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Apple (AAPL) is releasing earnings today and it’s one of the most anticipated reports of the season. Can the company curb its iPhone sales decline, and how will they approach the smartphone maturing industry moving forward?
Apple (AAPL) stock rose again on Monday, up 0.93% ahead of its earnings release today. The stock is up 21.3% since June 3 but it can be seen that recent positive developments on the US-China trade war front have threatened to hurt Apple’s business.
Apple stock had been pretty volatile through the last ten months because of worries about growth – especially considering its core iPhone business. The company’s revenue growth over the last two quarters has been negative.
The company’s iPhone business had its problems as lengthening smartphone upgrade period and customers being upset with high iPhone prices.
Apple has hit some recent headwinds, including the trade war with China, declining iPhone sales and a lack of enthusiasm for its upcoming streaming service. The company’s Chinese sales have been shrinking due to hard competition from local vendors offering much cheaper smartphones.
Also, a few days ago, President Trump said that Apple would not be granted tariff waivers on Mac Pro parts made in China. He also added that he expects Apple to announce it will open a manufacturing plant in Texas. He said:
“Well I want Apple to build their plants in the United States. I don’t want them to build them in China. So when I heard they’re going to build it in China, I said ‘It’s ok, you can build in China, but when you send your product into the United States, we’re gonna tariff you.’ But we’ll work it out.
A man I have a lot of liking for and respect is Tim Cook, and we’ll work it out. I think they’re going to announce they’re going to build a plant in Texas. And if they do that, I’m starting to get very happy.”
Apple will not be given Tariff waiver, or relief, for Mac Pro parts that are made in China. Make them in the USA, no Tariffs!
— Donald J. Trump (@realDonaldTrump) July 26, 2019
The same Tim Cook may today face a number of questions. Investors will be for sure interested in more than the quarter’s financial performance. One of the question could be about iPhone returning to growth. The thing is, analysts expect Apple to return to top-line growth in fiscal Q3. But growth is expected to be only slight.
Another question could be on increasing sales of wearables products. Here is a somewhat better situation regarding the fact that the segment saw revenue rise 30% year over year in fiscal Q2. But during the company’s second-quarter earnings call, management specifically said sales of its wearables products, or AirPods, Apple Watch, and Beats-branded products, increased nearly 50% year over year.
Analysts are also warning investors to look for an update on how Apple News+ is performing and on the planned timelines for the company’s other three new services.
A survey of 35 analysts reveals an earnings per share (EPS) estimate of $2.10. This figure is a 10.3% decrease from the previous quarter’s EPS of $2.34. The survey also predicts a revenue estimate of $53.39 billion, which is slightly lower than last year’s top line of $53.43 billion for the same fiscal quarter.
Be it as it may, many analysts have adopted a bearish attitude when it comes to the company. Neil Cybart from Above Avalon said that FYQ3 is “historically Apple’s weakest quarter for iPhone sales.” He said that iPhone revenue will be $25.3 billion, that represents a 14% nosedive from the same quarter last year.
However, Apple stock prices may rise if the company’s earnings report is even slightly better than expected. If the company can beat expectations and raise its guidance for the fiscal fourth quarter, this could give AAPL stock the very nice boost.