Apple has a chance to give investors another reason to keep Apple's uptrend going when it reports profits after the close on Tuesday. Apple shares rose 15% over the past three months, supported by a massive capital repatriation program announced in April.
Apple will show in its third quarter earnings, which spans the three months through June, whether the iPhones launched last September will continue to have demand or whether the more expensive $ 1,000 iPhone X will be in the weak season After the last year, very important holiday quarters evaporated. In general, Apple's spring quarter is the slowest in terms of both revenue and iPhone sales.
"Our tests show that demand for the iPhone 8 and 8 Plus remains seasonal, while iPhone X inventory has returned to normal and older models continue to perform well in emerging markets," Citi analyst Jim Suva wrote earlier this month.
Wall Street expects Apple to generate $ 52.3 billion in revenue, up 1
But investors will also pay close attention to the comments and details in the report, which could give some indication of where Apple will go, especially this fall, when it comes to the introduction of new iPhones.
Here's what Wall Street is looking for:
With the iPhone accounting for most of Apple's revenue, it's only logical that investors want to know how many iPhones have been delivered and which ones Average price they have been sold for.
Even a small difference in this number can change Apple's profit from a good day to a bad day for the stock.
For example, Morgan Stanley's Katy Huberty expects Apple to deliver 39.8 million iPhones in the June quarter, under consensus estimates of around 41.8 million delivered iPhones.
But more and more investors are seeing Apple's services – the money they sell to subscribers to iPhones – as the main driver of what could make Apple a more valuable product Company as it already is.
"With iPhone's results less late … we expect investors to focus more on service outcomes to see if Apple's installed monetization efforts can drive overall business growth despite declining device revenue." Huberty wrote July 23 note.
Apple defines services as revenue from iCloud, Apple Music, App Store, iTunes and AppleCare, and sometimes Apple comments its growth, especially in the slower quarters.
"Services are an increasingly important part of AAPL's history and a major driver of gross margin," wrote RBC analyst Amit Daryanani recently. "The segment currently accounts for ~ 15% of sales and is well on its way to becoming a $ 50 billion business by 2020."
Huberty is looking for services that will grow 32% year-over-year, which would be a big step.
The Chinese market remains the area where Apple's largest growth can be seen, given the country's growing middle class.
But Apple is also facing intense competition from domestic Android phone manufacturers, as well as regulatory issues in the Middle Kingdom. So far, Cook and his Managing Director from China, Isabel Ge Mahe, have successfully mastered the difficult regulatory landscape.
"China's production data (int 29% in F3Q) indicates Apple's sales growth in China will slow down from 21% in F2Q," said Jeffery Kvaal of Nomura.
The upcoming cycle
Often, Apple's fourth-quarter forecast will include some sales of Apple's newest phone, which are usually announced in September and go on sale shortly thereafter.
One week of sales, however, is usually not enough to know if the new product cycle will be a success or not. This has not stopped analysts from speculating that if Apple's leadership is strong, it could be an indication that the company is expecting a big iPhone launch.
"While all eyes are on Apple's FQ4 guidance, we note that the fourth quarter 2010 sales forecast was not necessarily a helpful indicator of the strength of the upcoming cycle," wrote Bernstein analyst Toni Sacconaghi ,
Apple's Passion Projects
Apple is working on several new technologies that could open up huge new markets: self-driving cars, augmented reality and health and medicine.
All these "special projects" and "technological investigations" are secret. But sometimes Apple officials give comments during a merit call, suggesting that they can see them as big projects and lead to expectations for increased revenue in the future.
"In our opinion, the revenue contribution can be substantial, even if Apple does not introduce dedicated AR hardware," wrote Bank of America analyst Merrill Lynch, Wamsi Mohan, in a note. "In particular, we estimate that by the end of fiscal 2020, AR will be able to add $ 1 billion in revenue through App Store downloads alone."
Apple has made data protection an important marketing and engineering priority for the company, and it began to pay off this year when Facebook came under fire, like Cambridge Analytica to access people's data.
CEO Tim Cook has even made a few barely veiled shots on Facebook.
So some analysts, like D.A. Davidston analyst Tom Forte looks for "management's comments on the importance of data protection and its efforts to address this in the updated versions of its operating systems."
The Trade War
Reuters reported earlier this month that Apple's Apple Watch may be affected by the rates proposed by the Trump administration.
This could lead to a price increase of the Watch or to a decrease of the margins of Apple.
Analysts will watch as the Apple leadership comments on how the smoldering trade war could affect Apple products.
"If any additional tariffs were incurred, we believe Apple would pass those costs on to consumers, and our view is that a price increase is not a positive demand," Citis Suva wrote.
"We also note that the iPhone for 818 goods is not included in the July 2018 tariff list," he continued.
How Siri fits into the company
Earlier this month, Apple announced that it had consolidated its Siri division under one roof: John Giannandrea, whom the iPhone giant hired by Google earlier this year.
This could signal a stronger emphasis on Siri and Artificial Intelligence in the enterprise.
Comment by Cook or CFO Luca Maestri could clarify the reasons and hopes for the change of staff.
"While we still see Apple catching up with Amazon's Alexa and Google's digital assistant, we're encouraging that John Giannandrea (Google's former Search and AI chief) reinforced Siri in April 2018," Forte , the Davidson analyst, wrote.
Every sign that people hang on their iPhones for longer
One case for Apple is that people replace their iPhones less frequently as the technology matures. The closer the replacement rates approach the three instead of two years, the stronger the case becomes.
"iPhone replacement rates have normalized over the past few years in the 2.5-year range after being only 2.2 years old in the iPhone 6 cycle," wrote Tim Long, an analyst at BMO Capital Markets. "We believe there may be more extensions if the new product cycle is unconvincing."