What matters most for AAPL shares next week

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in AAPL Investors edited January 23

Apple's latest installment of quarterly earnings is on January 30 after market close, and there are five key points that Apple needs to make to satisfy investors.

Man in a dark shirt waves with a financial growth chart and various U.S. dollar bills in the background.
Apple CEO Tim Cook



Morgan Stanley has proven to be one of the more accurate and reasonable firms that cover Apple. In a new note released on Friday by the firm, analyst Erik Woodring notes that the earnings setup feels very similar to a year ago. Like a year ago, he is expecting a street beat, but a lower than expected second quarter revenue predictions.

Specifically, the firm remains bullish on its overweight rating and maintained $273 price target. Woodring expects revenue of $124.0 billion, and $2.31 earnings per share. This all implies a 3.7% revenue growth -- which is roughly in line with what Wall Street expects as a whole.

The note does cite some uncertainty about short-term iPhone sales. It points to the iPhone SE 4 launch in March, iOS 18.4 in April, and an uncertain timing for a partnership for AI in China as catalysts for the next quarter.

In the note, though, Woodring details what he wants to see, and what should matter the most to investors on Thursday, January 30 in the longer-term.

Apple Intelligence impacts on iPhone demand



The rollout of Apple Intelligence has been contentious. Apple heavily promoted the feature in the September debut of the iPhone 16 lineup, and is still trickling out features -- and will be for some time to come.

So, the question of how much Apple Intelligence influences iPhone sales is an open one, with an enormous number of variables. Apple will likely make some kind of commentary about Apple Intelligence, but will shy away from specifics on demand impact, like it always does.

Apple will probably not update the schedule for wider global distribution of Apple Intelligence, particularly in China. However, we're certain that analysts will try to get details on this in the post-earnings question and answer session.

It's not clear where Apple stands on signing a deal with Chinese providers for Apple Intelligence, though. The earnings report is likely not going to be the venue where Apple announces that rollout, or the local companies it is required to partner with in China, as that would merit a spotlight all its own not hidden under financial results.

China iPhone demand



Apple has been clear for over a decade about the importance of China not just as a manufacturing partner, but also as a market for iPhones. Apple's fortunes in the country have waxed and waned, depending on a number of factors, not the least of which are geopolitical issues and Chinese consumer sentiment about US companies.

And, Apple is generally clear about how it's doing in the region. For instance, in the conclusion to Apple's 2024 fiscal year, Apple said that reports of poor demand in China were overblown, with the company seeing great successes in the region prior to the iPhone 16 launch.

Line graph showing fluctuating quarterly revenue from Greater China between 2016 and 2024, with peaks around $25,000 million and lows near $10,000 million.
Quarterly revenue from Greater China



Apple will certainly comment on demand in China, if not in the leading remarks, then certainly in the question and answer session. There have been recent tales of doom and gloom for Apple demand in the country, that historically don't seem to be based on much more than rumor.

Apple hasn't been shy on offering discounts in China for holidays and special occasions to drive demand. The Chinese New Year is the day before the earnings call on January 29 with celebrations extending to February 4 -- and sometimes longer.

Services cost and Apple's desire to raise prices



Apple's services revenues are a bulwark against the fluctuations in hardware sales as the year progresses.

Woodring notes that Netflix has just increased its rates, in what appears to be an annual tradition for them. Apple has generally not followed the same annual increase path, with its services only seeing smaller increases over the last few years.

A price hike in Apple Services would lead to increased revenue, which Woodring is hoping to see.

As part of Morgan Stanley's estimates for services earnings, Woodring is also hoping for some clarity on Apple's installed user base. Apple hasn't reported this figure with any granularity for years, so it's not precisely clear what Woodring is looking for.

The predictions made on Thursday assume an active product user base of 2.3 billion devices, implying that the iPhone replacement cycle is at about 4.6 years.

If this is correct, there is a "a record base of eligible iPhone upgraders (we estimate 700M+) that serve as a critical cohort for driving iPhone upgrades in FY26," according to Woodring.

And with that upgrade base, would come increased services revenue, cost hikes or no.

Capital expenditure spending intentions



Apple isn't always transparent how they allocate capital expenditure. Apple does have several giant initiatives on the fire, including a campus in Cary, North Carolina; and continued expansion in Austin, Texas.

