Apple Inc (AAPL) shares moved firmly higher Thursday ahead of the tech giant's highly-anticipated December quarter earnings after the closing bell, with investors focused on the impact from last year's supply chain disruptions in China and near-term demand for its iPhones and personal computers.
Apple is expected to post a bottom line of $1.94 per share for its fiscal first quarter, down 7.6% from the same period last year, with revenues in the region of $121.2 billion, although supply chain disruptions that have prevented some of its high-end iPhones making their way to U.S. markets, as well as China's evolving Covid crisis, could dent that figure.
The overall revenue tally will be the first annual decline for Apple in four years and is likely to include a 5% slump in iPhones sales - which hit a record $71.63 billion over the same quarter of last year.
Apple warned on November 6 that Foxconn's 200,000-person factory in Zhengzhou known as 'iPhone City' is "currently operating at significantly reduced capacity" owing to covid restrictions put in place last month by officials in Beijing and warned that it could curtail shipments of its higher-end iPhones heading into the holiday season.
The group's near-term profit and revenues forecasts, then, could prove crucial for investors to discern if demand will remain in place in order to take up sales that were delayed in December.
"Our thesis is that the impact that the Chinese government's COVID-zero policy had on Apple resulted in iPhone sales shifting to the March quarter, rather than being lost," said D.A. Davidson analyst Tom Forte, who carries a 'buy' rating with a $167 price target on the stock.
Forte puts the sales 'shift' at around $5.4 billion, but that figure requires sustained smartphone demand, alongside consistent consumer spending, and both dynamics appear to be on the wane.
Last month, Taiwan Semiconductor Manufacturing, the world's biggest contract chipmaker and key Apple assembler, lowered its capital spending plans for the coming year amid a pullback in global demand.
Apple's leading smartphone rival, Samsung, told investors earlier this week that the global handset market is likely to contract this year, with lower-end phones impacted the most, amid what it described as "high demand uncertainty".
Fading demand for personal computers, meanwhile, could slow sales for other Apple hardware, which benefited from a huge pandemic-era boost linked to work-from-home buying.
Both Intel (INTC) and Advanced Micro Devices (AMD), the biggest U.S. chipmakers focused on the PC sector, have warned on fading demand over the coming months amid a glut in overall supply and a pullback in global consumer spending.
In the U.S., consumer spending is slowing markedly as well, with December retail sales falling 1.1% to a collective $677.1 billion, following a 1% slump in November, even with the boost of lower gasoline prices.
That likely means, according to Wedbush analyst Dan Ives, that investors will be "laser-focused on (CEO Tim) Cook's commentary for the March/June quarters."
"In our opinion Cupertino will likely be more prudent around its guidance for the March quarter which is the smart move with the Street already dialing down growth expectations and much bad news baked into the stock," he added.
Apple may also speak to the ongoing job cuts affecting the tech sector, particularly given the impact that cost-controls had on profit margins at Meta Platforms (META).
Meta unveiled plans last week to slash more than 11,000 people from its global payroll, the biggest reduction in company history, as it grapples with mounting losses in its metaverse project and a pullback in ad spending that continues to hit sales at its flagship Facebook division.
In an interview with CBS Mornings in November, Cook said that while Apple will it will continue to hire, it will make only targeted additions to its estimated global workforce of around 165,000.
"What we're doing as a consequence (to the economic uncertainty) in this period, is we're being very deliberate on our hiring ... that means we're continuing to hire, but not everywhere in the company," Cook said, according to a clip of the interview shared by CBS Mornings.
"We believe strongly in investing for the long term," Cook added "We don't believe you can save your way into prosperity. We believe you invest your way into it."
Apple shares were marked 3% higher in Thursday afternoon trading to change hands at $149.73 each, a move that would extend the stock's one-month gain to around 19.7%.
