Summary
Wall Street is optimistic about Apple stock. Morgan Stanley expects a September quarter beat and sees an upside to December quarter Consensus estimates. But the concerns about iPhone 14 demand made its earnings outlook confused.
Apple(Nasdaq: AAPL)is scheduled to announce Q4 earnings results after the market closes on next Thursday, October 27. Analysts anticipate Apple’s revenues to reach $88.687 billion, Apple is expected to post earnings of $1.264 per share.
Overall, Wall Street is optimistic about Apple stock, with a Buy consensus rating based on 37 Buys, 10 Holds, and 2 Sells. The average price target of $181.8 implies a 26.47% upside potential from current levels.
Latest Results
It reported fiscal Q3 net income of $1.20 per share, down from $1.30 per share during the same quarter in 2021, while total net sales grew 2% year-over-year to $82.96 billion compared with $81.43 billion in revenue last year. It also set a cash quarterly dividend of $0.23 per share, unchanged from year-ago levels.
Q4 Guidance
While neither Cook nor Apple CFO Luca Maestri gave exact earnings or revenue forecasts for what is the company's fiscal Q4, Maestri said revenue is expected to "accelerate" on a year-over-year basis. Maestri also said Apple expects its gross profit margins for the quarter to be between 41.5% and 42.5%.
3 Things To Watch Before Q4 Earnings Release
1. Apple Shows off Updates to iPhone, AirPods, Apple Watch Lines AndApple TV 4K in a Month
Apple unveiled updates to its iPhone, AirPods and Apple Watch product lines on Wednesday, including the new Apple Watch Series 8 and iPhone 14 with satellite connectivity on September 7th.
It also announced new versions of its iPad Pros, a totally redesigned regular iPad and an updated version of the Apple TV 4K on October 18th.
The launches give Apple more new gadgets to sell ahead of the important holiday shopping season. The new tablets may help the company boost its iPad sales, which dipped 14% during Apple’s last holiday quarter and 2% during the most recent quarter. And they join Apple’s latest iPhone 14, two new Apple Watches and brand-new AirPods Pro.
2. Apple Ditches iPhone Production Increase After Demand Falters
It has told suppliers to pull back from efforts to increase the assembly of the iPhone 14 product family by as many as 6 million units in H2 2022. Instead, the company will aim to produce 90 million handsets for the period, roughly the same level as the prior year and in line with Apple’s original forecast this summer.
Demand for higher-priced iPhone 14 Pro models is stronger than for the entry-level versions, and Apple had upgraded its sales projections in the weeks leading up to the iPhone 14 release and some of its suppliers had started making preparations for a 7% boost in orders.
Global demand for personal electronics has also been suppressed by surging inflation, recession fears and disruption from the war in Ukraine. The smartphone market is expected to shrink by 6.5% this year to 1.27 billion units, according to data from IDC.
Moreover, the latest news is that Apple has had at least one manufacturer in China stop production of parts for the "Plus" smartphone model, while two suppliers in China that assemble the parts for the iPhone are dropping production by 70% and 90%.
3. Apple Sees Strong Mac Growth in Q3, Other PC Vendors Shrink on Weak Demand, Supply: IDC
Apple was the only PC vendor to see positive year-over-year growth in the third-quarter, as it was able to benefit from pent-up demand, research firm IDC said.
The research firm noted that Apple likely shipped 10.06M Macs in Q3, up 40.2% year-over-year. IDC estimated that Apple had 13.5% of the PC market as ofQ3, coming in fourth behind Lenovo, HP and Dell Technologies.
The total PC market declined to 74.3M units in the third-quarter, down from 87.32M units in the third-quarter of 2021, as demand continued to decline following the early days of the COVID-19 pandemic and uneven supply.
Analyst Opinions
Morgan Stanley expects a September quarter beat and sees an upside to December quarter Consensus estimates. It forecasts September quarter revenue to be $90.1 billion, implying a 2% upside to Street forecasts, while its $133.7 billion December quarter revenue forecast implies a 4% upside to consensus.
Bank of America lowered its price target to $160 from $185, it views the slowdown in services and relatively lackluster iPhone lead times as indicators that consumer spending will slow, and risks to that outperformance over the next year include a weaker iPhone 14 cycle that points to softness in consumer spending, a weaker near-term services trajectory where App Store and licensing via payments from Google can decelerate, and pressure from a stronger dollar.
Wedbush analyst Dan Ives had an outperform rating and a $220 price target on it. He noted that worldwide sales of the iPhone 14 Pro are exceptionally strong, with wait times on many models now between four and six weeks, going into November, and added that there is a ramp in Pro production, which should help drive the average selling price and revenue for Apple into the next quarter and early next year.
Credit Suisse analyst Shannon Cross had an outperform rating and a $190 price target on it. She expected it to generate $89.68B in revenue and $1.30 a share, up from a prior estimate of $88.7B and $1.26 a share. But she lowered her estimates for the 2023 and 2024 fiscal years to account for a "weaker consumer backdrop."