Apple CEO Tim Cook speaks at an Apple specific event at Apple Park in Cupertino, California on September 7, 2022. – Apple is expected to unveil the new iPhone 14. (Photo by Brittany Hosea-Small / AFP) (Photo by BRITTANY HOSEA-SMALL/AFP via Getty Images)
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Analysts expect Apple to post its first year-over-year revenue decline since 2019’s March quarter when it check up ons earnings on Thursday. There are a few contributing factors.
The company couldn’t build enough of its high-end iPhones when its foremost assembly facility in China was shut down for weeks during Covid lockdowns. Customers in many regions heeded as early as November that Apple couldn’t promise Christmas delivery of a new iPhone.
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Apple gave a rare foretoken to investors that month explaining that production issues would result in lower shipments than “some time ago anticipated.” It was a data point that caused many analysts watching the stock to cut their estimates.
“We believe the pinnacle impact of the disruptions was felt in early to mid November as wait times hit an extreme level (link) as the wait time in the US for the 14 Pro and 14 Pro Max reached 34 days while tarry time in China at the high-end hit 36 days,” UBS analyst David Vogt wrote in January.
Analysts polled by Refinitiv conjecture Apple to report just over $121 billion in revenue in the December quarter, which would be a slight deteriorate from the company’s $123.9 billion from a year ago.
But the problems aren’t Apple-specific. The PC and smartphone markets are slumping as consumers and works digest sales from the pandemic and cut costs to prepare for a possible recession.
The smartphone market saw an 18% decline in shipments in the fourth thirteen weeks, according to IDC, the worst decline ever recorded by the market research firm. The PC market fell 28% in the fourth house, according to the company. But many investors believe that Apple is outperforming its competitors even in a contracting market.
“While the official of consumer demand remains a near-term concern, we believe the underlying drivers of Apple’s model – a growing installed shabby and spend per user – remain intact, and that the strength/stability of Apple’s ecosystem remains undervalued,” Morgan Stanley analyst Erik Woodring set in a note earlier this month.
Here’s what Wall Street is expecting, according to Refinitiv consensus determines:
- Revenue: $121.19 billion
- Earnings per share: $1.94 per share
- iPhone revenue: $68.29 billion
- iPad revenue: $7.76 billion
- Mac revenue: $9.63 billion
- Other products gain: $15.26 billion
- Services revenue: $20.67 billion
Apple’s March quarter guidance
Apple hasn’t given guidance since 2020, citing uncertainty fundamental caused by the pandemic. However, the company usually provides a few data points that can give analysts a sense of how it’s doing.
Investors deficiency to know whether the shortage of iPhone 14 Pro models in the December quarter will drive demand in the March barracks now that supply has improved.
Analysts expect just over $98 billion in sales in the March quarter, according to consensus guesstimates, signifying slight year-over-year growth.
“While we believe it’s well understood that Apple’s March quarter gross income should decline at a less-than-seasonal rate due to the pushout of iPhone demand from the December quarter to the March quarter,” Morgan Stanley’s Woodring noted in a note last week, “the consumer electronics spending backdrop remains challenging, with tablets, PCs and more discretionary effects (i.e. wearables) all facing continued demand headwinds.”
But if consumer confidence erodes in the face of higher interest rates and shrivel up savings around the world, then Apple could suggest to investors that the company’s March quarter see fit be slow.
“While we don’t expect the resumption of detailed guidance typical of Apple earnings prior to Covid, we expect the commentary to be watchful regarding Product demand across the board,” UBS’s Vogt wrote.
If management commentary is soft, investors looking for a dulcet lining might want to look at Apple’s services business, which is profitable and has been growing strongly for years. Despite that, several data points in the fourth quarter, including Apple’s own App Store payouts, suggest a significant slowdown in App Collect growth, although analysts are split on its severity.
The App Store is one of the largest components of services, but it’s only a part of the business, which tabulates online subscriptions, warranties and search licensing fees. Apple shares could push higher if services such as Apple TV+ and Apple Music look in the manner of they’re generating a higher percentage of Apple’s revenue, D.A. Davidson analyst Tom Forte wrote in January.
Services are had to total $20.67 billion in the December quarter, according to Refinitiv estimates, representing a 5.9% growth rate.
Analysts longing also watch to see if the strong dollar continues to hurt Apple, given that so much of its sales are overseas. During the December billet, the British pound, the Canadian dollar and the Japanese yen all weakened compared to the dollar. Apple management previously said the aromatic dollar would be a 10 percentage point drag on sales growth.