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Apple Earnings: A downfall is ahead, but a cushion will soften the blow


MongiIG

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Hebe Chen | Market Analyst, Melbourne | Publication date: Monday 01 May 2023 04:41

Apple Earnings Date

Apple will report its March quarter earnings on May 4th 2023 after the US markets close. The report will be for the calendar quarter ending Mar 2023, or Q2 2023 based on the company’s fiscal calendar.

Apple Earnings Expectation

Apple's Q2 2023 earnings are anticipated to report a decline of 5% to 6% in both revenues and EPS.

The consensus EPS forecast for the quarter is $1.44, representing a decline of 6% from the same quarter last year ($1.52)

The projected revenue will be $92.84B, substantially down from $117.15B reported in the last quarter and 5% less than the same period in 2022 ($97.28B).

Apple Earnings Key Watch

  • Apple’s product line

 

Apple missed its earnings versus consensus expectations in the previous quarter, the Q1 2023. Its first earnings missed in almost seven years. Unfortunately, the winter season seems far from over.

In the previous quarterly report, Apple's Mac revenue tumbled by 28.66% from $9.63 billion to $7.74 billion. For the upcoming reported quarter, the downtrend is projected to accelerate after Apple reported a significant 40% decrease in Mac shipments in the first calendar quarter of 2023, from 6.9 million in Q1 2022 to 4.1 million in Q1 2023.

The result in its Smartphone segment is slightly better but not too promising. The expectation is for Apple to post a revenue decline of -8% in fiscal Q1 versus a decline of 5.49% in the last report.

According to research conducted by Canalys, global Smartphone shipments shrank by 13% in Q1 2023, but Apple's market share increased to 21% from 18%, offsetting part of the decline.

The only sector that may welcome some positive numbers is its tablet segment. In the last quarter, iPad revenue surprisingly rose by 29.66% year-over-year, reaching $9.4 billion, beating the estimated $7.76 billion by 20%. The main driver behind this growth, the rebounding demand from China, is likely to continue into the March quarter.

SmartphoneMarketshare.jpgSource: Canalys
  • Apple’s service line

Another silver lining for Apple is its services segment, which saw a 6.4% year-over-year increase in revenue in the prior quarter and accounted for 17.7% of total sales, up from 15% the previous year. This segment is expected to provide Apple with another layer of "polish" in the long term, thanks to its higher margins generated by the recurring revenue model.

  • Apple’s Immigration Plan

A potential resurgence in Chinese sales, after COVID-19 restrictions fully ease and workers return to offices, in the first 90 days of this year may help to offset the downtrend in other areas. After all, the Greater China market represents one-fifth of the company's total revenues.

But Apple is looking beyond that.

In the to-be-unveiled report, India will be classed as an individual sales region for the first time under the “Net sales by reportable segment”. In the year leading up to March, India generated almost $6 billion in revenue for Apple, an eye-widening 50% year-over-year growth.

Apple not only focuses on sales but also determines to relocate its manufacturing line out of China, where the company has resided for decades.

According to JPMorgan Chase, by 2025, one out of four iPhones will be made outside of China. Thailand will become the new home to MacBook, while AirPods earphones will be made in Vietnam.

As Apple puts down roots in new Asian markets, whether or not the new soil will bring forth new blossoms, it will be an interesting sight to witness.

Apple Stock price Technical Analysis

Turning to Apple’s share prices action, after surging by nearly 30% this year, Apple’s stock price is now approaching a seven-month-high as well as the unclosed gap area between $169 and $171. This area used to trigger a 26% downfall from last August to early January.

The possibility of a bullish breakout should be supported by a positive earnings report, in which case we could see a rally toward $172 until meeting with the upper boundary of the ascending trajectory.

Conversely, if the report fails to please its shareholders, a pullback should bring the initial support at $165 in view. Any further downtrend from this level could lead to an aggressive challenge to the long term trendline from January this year and spark a bearish reversal.

Applechart.jpg
IGsentiment0428.jpg*IG Sentiment on April 28th

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