Of note, Apple's research and development measured over a decade shows a fairly linear increase, with some hiccups here or there. Minus an outlier in the beginning of 2023, there are few spikes to indicate that a major new project is underway.

Line graph showing Apple's quarterly research and development costs increasing steadily from 2016 Q4 to 2024 Q4, with slight fluctuations.
Apple's research and development budget since 2016 through September 2024



Apple will likely not disclose any new initiatives for capex during the call. It almost never does.

Kevan Parekh's debut in the earnings presentation



Also, the January 30 earnings call marks Kevan Parekh's first public earnings call. Apple wouldn't have selected him if he was going to be radically different than Luca Maestri, so large changes in presentation aren't expected.

However, how details are covered may vary. Focuses will likely be different, and how he responds to analysts' questions will be interesting to witness.



Read on AppleInsider

Comments

  • Reply 1 of 13
    I believe that Apple would have a lot to gain if they buy TikTok, it could attach to their the appleTv app that would be present in much more divices then just smartphones, it would have a much stronger, more diversified application and could compete directly with Youtube.

    In addition to being able to use the company's AI that is excellent at the video level and also with that being able to enter the Chinese market.

    I don't someone agrees or if that makes sense?
    ssfe11ronngwmacsconosciutodanoxBart Y
     3Likes 3Dislikes 0Informatives
  • Reply 2 of 13
    ssfe11ssfe11 Posts: 115member
    Just like with everything concerning Wall Street some things just take time. Wall Street wants it right now! Apple Intelligence is not going to all of a sudden get millions to rush out knock each other over and upgrade iPhones lol. Thats what Wall Street expects and if it doesn’t happen then “oh no they’re not knocking each other over! sell! something’s wrong!” Lol. It’s a gradual process that will happen but take some time. Like Buffet says you can’t get 9 women pregnant and get a baby in a month. Once again patience is paramount and Wall Street has zero patience. 
    edited January 23
    jas99Bart Y
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  • Reply 3 of 13
    Donald Trump has declared in an interview with Fox News that he "doesn't care" about the economy so that may cause some problems down the road. 
    mmatzjas99sconosciutomattinozBart Y
     4Likes 1Dislike 0Informatives
  • Reply 4 of 13
    If you look back at the same time last year,  Erik Woodring forecast a significant upgrade cycle due to AI features in the upcoming iPhone 16.  I know, because I ridiculed him and other analysts over it at the time.  Of course the anticipated AI-driven "super upgrade cycle" didn't happen and now, a year later, we're still waiting for the more significant promised AI features to materialize....as far as I can tell, it doesn't look like there  won't be a "must have" AI feature  even by the time the iPhone 17 comes around.
    ssfe11sconosciutoBart Y
     1Like 2Dislikes 0Informatives
  • Reply 5 of 13
    JohnyTuga said:
    I believe that Apple would have a lot to gain if they buy TikTok, it could attach to their the appleTv app that would be present in much more divices then just smartphones, it would have a much stronger, more diversified application and could compete directly with Youtube.

    In addition to being able to use the company's AI that is excellent at the video level and also with that being able to enter the Chinese market.

    I don't someone agrees or if that makes sense?
    Apple buying Tiktok would be the weirdest thing ever, as it in no way aligns with their values and priorities at all.
    muthuk_vanalingamsconosciuto
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  • Reply 6 of 13
    Earnings will be the same as it has the past few years.  Narrow beat or narrow miss.  No new innovation, no triggers for future growth.  I continue to slowly divest for greener and growing pastures.  
    ssfe11jas99
     0Likes 2Dislikes 0Informatives
  • Reply 7 of 13
    JohnyTuga said:
    I believe that Apple would have a lot to gain if they buy TikTok
    Apple wont touch social media or user generated content in general with a ten foot pole.

    You have to go ALL the way back to 1994's short lived eWorld for an example.

    Even Apple Maps business reviews are outsourced to Yelp.

    Social media companies have armies of people making sure you don't see cats in blenders and human decap tiations and even worse

    Its not in Apple's DNA
    jas99sconosciutoBart Y
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  • Reply 8 of 13
    gwmacgwmac Posts: 1,826member
    If memory serves regardless of how Apple performs their stock value goes down on these reports with a few exceptions. However, my apple share have taken a bruising in January. I am down over $400,000 just this month so I am hoping that it can at least stabilize on some good or expected news.
     0Likes 0Dislikes 0Informatives
  • Reply 9 of 13
    JohnyTuga said:
    I believe that Apple would have a lot to gain if they buy TikTok, it could attach to their the appleTv app that would be present in much more divices then just smartphones, it would have a much stronger, more diversified application and could compete directly with Youtube.

