What to expect from Apple's holiday quarter results on Tuesday

Posted:
in AAPL Investors edited January 29
Anxiety is mounting over Apple's December-quarter financial results, which will be officially revealed on Tuesday following a $5 billion-plus revenue downgrade to $84 billion earlier this month. Here's what some analysts are predicting.

Worried stock broker

Morgan Stanley

Morgan Stanley's Katy Huberty is anticipating $52.2 billion in iPhone revenue, based on 62.3 million units and an average sales price (ASP) of $842. Services revenue is seen slotting in at $10.8 billion. Gross profit margin is forecast at 38 percent, and earnings per share (EPS) at $4.17.

"March quarter guidance will provide a base for forecasts during the remainder of the year, and with the stock close to where it was ahead of the pre-announcement, Apple likely needs to deliver a 'better than feared' revenue outlook for shares to recover further in the very near-term," she commented.

The biggest question is said to be what caused a deceleration in services revenue, up approximately 19 percent year-over-year versus 25 percent in the September quarter. Huberty suggests this is a temporary issue caused by fewer AppleCare purchases as well as various legal settlements, and the interruption of gaming licenses in China -- Chinese game spending may account for as much as 25 percent of App Store revenue, and 9 percent of overall services flow.

Now is an opportune time to invest, Huberty concluded, given upcoming service launches like video streaming, and the fact that share prices are already accounting for Apple's downgrade.

Macquarie Research

Macquarie stated only that it's maintaining a "neutral" rating on Apple stock, citing worries that the company's highest-profit services -- said to be the App Store, licensing, and AppleCare -- will slow down in 2019. Apple takes a 30 percent cut from most App Store transactions, lowering that to 15 percent only in the case of in-app subscriptions lasting a year or longer.

JPMorgan

The firm's research arm gives Apple an "overweight" rating, with a $228 stock target. It's predicting $4.20 in EPS for the December quarter, above a $4.17 Wall Street consensus, and suggests that any services slowdown will not only be temporary, but that Apple will report a high profit margin on the segment that could boost investor confidence. It drew attention to the fact that a growing percentage of transactions come from subscriptions, making for "sticky" income.

A concern in that area however is whether more Chinese may leave the iOS ecosystem, given the App Store's dependence on that market.

Other December-quarter estimates include $31.994 billion in gross profit, and net income of $19.957 billion.

TF Industries

Looking strictly past the December quarter, TF Industries analyst Ming-Chi Kuo believes iPhone sales are likely to drop 29 percent year-over-year in the March quarter to 36-38 million, and see a 15 percent decline to between $34 million and $37 million in the June period. While Apple's trade-in programs have fueled demand outside of China, interest in new models within China and "emerging" markets markets has been lower than expected, he said.

For 2019 as a whole Kuo is sticking to an estimate of 188 million to 192 million units, significantly above the consensus view of 180 million. The analyst expects this fall's iPhone models to keep 2H19 units flat against 2018, thanks to trade-in programs, healthy replacement demand, and growing European marketshare.

AllianceBernstein

Toni Sacconaghi is offering a "market-perform" rating and a $160 price target. Comparable to other analysts, he's predicting a mid-60s percentage in services gross margin, but with the caveat that he doesn't see it fueling share purchases.

He worries also that the company may be sitting on 4 to 5 million or more units of iPhone inventory, which combined with a "material drawdown" of 2 million or more units in the March quarter could further damage Apple stock. Apple probably won't disclose any inventory data on Tuesday, he noted.

UBS

Timothy Arcuri's estimates are among some of the more pessimistic, calling for $4.14 in EPS and $52 billion in iPhone revenue on 64 million units. That rates against Street consensus of $52.9 billion and 68 million. Likewise, gross profit margin for services is seen in the low 60s percentages.

For the March quarter Arcuri is calling for $56.2 billion in total revenue, $2.43 EPS, and 41.5 million iPhone shipments, the latter below a consensus 45 million. ASP could come in at $711 "due to [the] need for channel price adjustments and FX," he wrote. Services revenue is modeled at $46.9 million, with gross margin at 61-62 percent.

Apple executives will have address fears about App Store revenue, given Netflix's decision to abandon in-app subscriptions, he remarked.

The UBS stock price target is $180.

