Apple Earnings Preview: Fundamentals Should Justify Current Bull Run
Investing.com | Nov 10, 2019 17:04
* Reports Q4 2019 results on Wednesday, Oct. 30, after the close
* Revenue expectation: $62.94B
* EPS expectation: $2.83
Apple Inc (NASDAQ:AAPL) is among a very limited number of technology companies that have proven forecasters wrong this year. Backed by improving sales prospects, its stock has so far surged about 50%, massively outperforming other big names, such as Google (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN).
But that strong rally, which began in August, will face its first big test today when the maker of popular iPhones releases its fiscal 2019, fourth-quarter earnings.
The consensus revenue forecast shows that the majority of analysts have quickly adjusted their view about Apple, which had appeared for some time to be facing a grim outlook — hurt by its maturing iPhone business as users held on to their older versions and expensive models failed to gain much traction. iPhones make up about 50% of the company’s total sales.
h2 Game-Changer iPhone 11 /h2But a pessimistic case against Apple — in which the company loses its market share too quickly — isn’t looking credible after the company’s successful launch of the iPhone 11 last month. Wall Street’s consensus estimates for iPhone shipments in Apple’s current fiscal year have increased by 3 million units as analysts factor in the strong reception the new models have received since they went on sale on Sept. 20, according to FactSet.
Besides the iPhone, there are other positive developments that also helped remove some of the uncertainty that gripped Apple stock early this year. The U.S. and China, for example, have shown considerable progress toward resolving their trade dispute, and the two countries are likely to sign the first-phase of their pact next month. Apple has a huge stake in China where it maintains a vast network of suppliers. The company also sells a great number of cellphones to consumers in China, the most populous nation in the world.
The other catalyst fueling optimism is CEO Tim Cook’s success in generating a sizeable chunk of revenue from products other than iPhones. Sales from Apple’s Wearables, Home, and Accessories segment grew 48% to more than $5.5 billion in the second-quarter, showing that these products are quickly picking up the slack left by iPhones’ slowing demand.
Get The App
One new driver which will boost the demand for new hardware is the roll-out of Apple’s fifth-generation, or 5G, phones in 2020. Wall Street’s estimates for the impact of 5G iPhones on Apple are too conservative, according to Jefferies analyst Kyle McNealy.
Energized by this upbeat context, Apple shares hit a record high of $249.05 on Monday. Trading at $243.29 at Tuesday's close, the stock has rebounded more 70% from its January low, pushing the company’s valuation back to over a trillion dollars.
Bottom Line
Apple’s current surge is consistent with our bullish view on this stock and is backed by real improvements in fundamentals. In addition, Apple’s massive share buyback plan and its growing dividends, which now yield 1.25%, make this stock even more attractive for long-term investors. Today’s earnings report could very much solidify this rally.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.