[Trade Feed] Apple's AI-Powered Ascent: Why the Tech Titan is Poised for Another Earnings Surprise

$苹果(AAPL)$ reported its fiscal third-quarter results for 2024, with revenue and earnings both exceeding expectations.

Here are the reviews by @jace0777 .

Apple's earnings are set to drop on August 1st, with analysts predicting $84.39 billion in revenue, a 3.1% increase from last year, and a net income of $20.64 billion or $1.34 per share. The big question: can Apple beat forecasts again like it did in May? Looking ahead, will AI features drive consumers to upgrade their devices and boost Apple's potential even further? Stay tuned—I think a positive case is in order.

...Tech Rally and Economic Optimism

Wall Street's recent tech-fueled fireworks show on July 31 has everyone buzzing. The S&P 500 leaped 1.6%, and the Nasdaq skyrocketed 2.6%, both clocking their best days since February. Even the Dow managed a respectable 0.2% climb. This surge in investor enthusiasm is rooted in the strong belief that the Federal Reserve will finally deliver a much-anticipated interest rate cut in September. Lower rates typically light a fire under growth-oriented assets like tech stocks, and Apple is perfectly poised to ride this wave. With its stellar track record and robust portfolio, Apple stands ready to capitalize on the anticipated economic easing.

Robust Services Portfolio

While Apple's iPhone may be the star of the show, the real unsung hero is the Services portfolio. Think cloud services, the App Store, Apple Music, AppleCare, Apple Pay, and licensing—it’s all in there, and it’s a goldmine. This segment has become a significant revenue driver, contributing a hefty 26.3% to Apple’s sales in the second quarter of fiscal 2024. With over a billion paid subscribers, Apple’s Services business is a powerhouse. The growing popularity of Apple TV+, Apple Music, Apple Arcade, Apple News+, and Apple Card only adds more fuel to the fire. This steady stream of income is not just reliable; it's growing like a well-watered plant.

Strong Earnings Growth

Apple’s expected earnings growth rate of 7.8% for this year is nothing to sneeze at. And guess what? The estimates have been ticking upwards, improving by 0.5% over the last 60 days. Apple’s ability to keep pushing the envelope and growing its earnings—even when the competition is fierce—makes it a solid choice for any savvy investor.

Expanding Market Share in PCs

Apple isn't just resting on its iPhone laurels; it's making waves in the PC world too. According to IDC, Apple shipped 5.7 million Macs in the latest quarter, snagging an 8.8% market share, up from 7.5% last year. Gartner's numbers paint an even rosier picture, with a 13.1% increase in Apple’s shipments. Compared to competitors like Acer, Lenovo, and HP, Apple is the belle of the PC ball.

Expected Growth in iPad and Mac Sales

Apple’s iPad is set to steal the spotlight with an expected 19% year-over-year revenue growth in the fiscal third quarter, translating to net sales of $6.88 billion. Macs aren’t far behind, with anticipated net sales of $6.92 billion, marking a 1.2% growth. Whether it's an iPad or a Mac, consumers just can’t seem to get enough of Apple’s hardware.

Steady Services Growth to Boost Revenue

Let’s not forget Apple’s Services business, which is on a roll. The increasing user base of the App Store, alongside the rising viewership of Apple TV+, is a testament to this segment's momentum. Apple Music, Apple Arcade, Apple News+, and Apple Card are also making significant strides. For the fiscal third quarter, Services net sales are estimated at a robust $24 billion, suggesting a 13.1% year-over-year growth. If you’re looking for a steady revenue stream, Apple’s got you covered.

Positive whales movement

Furthermore, if we analyze the aggregate options premiums for the underlying stock accumulated by the « WHALES » over the past few days, notice how the net premiums at the underlying strike price of $225 had an almost four-fold spike. These are big players « leaking » sentiments about their hypothesis of the stock for upcoming earnings.

Positive customers sentiments

Another good indication of general sentiments for the stock is to track the options dealers deltas for the various strike prices. Notice how we are seeing positive (ie green) sentiments at strike prices between 222.5-227.5. Another beautiful confluence of factors to suggest a potential positive movement for AAPL at earnings!

I think Apple is making bold moves in AI with "Apple Intelligence," a suite of features poised to revolutionize user experiences across iPhones, iPads, and Macs. The game-changing elements include:

- Advanced Siri Capabilities: Siri will now offer enhanced language understanding, typing options, and integration with ChatGPT for more complex queries.

- AI Writing Tools: Features like AI-assisted writing, text summarization, and content generation will streamline productivity.

- Visual Expression: Tools such as personalized image creation, Genmoji, and Image Wand for transforming sketches will redefine visual creativity.

- Smart Notification Management: Prioritizing crucial notifications and summarizing web pages and voice notes will keep users efficiently informed.

These innovations are set to roll out with iOS 18 updates later in 2024, and these position Apple at the forefront of AI integration in consumer tech, especially amongst its fans.

Personally, I’m not so sanguine about Apple’s prospects in China. Apple's AI ambitions hit a wall in China, grappling with strict regulations and fierce competition from local brands. Even as Apple globally rolls out advanced Siri capabilities and cutting-edge AI tools, they're keeping mum about their AI game plan for China. Furthermore, the country's tough stance on AI and data privacy also makes it tricky to deploy these technologies.

Quite unsurprisingly, Apple's market share in China has taken a hit, with local players like Huawei swiftly integrating AI into their devices. While Apple is exploring partnerships and strategies to overcome these hurdles, the road ahead remains tangled and uncertain. I won’t hold my breath.

All in all, let’s hold on to our seats tight and let the show begin! 😁

Thank @jace0777 for the fantastic sharing! If you're eager to know about his latest live trading actions, make sure to subscribe to his real-time updates! (Click here to view>>)

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