Goldman Sachs

Assigning a neutral rating, Goldman Sachs claims that demand decline in China is slowing, but that Apple is also "losing share in Europe in the midst of a more tepid demand environment there." Apple promo activity is reportedly "higher than normal" as a result, though its impact on results is uncertain.

Going into 2019 most of Apple's earnings risks are related to ASP, not unit sales, the firm says. March-quarter revenues are forecast at $58.3 billion, 2 percent below consensus, riding on 42.3 million iPhones.

"More positively, we believe Apple's latest plan to slow hiring could help the company control its opex [operating expenditure] intensity levels," it added.

Bank of America

Bank of America is predicting 65 million iPhone shipments for the December quarter, and 41 million for March. Revenues for the latter timeframe are estimated at $57 billion.

Though Apple is unlikely to break out these numbers on Tuesday, it's thought that Apple grew App Store revenues 18 percent in the last quarter, and 5 percent in China particularly even with sagging iPhone sales.

A neutral rating for AAPL is predicated on a "lack of near-term catalysts" and "expected continued weak iPhone sales," counterbalanced by "large net cash/optionality."

Merrill Lynch

Wamsi Mohan is anticipating $4.17 in EPS, with $52.36 billion in iPhone sales, $6.50 billion from iPads, and $7.09 billion from Macs. He expects a slightly higher gross margin than most analysts, 38.4 percent. The otherwise common prediction is a flat 38 percent.

Piper Jaffray

Michael Olson's numbers include $4.16 in EPS, $52.61 billion in iPhones, $5.78 billion in iPads, and $7.54 billion in Macs.

Canaccord Genuity

Deviating from his peers T. Michael Walkley is expecting $11.5 billion in services revenue, well over the approximately $10.8 billion called for by everyone else. His figures are relatively standard in other respects, with $4.16 in EPS, $52.13 billion in iPhones, $5.5 billion in iPads, and $7.31 billion in Macs.

Loup Ventures

For Gene Munster Apple is predicted to have $4.15 in EPS, $52.16 billion from iPhones, $5.8 billion from iPads, and $7.54 billion from Macs.

BTIG

One of the earliest analysts to chime in after Apple's revenue downgrade, Walter Piecyk is targeting $4.17 in EPS, $52.1 billion in iPhones, $6.6 billion in iPads, and $7.4 billion in Macs.
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Comments

