Today, technology giant Apple Inc, $AAPL is set to report fiscal first-quarter results. A lot of analysts are giving company’s surprising warning, while others are still worrying about the US-China trading war and its influence on the stock. So let’s take a brief look at the key factors and try to understand what results they might lead to.
The Wall Street Analysts predict EPS of $4.17 on revenues of $84.04 billion. That would represent almost 5% decline in sales while increasing EPS of more than 7%. The main reasons such a difference are the company’s massive buyback along with that it is the last calendar quarter where Apple has a much lower tax rate comparing to the prior year period because of the US tax decrease of late 2017. The financial reporting is also going to be presenting in a new format after Apple made a decision of stopping providing unit sales numbers for key products, which become disappointing news for investors.
On January 2nd, Tim Cook, CEO of Apple $AAPL, revealed a document, that shows that predictable revenue for the Q1 2019 might be $84B, which is less than previous estimates between $89B and $93B. Cook explained it with overall market slowdown, in addition to supply constraints, in ramping new products for the revenue shortfall. Conflict with China became one of the major problems. Not only the economy slow down in there, but the trade tensions and threats of further tariffs have made the overall situation worse. Management reported a strong decline in smartphones sales in addition to the soft traffic to Apple retail stores in China. Falling stock markets also have reduced consumer sentiment, further weighing on overall sales. In addition to supplying constraints, in ramping new products for the revenue shortfall. This announcement also made the situation a bit worse. These updated just added some oil into the fire and pushed shares down for another 6% since the end of December.
D.A. Davidson analyst Tom Forte has cut his target price for $AAP to $245 per share, as comments continue to spread of weak iPhone sales through the start of 2019. Forte has continued to lower his target price for the stock over the past few weeks starting with the previous target of $290.
The biggest indicator of Apple’s progress will be guidance. However, even estimates have dropped, the analysts don’t expect as much of a revenue decline in Q2 as seen in Q1. A lot of things will depend on Apple’s new products launches as well as new services, such as a new magazine and news subscription service.