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Apple earnings: Where does Apple go from here?



Apple's upcoming earnings report could be the first chapter in an increasingly boring story.

There is less drama than usual to enter the smartphone maker's fiscal report for the first quarter of January 29, when Apple at the beginning of the year warned that revenue would drop significantly less than a previously issued forecast. Apple

AAPL, + 3.31%

also announced in its latest earnings report that it would stop reporting how many iPhones it sells, which has long been a key figure for investors.

Opinion: Apple lives up to Wall Street's fear of massive revenue loss

Apple's outlook for the current quarter is always of interest, but the business is not necessarily forthcoming when discussing big picture trends. The management fully dismissed China in its last earnings call in November, only blaming China for the revenue error as it issued preliminary figures two months later.

The company is clearly trying to shift its history to the fastest growing service segment and away from the more troubled hardware business. Apple hit the loss of the device sales metric as a bit of a trade-off for investors, as the company for the first time will begin reporting gross margin services instead. But true service-oriented companies report numbers such as levels of curvature and unique user counts, things that will almost certainly be absent in Apple's next report.

Even the traditional services say that Apple posts will deserve a watchful eye: As the Wall Street Journal recently noted, a change in revenue execution accounts met Apple's prior announcement of its December revenue turnovers. The new accounting standards combined with limited information at the time of CEO Tim Cook's January 2 letter to shareholders disguised what should have been fear of service revenue for the company in the first quarter.

Opinion: When it goes hard, Apple hides its figures

In order for Apple to get investors back on track, it will probably be necessary to comment on a new product or service who has the potential to transform the course. This can be in the form of hardware ̵

1; as an enlarged reality device – or a fundamental change in its business model, such as a bundled hardware and software subscription that leverages the company's growing investment in original content.

The company does not make such earnings call announcements, but management may drop some hints on future plans under the question and the share of the issue if it feels pressured to make the start of this era of Apple more exciting than expected.

What to Expect

Earnings: Analysts examined by FactSet expects Apple to report $ 4.17 a share in earnings, up from $ 3.89 in the previous period. The FactSet Consensus required earnings of $ 4.66 a share before Apple's warning of results at the beginning of January.

Earnings: Chief Executive Tim Cook said in a letter to investors on January 2 that the company expected to report $ 84 billion in revenue in the December quarter, which is now largely FactSet consensus. Estimate calls to $ 84.6 billion Dollars in turnover. Before earnings alert Apple expects $ 89 billion to $ 93 billion in revenue for the holiday season.

The company's outlook for the current quarter may be the main number of forthcoming reports. "With the inventory close to where it was prior to the pre-notification, Apple is likely to provide a better than feared revenue outlook for stocks to recover in the short term," wrote Morgan Stanley's Katy Huberty, who overweight the stock with a goal price of $ 211. Analysts surveyed by FactSet currently expect $ 59.3 billion on average in the March quarter.

Stock Movement: Apple shares have won after six of its last 10 earnings reports. The stock has fallen 29% over the past three months, including a 10% decline the day after Apple's negative pre-announcement. Dow Jones Industrial Average

DJIA, + 0.75%

of which Apple is a component, is almost flat over a three month period.

Read: Apple's Darkest Day in iPhone Era Triggers Flood of Analyst Price Cuts

Of the 41 analysts surveyed by FactSet covering Apple, 20 purchase ratings and 21 have ratings on stock. The average price target is $ 179.62, 18% above current levels.

What more to look for

The biggest component of Apple's revenue calls will be the management's comments on the challenges of new markets and how the company sees them for the current quarter and beyond. With regard to China, Cook quoted trade tensions, an economic downturn, and financial market uncertainty as reasons why consumers were more reluctant to buy. Investors will have an update on the situation, expected time of recovery and any steps Apple takes to compensate for these external factors.

Bernstein analyst Toni Sacconaghi will seek more information on whether Apple's problems are due to cyclical, structural or nationalist factors.

Managers can also share more details on other emerging markets, including India, Brazil and Turkey, which experienced pressure back in November, partly due to currency transfers.

"China appears to account for half of the iPhone deficit in the first quarter," Sacconaghi wrote, with a market performance and $ 160 target price on shares.

Don't miss out: Tech's answer to Wall Street's doubts will not include a holiday circus

Of course, Wall Street would also like to know about the domestic iPhone demand, although they may not receive much information. Cook told investors at the start of the previous iPhone cycle that iPhone X was then the company's best-selling entity, and it would be worth analyzing its comments in the quarter for any qualitative indicators on how the iPhone XR and iPhone XS Max do.

Canaccord Genuitet Analyst T. Michael Walkley expects the company to deliver a "soft" outlook for the March quarter as Canaccord's consumer surveys suggest "weak" iPhone sales. He considers the store a purchase with a price target of $ 190.

Also related to iPhone demand is the company's battery replacement policy. After customers complained that the company was slowing down older phones, Apple began offering 29 replacement batteries. Now, some on Wall Street are worried that these cheap replacements stopped users from upgrading their devices in the current cycle, and analysts could push for more information about the conference.

"If Apple could normalize battery replacement costs (currently $ 49 against $ 29 initially and $ 79 before launching the program) ahead of the new launch of the phone, we believe this could benefit the new cycle, especially as comps become easier, "wrote RBC Capital Markets analyst Amit Daryanani, who has an outperform rating and $ 185 target price on shares.

From a service perspective, look for comments on the App Store's performance in China, as a government-based freeze on new gaming approvals towards the end of last year was assumed to have a potential impact on app-related expenses.

See more: Apple has its problems, but the App Store is not one of them, says Bernstein

Bernstein's Sacconaghi is not worried about pushback from several important App Store customers around the so-called " called Apple Tax, which gives the smartphone maker a 15% to 30% cut in revenue generated from apps downloaded through the App Store.

NFLX, + 3.48%

and Spotify Technology SA

SPOT, + 1.48%

is among the app operators in "rebellion", but Sacconaghi pointed out that even the highest generating app on the platform accounts for only a small amount of total service revenue. And those pushing back to Apple's app purchase policies remain subject to its existing customer fees.

Following reports of redundancies in Apple's self-propelled entity, analysts may ask for an update on the progress and scale of Apple's automotive industry.

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