    In addition to being able to use the company's AI that is excellent at the video level and also with that being able to enter the Chinese market.

    I don't someone agrees or if that makes sense?
    It is about as nonsensical and ignorant of Apple’s track record in acquisitions as when people thought Apple should buy Peleton or Tesla.
     0Likes 0Dislikes 0Informatives
  • Reply 10 of 13
    gwmac said:
    If memory serves regardless of how Apple performs their stock value goes down on these reports with a few exceptions. However, my apple share have taken a bruising in January. I am down over $400,000 just this month so I am hoping that it can at least stabilize on some good or expected news.
    You’re not down anything until you sell at a lower price than when you bought.

    Short term holders of AAPL are buying or selling on rumors and gossip in the runup to 1/30. If you are looking for a quick hit, hold tight I guess. If your timeframe is anything longer, pay more attention to the period from about a week after earnings to 9 wks post-earnings, it’s more reflective of market sentiment.
    edited January 24
    Bart Ymuthuk_vanalingam
     2Likes 0Dislikes 0Informatives
  • Reply 11 of 13
    danoxdanox Posts: 3,510member
    JohnyTuga said:
    I believe that Apple would have a lot to gain if they buy TikTok, it could attach to their the appleTv app that would be present in much more divices then just smartphones, it would have a much stronger, more diversified application and could compete directly with Youtube.

    In addition to being able to use the company's AI that is excellent at the video level and also with that being able to enter the Chinese market.

    I don't someone agrees or if that makes sense?

    Apple definitely doesn’t need to buy TikTok or any other social media company it would be a waste of time and money, Apple already gets enough of that they do it too from Google, Meta, Microsoft and the public when any of those companies go off the rails.

    Apple should be doing what they’ve done in the past constant iteration on Apple OS, Apple Silicon combined with continuous development of new Apple devices going into the future.
    edited January 24
    Bart Y
     1Like 0Dislikes 0Informatives
  • Reply 12 of 13
    gwmacgwmac Posts: 1,826member
    gwmac said:
    If memory serves regardless of how Apple performs their stock value goes down on these reports with a few exceptions. However, my apple share have taken a bruising in January. I am down over $400,000 just this month so I am hoping that it can at least stabilize on some good or expected news.
    You’re not down anything until you sell at a lower price than when you bought.

    Short term holders of AAPL are buying or selling on rumors and gossip in the runup to 1/30. If you are looking for a quick hit, hold tight I guess. If your timeframe is anything longer, pay more attention to the period from about a week after earnings to 9 wks post-earnings, it’s more reflective of market sentiment.
    Oh I Know, but it still hurts to see it drop so much that fast. I’ve been holding Apple shares since 1989
     0Likes 0Dislikes 0Informatives
  • Reply 13 of 13
    danoxdanox Posts: 3,510member
    gwmac said:
    gwmac said:
    If memory serves regardless of how Apple performs their stock value goes down on these reports with a few exceptions. However, my apple share have taken a bruising in January. I am down over $400,000 just this month so I am hoping that it can at least stabilize on some good or expected news.
    You’re not down anything until you sell at a lower price than when you bought.

    Short term holders of AAPL are buying or selling on rumors and gossip in the runup to 1/30. If you are looking for a quick hit, hold tight I guess. If your timeframe is anything longer, pay more attention to the period from about a week after earnings to 9 wks post-earnings, it’s more reflective of market sentiment.
    Oh I Know, but it still hurts to see it drop so much that fast. I’ve been holding Apple shares since 1989
    Then you’re an old veteran you’ve been through all the ups and downs in recent times, like clockwork all the negative Apple is done in China come out at about this time every year over the last 10 years without fail. Might take away over the years since investing in the stock market is the fact that an awful lot of people (investors) don’t really pay attention to what Apple actually does not really in real tech detail particularly in comparison to their competition . The analysts seem to just gloss over the surface for example, Intel is in real serious trouble (Kodak, Xerox level trouble).
    Bart Y
     1Like 0Dislikes 0Informatives
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