Apple (AAPL) will announce its fiscal Q2 (calendar Q1) earnings later today, and the general view of analysts is that the “worst is probably behind us.”
Wall Street analysts expect AAPL’s revenue for Q2 to be down 5-6% year-on-year. However, that isn’t causing pessimism among most analysts. On average, most expect Apple will announce numbers somewhere around the midpoint of its $55-59B guidance.
“Heading into C1Q, we’re most focused on the trajectory of iPhone following the sharp drop-off in Dec; we expect iPhone units/sales of 41.8mn/$30.6bn (-20%/-18% y/y), though believe the worst is likely behind us this cycle supported by ‘less bad’ supply chain data points,” analysts led by Matthew Cabral wrote to clients last week. (Via Business Insider)
Observers don’t expect much movement in the price of AAPL following the earnings announcement, as the known and anticipated bad news (the Chinese market, weak iPhone sales, and price cuts), is already reflected in the current price of the stock.
UBS says that “off low expectations, results/guide should be fine.” Which means that even when revenue is announced is down and if revenue guidance for Q3 is modest, it’s unlikely to lead to a sell-off of the stock.
Wells Fargo analysts say that while it’s tough to ignore weak iPhone demand, that’s already priced into the stock, they are encouraged by the Apple vs. Qualcomm settlement, as well as Apple’s expansion of their subscription services. “The rate of expansion of Apple’s installed base should remain a key focus,” the analysts added.
Morgan Stanley remains bullish, listing three reasons to be optimistic about AAPL.
- They believe investors underappreciate Apple’s platform, with iOS users’ mobile- app spending 10 times that of Android users.
- iPhone data points have begun stabilizing, the analysts have found.
- Apple and Qualcomm’s settlement increases the likelihood of Apple launching a 5G iPhone in 2020, which the stock typically begins pricing in six to nine months in advance, they said.
Analyst Katy Hubert sees iPhone sales drops easing, while the company’s Services growth accelerates.
Not everyone is optimistic about the company’s earnings future, as analyst Raymond James was pessimistic, saying: “Apple has to contend with a serious deterioration in mix (which causes us to cut our FY20 estimates), and the math just doesn’t work for a Services bull thesis.”
James does see a bright spot though, as he sees the Qualcomm settlement as assurance Apple will be able to meet demand for 5G handsets in 2020.
Apple will report its earnings at 2 p.m. Pacific Time/5 p.m. Eastern Time. We’ll report on the earnings once they’re announced.