  • Reply 1 of 25
    I am not worried at all. Services are great. People who need larger displays can easily get a $330 iPad instead of a $1100 XS Max.
    All Apple needs right now is a killer $500-600 ARM Mac. That would kill the already slowing laptop market. Hopefully that launches in a few years.
    minisu1980palomine
  • Reply 2 of 25
    imoiimoi Posts: 14member
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
  • Reply 3 of 25
    Haven’t these analysts heard? Apple is at death’s door and they only have enough cash on hand to pay for the funeral.
    StrangeDays
  • Reply 4 of 25
    I am not worried at all. Services are great. People who need larger displays can easily get a $330 iPad instead of a $1100 XS Max.
    All Apple needs right now is a killer $500-600 ARM Mac. That would kill the already slowing laptop market. Hopefully that launches in a few years.
    The economic opportunity provide by an ARM Mac can’t be overstated. If they maintain margins and pass the cost reduction down to customers Apple will be able to address a large portion of the PC/Laptop market. I believe Apple has around 10% of this market currently. Even if you write of 75% of this new market as customer who would never change due to various non price factors, that leaves are huge amount of that leaves 22.5% to sell to at Apple margin levels while the 67.5% continue earning scraps.
    palomine
  • Reply 5 of 25
    imoi said:
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
    Very strange point of view. Sinking ships and management disconnected from reality doesn't build the biggest, most profitable public company in history with the highest consumer satisfaction ratings. Their P/E indicates there is more value to come despite what investors think they know about Apple. But doooom, yes, always doom for Apple...yet, 40+ years they're still here, the only PC guys still standing from then and eating up so much of the profits to boot.
    JFC_PAtmaylkruppmacplusplus
  • Reply 6 of 25
    I'm holding firm with long AAPL primarily due to the dividends. Last year it was up 16%. If they do another one of those I'll be retiring this year, otherwise I'll have to wait another year. I think they are very safe on dividends..and still a decent chance at return. Oh well...we'll see how it goes. Tuesday will be an interesting evening. No matter what happens, I'll probably have a few drinks. :)
  • Reply 7 of 25
    Ben Bajarin tweeted:
    Ben Bajarin (@BenBajarin) 1/28/19, 10:17 AM Apple's December quarter iPhone sales are looking to be off about ~16% down from 77m to about 65/66 million. My talks with investors have moved from the bad quarter to how bad the year may be for iPhone sales. Services/Wearables still where growth hope comes from.
    Ben Bajarin (@BenBajarin) 1/28/19, 10:28 AM I've been reading several reports from Chinese economists on the conditions there and it's not good. There is no overnight fix but understanding how that impacts tech companies is relevant to your market view.
  • Reply 8 of 25
    imoiimoi Posts: 14member
    imoi said:
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
    Very strange point of view. Sinking ships and management disconnected from reality doesn't build the biggest, most profitable public company in history with the highest consumer satisfaction ratings. Their P/E indicates there is more value to come despite what investors think they know about Apple. But doooom, yes, always doom for Apple...yet, 40+ years they're still here, the only PC guys still standing from then and eating up so much of the profits to boot.
    Things change you know. I don't dispute that Apple WAS at a time, not so long ago, the most profitable company with the higher consumer satisfaction ratings. Then they lost more than 35% of their value in 2 months or so. And people buy less and less iPhones and MacBooks because they're much too expensive for what you're getting. And they will lose more if they continue offering gimmicky improved (faceid, emoji, touchbar, no travel keyboards...) iPhones and MacBooks at stupidly excessive high prices while removing features no one asked to remove (audio jack, home button, touch id, usb-a, hdmi, ethernet ports...) But hey, feel free to continue thinking they're the most profitable with the higher consumer satisfaction company in history if that makes you happy, that's what counts, after all. ;)
    avon b7
  • Reply 9 of 25
    imoi said:
    imoi said:
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
    Very strange point of view. Sinking ships and management disconnected from reality doesn't build the biggest, most profitable public company in history with the highest consumer satisfaction ratings. Their P/E indicates there is more value to come despite what investors think they know about Apple. But doooom, yes, always doom for Apple...yet, 40+ years they're still here, the only PC guys still standing from then and eating up so much of the profits to boot.
    Things change you know. 
    Oh, okay.
    imoi said:
    imoi said:
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
    Very strange point of view. Sinking ships and management disconnected from reality doesn't build the biggest, most profitable public company in history with the highest consumer satisfaction ratings. Their P/E indicates there is more value to come despite what investors think they know about Apple. But doooom, yes, always doom for Apple...yet, 40+ years they're still here, the only PC guys still standing from then and eating up so much of the profits to boot.
    I don't dispute that Apple WAS at a time, not so long ago, the most profitable company with the higher consumer satisfaction ratings. Then they lost more than 35% of their value in 2 months or so. 
    You're confusing share price with profit and consumer ratings. The share price was reduced (as were several other tech players over this China recession fear), but that doesn't change Apple's profitability and consumer satisfaction ratings -- two solid signals that counter your claim that they don't know what they're doing, DOOMED, etc.
    imoi said:
    imoi said:
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
    Very strange point of view. Sinking ships and management disconnected from reality doesn't build the biggest, most profitable public company in history with the highest consumer satisfaction ratings. Their P/E indicates there is more value to come despite what investors think they know about Apple. But doooom, yes, always doom for Apple...yet, 40+ years they're still here, the only PC guys still standing from then and eating up so much of the profits to boot.
    And people buy less and less iPhones and MacBooks because they're much too expensive for what you're getting. And they will lose more if they continue offering gimmicky improved (faceid, emoji, touchbar, no travel keyboards...) iPhones and MacBooks at stupidly excessive high prices while removing features no one asked to remove (audio jack, home button, touch id, usb-a, hdmi, ethernet ports...) 
    That's all opinion on your part. As a pro software dev I love having smaller, thinner, *lighter* mobile devices that are easier to bring with me more places. I'm not crying over freaking ethernet ports, LOL. Same with the X and Face ID bringing bigger screen and less shell. 
    imoi said:
    imoi said:
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
    Very strange point of view. Sinking ships and management disconnected from reality doesn't build the biggest, most profitable public company in history with the highest consumer satisfaction ratings. Their P/E indicates there is more value to come despite what investors think they know about Apple. But doooom, yes, always doom for Apple...yet, 40+ years they're still here, the only PC guys still standing from then and eating up so much of the profits to boot.
    But hey, feel free to continue thinking they're the most profitable with the higher consumer satisfaction company in history if that makes you happy, that's what counts, after all.
    Oh, you mean believing in actual facts rather than your unsubstantiated claims of a sinking ship, doom, etc? Yeah no problem.
    edited January 28 shark5150radarthekatfastasleepmacplusplus
  • Reply 10 of 25
    Nvidia reported today and their China results were bad. Stock down 15% right now.
    muthuk_vanalingam
  • Reply 11 of 25
    Warren Buffett is going to be thoroughly disgusted with Apple and I don't blame him one bit.  Two tech stocks in a row and both ending up in the toilet is not a good track record for the Oracle of Omaha.  Apple needs to find a way to get rid of its high beta.  The stock seems to remain volatile, no matter what Apple has tried to do.  Apple may not be a sinking ship, but it valued far lower than even Microsoft.  I'm willing to bet even Facebook is going to outperform Apple in 2019 even after the data breaches.  It's unlikely Apple is going to be able to sell their Services strategy to big investors.  No one seems to trust Tim Cook, so anything positive he has to say about Apple Services will be completely ignored.

