble caused by the alleged softening iPhone demand.
Meanwhile, some are asking whether Apple's earnings even matter after all. At Seeking Alpha, Bill Maurer notes that, because of the capital return plan, "this is the one quarterly report a year where the pressure on Apple to report solid business results is the least."
Apple's new sixth generation iPad was released too late to have any impact on the second fiscal quarter.
Once again, Apple finds itself in the unique position in which there are questions about its business model and overall health, despite its status as the most valuable company in the history of the world.
Apple will give the results of its latest quarter, and provide guidance for the quarter ending in June, after markets close on Tuesday. A conference call with analysts and members of the media will follow at 2 p.m. Pacific, 5 p.m. Eastern, and AppleInsider will have full coverage.
Wesley Hilliard
Marko Zivkovic
Christine McKee
Malcolm Owen
Amber Neely
14 Comments
Overwrought quarterly feedback does terrible things for business, undermining good long-term strategies and rewarding stupidity that generates good quarterly numbers at the expense of long-term viability. Companies like Apple that actually do look long-term are forced to do this ridiculous dance every three months to entertain the Jim Cramers of the world, while trying to compartmentalize all that in order to pay attention to what's actually important.
Quarterly reports invite short term thinking. It may be a good idea to publish only HY and FY reports, and report only minimal information at Q1 and Q3. This would send the right signal about the way Apple is running the business. It would save a lot of useless work at Apple HQ.
Every damn quarter brings more doom and gloom for Apple. Won't Tim Cook ever figure some way out of this annoyance? Apple has so much cash to be able to do something about this nonsense. I'm not saying Apple has to join in a quarter to quarter race but do something at least to offset the constant chatter of iPhone sales losses. What's worse is that Wall Street is saying that $269B of overseas cash is already baked into the share price. How is that even possible, not knowing what Apple intends to do with it. Apple always seems to have such poor quarterly predictions while so many other companies get a free pass. This quarter's doom and gloom as been going on for a few weeks on an almost a daily basis.
I'm sure this crap doesn't harm Apple's value in any significant way, especially if shares are being bought back at a lower price, but it's just stupid to always be singling out Apple when there are plenty of other stocks that can be crapped on for various reasons. I'm counting on Apple raising dividends and Apple will certainly be able to carry that out.
Let me get the analyst narrative straight:
1) Sky is falling because iPhone X is not selling well, because it is a law of physics people will not spend more than $999 on a smartphone despite of the fact people regularly spend far more than this on things that are far more frivolous (wine, collectable cards, clothes, etc) The same thing was said about the original iPhone's price point.
2) Questionable supply chain rumors pass through a human centipede of analysts, each ingesting the output of the one before him, adding their own special flavor for the next one to devour. (These rumors are routinely wrong, Cook directly stated it is fools endeavor to try and draw conclusions from the supply chain, Cook stated iPhone X out sold other iPhone models last quarter ... with factual reported profits to suggest this was the case)
3) 2 days before the end of quarter results, their tune changes to "oh wait, we think Apple will meet their guidance". (It is known the majority of iPhone sales occur on the last day of the quarter /s)
4) Wait, wait we weren't wrong maybe just a bit off on the timing of our predictions ... yeah next quarter lets look for failure next quarter.
It amazing these people still have jobs. I find it funny they layout their doomed predictions, then lower their price target from $205 down to $203. If they actually believed any of their own "data" you would think they would put the target maybe below what it's currently trading, instead of still being $40 higher. I'm still confident reality, over a long enough time, will bring the price back inline hopefully before my calls expire in 2020.