To The Moon

Apple is expected to report its earnings on May 2 after market close. The report will be for the fiscal Q2 2024.

Q2 Fiscal Year 24 Earnings Outlook

Analysts expect Apple’s revenue to come in at $90.299 billion and adjusted net income to be $23.170 billion. Adjusted earnings are likely to be $1.5 per share, according to Bloomberg's unanimous expectations.

Previous Quarter Review

Apple’s earnings and revenue top expectations in the last quarter but the company logged a sharp miss on revenue from Greater China. The company generated $119.6 billion in fiscal first-quarter revenue and ahead of the FactSet consensus, which was for $118.0 billion. Apple generated $20.8 billion in sales from Greater China. Analysts were looking for $23.5 billion.

Apple posted a sizable earnings beat for the December quarter, raking in net income of $33.9 billion, or $2.18 a share. Analysts had been modeling $2.10 in earnings per share.

Sales from the iPhone segment increased to $69.7 billion and Apple's Mac business generated $7.8 billion in December-quarter revenue.

Apple iPhone Sales Could Modestly Surpass Consensus

Preliminary data from research firm International Data Corporation showed last week that Apple’s global smartphone shipments had fallen 9.6% on year in 1Q24.

Earlier this week, data from Counterpoint Research showed that in Q1 2024 Apple's smartphone shipments in China fell by 19% compared to the previous year, marking its worst performance since 2020. The company's market share in China dropped from 19.7% to 15.7%. Apple is also seeing challenges at home in the U.S. market. Apple's shares of smartphone activations fell to 33% in the most recent quarter in the U.S., down from 40% in the 12 months ended March 2023.

However, analysts from Bloomberg still believe that Apple's FY2Q iPhone sales growth could come in 200-300 bps above consensus' 11% decline is slightly offset by a boost in average selling prices due to the iPhone 15 Pro Max.

Services revenue will likely continue momentum, with low-double-digit growth in FY2Q, led by advertising and iCloud, which carried paid subscriptions to double-digit gains in FY1Q. Still, Apple's FY3Q revenue outlook might be softer than consensus' $83 billion, as there likely won't be any change in sentiment around pressure in China.

Apple's GenAI strategy Could Be Next Major Post-Earnings Catalyst

Apple Inc. is expected to beat expectations for its March quarter but deliver disappointing guidance for the June quarter, according to Morgan Stanley analyst Erik Woodring.

“As a result, there's a chance Apple could see a relief rally/squeeze higher on a 'better-than-feared' earnings report/guide,” Woodring said. “Investors don't necessarily need to step in front of earnings, but they could buy any pullback ahead of biggest WWDC ever”. Investors are looking ahead to the company's WWDC event in June that's expected to bring an artificial-intelligence announcement.

“Confidence in Apple’s GenAI strategy could be a positive catalyst,” Wells Fargo analyst Aaron Rakers also said. The company is expected to deliver updates on its generative AI projects at the Worldwide Developers Conference, or WWDC, on June 10.

BofA Securities analyst Wamsi Mohan released a note Monday that said the company’s “rich catalyst path with defensive cash flows makes AAPL a top pick for 2024.”

 “We see catalysts including re-upping the capital return at earnings (May), Gen AI announcements at WWDC (June), the launch of new iPhones in the fall (iPhone 16) and reacceleration in gross profit dollar growth each quarter,” Mohan wrote. He rates Apple as a Buy with a $225 price target.

Melius Research’s Ben Reitzes wrote in a note last month that the iPhone will gain more improvements as Apple “will likely offer their own AI apps, perhaps through an upgraded Siri and its own assistant that can be integrated into non-Apple Apps too.”