    I've given up on seeing any significant, long-lasting share gains from Apple and I'll just have to settle for increased dividends over the next couple of years.  Dividends are the one thing I can count on from Apple as Wall Street can't devalue them as they do Apple.
  • Reply 12 of 25
    I am not worried at all. Services are great. People who need larger displays can easily get a $330 iPad instead of a $1100 XS Max.
    All Apple needs right now is a killer $500-600 ARM Mac. That would kill the already slowing laptop market. Hopefully that launches in a few years.
    The economic opportunity provide by an ARM Mac can’t be overstated. If they maintain margins and pass the cost reduction down to customers Apple will be able to address a large portion of the PC/Laptop market. I believe Apple has around 10% of this market currently. Even if you write of 75% of this new market as customer who would never change due to various non price factors, that leaves are huge amount of that leaves 22.5% to sell to at Apple margin levels while the 67.5% continue earning scraps.
    Apple should design some ARM-based servers and compete with Intel.  I would give Apple an opportunity to get some decent enterprise business.  Those A-series SoCs are quite powerful and energy efficient so I think Apple could have some advantage of offering them to businesses.
  • Reply 13 of 25
    radarthekatradarthekat Posts: 2,926moderator
    Warren Buffett is going to be thoroughly disgusted with Apple and I don't blame him one bit.  Two tech stocks in a row and both ending up in the toilet is not a good track record for the Oracle of Omaha.  Apple needs to find a way to get rid of its high beta.  The stock seems to remain volatile, no matter what Apple has tried to do.  Apple may not be a sinking ship, but it valued far lower than even Microsoft.  I'm willing to bet even Facebook is going to outperform Apple in 2019 even after the data breaches.  It's unlikely Apple is going to be able to sell their Services strategy to big investors.  No one seems to trust Tim Cook, so anything positive he has to say about Apple Services will be completely ignored.

    I've given up on seeing any significant, long-lasting share gains from Apple and I'll just have to settle for increased dividends over the next couple of years.  Dividends are the one thing I can count on from Apple as Wall Street can't devalue them as they do Apple.
    IBM will be just fine.  It’s just taking a few extra quarters versus what folks calculated.

