Expectations are muted for Apple‘s financial results, particularly given recent production issues in China, but other crosscurrents make the report a little difficult to call.
The single biggest issue Apple will need to address in its December quarter report, due Thursday afternoon, is how demand for its products is being affected by a clear slowdown in consumer spending on PCs, mobile phones, and other electronics. The fading strength of the dollar, meanwhile, could skew how the numbers turn out.
The consensus view on Wall Street is that Apple (ticker: AAPL) will report sales of $121.7 billion for its fiscal first quarter, down 1.8% from the year-earlier quarter, marking the first year-over-year quarterly decline since 2019. Profits are projected at $1.95 a share, down from $2.10 a year earlier.
Apple stopped providing specific financial guidance early in the pandemic, and seems unlikely to resume the practice soon. But CFO Luca Maestri did provide some color on the outlook on the latest earnings call, in late October, and his comments were generally cautious.
Maestri said Mac sales would be down substantially from a year ago, due to a tough year-earlier comparison. Services revenue would grow year over year, but the company faces macroeconomic issues in both videogaming and advertising, he said.
On the other hand, the Apple CFO said that sales growth could be reduced by 10 percentage points from negative foreign-exchange effects. But the dollar has been weakening recently, which would suggest the impact could be less than Maestri had anticipated.
Also keep in mind that this time around, the December quarter had 14 weeks, rather than the usual 13. That was widely known, but an extra week can sometimes distort the Street’s estimates.
The biggest swing factor is likely to be iPhone sales, where the Street is anticipating a hit from the company’s well known production problems for the iPhone 14 Pro and Pro Max. The wild card is how the weakening economy has affected demand for those high-end phones. Previously long wait times have largely abated.
Wall Street analysts tracked by FactSet expect iPhone revenue in the quarter of $68.3 billion, down 4.6% from a year earlierwith Mac revenue of $9.3 billion, off 14%. The Street sees iPad revenue of $7.9 billion, up 9.6%. Wearables, home, and accessories revenue is projected to be $15.2 billion, up 3.4%. Analysts project services revenue of $20.5 billion, up 5%.
Street estimates anticipate a down year-over-year sales quarter in most geographies, including a nearly 20% drop in Greater China, and a 22% drop in Europe.
BofA Global Research analyst Wamsi Mohan wrote in a note previewing the quarter that “the tone on the call will be crucial to understand the underlying demand trajectory,” given the limits on supplies of iPhones in the December quarter. The availability of phones is now back to normal, Mohan said, concluding that “demand could be softer than expected” in the first half of calendar 2023..
Mohan, who has a Neutral rating and $153 target price on Apple shares, said that while consensus estimates for Apple’s results have been drifting lower, “we see more downside.”
Cowen analyst Krish Sankar was downbeat at well, saying in a preview of the results that while supply-chain issues have been mostly resolved, Apple is entering “a period of slower demand due to macro factors.” He remains a long-term bull on the stock, rating it at Outperform with a target of $200 for the price.
Apple shares were up almost 12% so far this year as of the close of trading on Wednesday.
Also Read: Apple Stock Typically Gains After Earnings. That Could Change This Time
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