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Apple (AAPL) will wrap up the FAANG earnings season when it reports fiscal Q4 2023 earnings today after the closing bell. It’s been a mixed earnings season for the elite group. While it started with a bang as Netflix (NFLX) shattered subscriber estimates, Meta Platforms (META) and Alphabet (GOOG) shares fell after their respective Q3 earnings.
Amazon’s (AMZN) earnings provided some respite, but the tepid guidance somewhat overshadowed an otherwise strong quarter, with the e-commerce giant posting record profits in the September quarter. With a closely watched Fed decision now in the rearview, Apple’s earnings are among the key events to watch in November. Here’s what Wall Street is expecting from Apple’s earnings, plus the key metrics that you should watch in the report.
Apple Q3 Earnings Preview
Wall Street analysts expect Apple to post revenues of $89.3 billion in the September quarter – a YoY fall of around 1%. Notably, Apple’s revenues have fallen YoY for the previous three quarters, so a repeat performance would mark the fourth consecutive quarter where the Cupertino-based company has reported declining revenues.
During their fiscal Q3 earnings call, Apple CFO Luca Maestri said that the company expects its fiscal Q4 revenue performance to be “similar” to Q3, where its sales fell 1% YoY - “assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter.” However, Apple forecast “double-digit” YoY declines in iPad and Mac sales, due to tough comparisons with the year-ago period.
Analysts expect Apple to post per-share earnings of $1.39 in fiscal Q4 – a YoY rise of just about 8%.
What to Watch in Apple’s Fiscal Q4 Earnings
Here’s what I will be watching in Apple’s fiscal Q4 earnings:
1. iPhone Sales: While Apple posted better-than-expected earnings in fiscal Q3, the stock still fell after the earnings release on lower-than-expected iPhone revenues. When Apple reports its fiscal Q4 earnings today, it will be crucial to watch the iPhone sales data.
2. Comments on the Chinese Market: Multiple reports have suggested that sales of Apple products have been tepid in China, and it has lost the top slot to Huawei – which, until recently, was fighting for survival amid strict U.S. sanctions. Counterpoint Research estimates that sales of Apple iPhone 15 in China are 5% lower in the first 17 days of launch when compared with the iPhone 14. Incidentally, amid reports of weak sales in the country, Apple CEO Tim Cook visited China last month – his second trip this year.
3. Revenue Guidance: Apple stopped providing quantitative revenue guidance in 2020, but the company still provides some color and directionality during the earnings call. During Apple’s fiscal Q4 earnings, I would watch the guidance for fiscal Q1 2024, which coincides with the holiday shopping season in the U.S. However, while the December quarter is the strongest seasonally, and analysts expect Apple's sales to show a YoY rise, Amazon’s tepid Q4 sales outlook has raised concerns about holiday shopping this year. Concerns over Apple losing market share in China are not helping matters for the iPhone maker, either.
4. Updates on New Products: Apple recently announced new chips, as well as MacBook Pro laptops and iMac models. The launch comes ahead of an expected recovery in the PC market next year. During the earnings call, Apple might provide some commentary on the medium-term outlook for PC sales. The company might also offer insights into the sales outlook for its Vision Pro headsets, which it expects to start shipping in early 2024.
Apple Stock Forecast: Some Analysts Are Apprehensive Before Earnings
Some Wall Street analysts seem apprehensive about AAPL ahead of the earnings. While Morgan Stanley reiterated the stock at “overweight” and expects the company to post better than expected earnings in fiscal Q4, the firm says it's “more cautious on the December quarter," and listed unfavorable comps, currency headwinds from a strong U.S. dollar, cautious consumer spending, and supply issues related to iPhone 15 as headwinds.
UBS also maintained its “neutral” rating on Apple, and said that channel checks pointed to lower wait times for iPhone 15 Pro - which suggests “mixed” demand for the model.
Overall, Wall Street analysts lean bullishly on Apple, as 17 of the 29 analysts who cover the stock rate it as a Strong Buy, and 3 more as a Moderate Buy, with 9 calling it a Hold. Apple’s mean target price of $204.69 is about 15.6% higher than the current price levels.
Meanwhile, even as I believe that Apple is among the stocks that are almost “hold for life” worthy, it is battling multiple headwinds currently with the growing U.S.-China rivalry not helping matters.
AAPL shares currently trade at a next 12-month price-to-earnings multiple of 27.4x - which looks fully priced to me, leaving little upside for investors in the short term. The company’s fiscal Q4 earnings tonight might not lead to any major rally, unless the iPhone maker can come up with something really compelling – and the probability there does not look particularly high.
On the date of publication, Mohit Oberoi had a position in: AAPL , AMZN , META , GOOG . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