    AAPL will be fine too.  
  • Reply 14 of 25
    imoiimoi Posts: 14member

    Oh, you mean believing in actual facts rather than your unsubstantiated claims of a sinking ship, doom, etc? Yeah no problem.
    Where did I wrote anything about Apple being doomed. This post is about the Apple stock (aapl) next earning report, and the stock, lately, has been like a ship sinking, worst, the captain and his senior officers are thinking everything's fine and maintenaing course, even throwing away life-jackets (SE). Think about it for 2 seconds, would I want to get back in at a lowerprice if I thougt Apple was doomed?
    muthuk_vanalingamavon b7gatorguy
  • Reply 15 of 25
    This rank amateur thinks these professional analysts are way off on their EPS estimates.  I'm looking for something in the $4.35-$4.45 range.  Maybe more if they hit 38.5% margin and $85 billion in revenue.
    edited January 28
  • Reply 16 of 25
    jrljrl Posts: 2member
    Apple, among other unnamed tech companies {if you've been around for awhile, you can figure it out} have been "in play/out of play" for a LONG time...emphasis on LONG. Most of what I just read above, smacks of "Sesame Street" attention spans and inability to take the long term view - which equity investing is all about, IMHO. Yes, things change, ALL THE TIME, but look at the fundamental vision, mission and strategy of the "anti-IBM" vanguard. It hasn't changed. Why? Because it's founded on a fundamental belief that creating usable technology, and now, services, is good. I've not seen the fundamentals of Apple's vision change since the early days in the garage. Strategies and tactics...of course, humans are leading the journey, so yes, they falter at times. Making good profits for profit is not necessarily a bad thing; seeking ONLY profit is. I'm not sure I've seen this, yet. So, what am I doing? I'm quintupling down with a mixture of hope and belief, the Apple will "bob" once again. It's only a game, folks. At the end of the day, it don't mean diddly.
    muthuk_vanalingam
  • Reply 17 of 25
    flydogflydog Posts: 150member
    imoi said:
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
    Someone is disconnected from reality, but it's not Apple.
    MacPro
  • Reply 18 of 25
    k2kwk2kw Posts: 1,610member
    imoi said:
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
    Yes, I think that 2019Q2 will be even worse because its been a very good quarter for Apple in past years because of China.    Now with China turning away from Apple it could look like a bloodbath.

    Listening to NPR last night they of course had as story about Apple in China.   One of the complaints was that Apple doesn't do enough to make their products special in anyway there.   Maybe they need to have a mini-WWDC in China.   So much of Chinese services go through WeChat that Apple isn't the Eco-system that it is in U.S.   

    Wish AppleInsider had a reporter based in China/Hong Kong.    It's both important as a market for Apple and for the Supply Chain.   Rather get real reporting than DED's irrational rants when realty doesn't line up with his theories.
    avon b7muthuk_vanalingam
  • Reply 19 of 25
    MacProMacPro Posts: 17,868member
    k2kw said:
    imoi said:
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
    Yes, I think that 2019Q2 will be even worse because its been a very good quarter for Apple in past years because of China.    Now with China turning away from Apple it could look like a bloodbath.

    Listening to NPR last night they of course had as story about Apple in China.   One of the complaints was that Apple doesn't do enough to make their products special in anyway there.   Maybe they need to have a mini-WWDC in China.   So much of Chinese services go through WeChat that Apple isn't the Eco-system that it is in U.S.   

    Wish AppleInsider had a reporter based in China/Hong Kong.    It's both important as a market for Apple and for the Supply Chain.   Rather get real reporting than DED's irrational rants when realty doesn't line up with his theories.
    I've yet to read an article /editorial by DED that wasn't accurate.
  • Reply 20 of 25
    avon b7avon b7 Posts: 3,179member
    MacPro said:
    k2kw said:
    imoi said:
    Having sold my last AAPL shares at 212$ in november, I've been watching the boat sink since then. I was thinking that I might have an opportunity to buy back at a nice entry level (below 140$) after next earning reports but the current management is so disconnected from reality, plus the global context, I see more downside coming, I'll wait for 110$. Signed Ex AAPL-long
    Yes, I think that 2019Q2 will be even worse because its been a very good quarter for Apple in past years because of China.    Now with China turning away from Apple it could look like a bloodbath.

    Listening to NPR last night they of course had as story about Apple in China.   One of the complaints was that Apple doesn't do enough to make their products special in anyway there.   Maybe they need to have a mini-WWDC in China.   So much of Chinese services go through WeChat that Apple isn't the Eco-system that it is in U.S.   

    Wish AppleInsider had a reporter based in China/Hong Kong.    It's both important as a market for Apple and for the Supply Chain.   Rather get real reporting than DED's irrational rants when realty doesn't line up with his theories.
    I've yet to read an article /editorial by DED that wasn't accurate.
    You don't have to go back very far.

    I think the same day he claimed Apple was doing just fine in China, Apple issued a profit warning - citing a slowdown in China as a major reason.
    muthuk_vanalingamgatorguy
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